ALLEGIANCE CORP, S-1/A, 1996-09-30

ALLEGIANCE CORP
S-1/A, 1996-09-30
SPECIALTY OUTPATIENT FACILITIES, NEC

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 30, 1996

REGISTRATION NO. 333-12525

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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AMENDMENT NO. 1

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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ALLEGIANCE CORPORATION
(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C> <C>
DELAWARE 5047 36-4095179
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
</TABLE>

1430 WAUKEGAN ROAD
MCGAW PARK, ILLINOIS 60085
(847) 689-8410
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)

WILLIAM L. FEATHER
SENIOR VICE PRESIDENT
GENERAL COUNSEL AND SECRETARY
ALLEGIANCE CORPORATION
1430 WAUKEGAN ROAD
MCGAW PARK, ILLINOIS 60085
(847) 689-8410

(Name, address, including zip code, and telephone number, including area code,
of agent for service)

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COPIES TO:

SCOTT N. GIERKE, P.C. ROBERT RISOLEO, ESQ.
MCDERMOTT, WILL & EMERY SULLIVAN & CROMWELL
227 WEST MONROE STREET 125 BROAD STREET
CHICAGO, ILLINOIS 60606-5096 NEW YORK, NEW YORK 10004
(312) 984-7521 (212) 558-4000

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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.

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If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box.

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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION ACTING PURSUANT
TO SAID SECTION 8(A), MAY DETERMINE.

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<PAGE>

SUBJECT TO COMPLETION, DATED SEPTEMBER 30, 1996

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
$500,000,000

[LOGO] ALLEGIANCE CORPORATION
$200,000,000 % NOTES DUE , 2006
$150,000,000 % DEBENTURES DUE , 2016
$150,000,000 % DEBENTURES DUE , 2026

Interest on the % Notes due , 2006, the % Debentures due
, 2016 and the % Debentures due , 2026 (the Notes and the
Debentures collectively, the "Securities") is payable on and
of each year, commencing , 1997. The holder of each 2026
Debenture may elect to have that 2026 Debenture, or any portion of the principal
amount thereof that is a multiple of $1,000, repaid on , 2003 at
100% of the principal amount thereof, together with accrued interest to
, 2003. Such election, which is irrevocable when made, must be made
within the period commencing on , 2003 and ending at the close of
business on , 2003. The Securities are not redeemable at the option
of the Company prior to maturity and are not entitled to the benefit of any
sinking fund. The Securities are unsecured obligations of the Company and will
rank PARI PASSU with each other and with all other unsecured and unsubordinated
indebtedness of the Company.

Each series of the Securities will be represented by one or more global
Securities registered in the name of the nominee of The Depository Trust Company
("DTC"). Beneficial interests in the global Securities will be shown on, and
transfers thereof will be effected only through, records maintained by DTC and
its participants. Except as described herein, Securities in definitive form will
not be issued. The Securities will be issued only in registered form in
denominations of $1,000 and integral multiples thereof. See "Description of
Securities."

SEE "RISK FACTORS" BEGINNING ON PAGE 8 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE SECURITIES OFFERED
HEREBY.

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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.

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<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE(1) DISCOUNT(2) COMPANY(3)
------------------------ ------------------------ ------------------------
<S> <C> <C> <C>
Per % Note due 2006....................... % % %
Total........................................ $ $ $
Per % Debenture due 2016.................. % % %
Total........................................ $ $ $
Per % Debenture due 2026.................. % % %
Total........................................ $ $ $
</TABLE>

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(1) Plus accrued interest, if any, from , 1996.

(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.

(3) Before deducting estimated expenses of $650,000 payable by the Company.

The Securities offered hereby are offered severally by the Underwriters, as
specified herein, subject to receipt and acceptance by them and subject to their
right to reject any order in whole or in part. It is expected that the
Securities will be ready for delivery in book-entry form only through the
facilities of DTC in New York, New York, on or about , 1996, against
payment therefor in immediately available funds.

GOLDMAN, SACHS & CO.

J.P. MORGAN & CO.

SMITH BARNEY INC.

BA SECURITIES, INC.

FIRST CHICAGO CAPITAL MARKETS, INC.

NATIONSBANC CAPITAL MARKETS, INC.

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The date of this Prospectus is , 1996.
<PAGE>
AVAILABLE INFORMATION

Allegiance has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 (together with all
amendments, schedules and exhibits thereto, the "Registration Statement") under
the Securities Act of 1933, as amended and the rules promulgated thereunder (the
"Securities Act"), for the registration of the Securities offered hereby. This
Prospectus, which constitutes a part of the Registration Statement, does not
contain all of the information in the Registration Statement certain parts of
which are omitted in accordance with the rules and regulations of the
Commission. For further information with respect to the Company and the
Securities offered hereby, reference is made to the Registration Statement.
Statements made in this Prospectus as to the contents of any contract, agreement
or other document are not necessarily complete; with respect to each such
contract, agreement or other document filed as an exhibit to the Registration
Statement, reference is made to the exhibit for a more complete description of
the matter involved, and each such statement shall be deemed qualified in its
entirety by such reference. The Registration Statement and the related exhibits
and schedules filed by Allegiance with the Commission may be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549, as well as at the Regional
Offices of the Commission at Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661 and 7 World Trade Center, 13th Floor, New York,
New York 10048. Copies of such information may be obtained by mail from the
Public Reference Branch of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, at prescribed rates. In addition, electronic copies of the
Registration Statement and all related exhibits and schedules may be accessed on
the world wide web via the Commission's EDGAR database at its website
(http://www.sec.gov). In addition, the common stock of Allegiance is listed on
the New York Stock Exchange and materials filed by Allegiance after September
30, 1996 can be inspected at the office of the New York Stock Exchange, 20 Broad
Street, New York, New York 10005.

Allegiance is subject to the informational and reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Commission. Such reports, proxy statements and other information can be
inspected at the public reference facilities and website maintained by the
Commission that are referenced in the above paragraph.

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IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF EACH SERIES OF THE
SECURITIES OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN
THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY
TIME.

2
<PAGE>
PROSPECTUS SUMMARY

REFERENCE IS MADE TO, AND THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY
BY, THE MORE DETAILED INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS
THE CONTEXT REQUIRES OTHERWISE, (I) "ALLEGIANCE" OR THE "COMPANY" REFERS TO THE
ALLEGIANCE BUSINESS (AS DEFINED BELOW) OF BAXTER INTERNATIONAL INC. ("BAXTER")
FOR PERIODS PRIOR TO SEPTEMBER 30, 1996 (THE "DISTRIBUTION DATE") AND ALLEGIANCE
CORPORATION AND ITS CONSOLIDATED SUBSIDIARIES FOR THE PERIODS ON AND AFTER THE
DISTRIBUTION DATE, (II) ALL REFERENCES TO "BAXTER" INCLUDE BAXTER INTERNATIONAL
INC. AND ITS CONSOLIDATED SUBSIDIARIES AS OF THE RELEVANT DATE, AND (III)
"OFFERING" REFERS TO THE OFFERING OF $200,000,000 MILLION AGGREGATE PRINCIPAL
AMOUNT OF THE COMPANY'S % NOTES DUE , 2006 (THE "NOTES"),
$150,000,000 MILLION AGGREGATE PRINCIPAL AMOUNT OF THE COMPANY'S %
DEBENTURES DUE , 2016 (THE "2016 DEBENTURES") AND $150,000,000
MILLION AGGREGATE PRINCIPAL AMOUNT OF THE COMPANY'S % DEBENTURES DUE
, 2026 (THE "2026 DEBENTURES" AND TOGETHER WITH THE NOTES AND THE 2016
DEBENTURES, THE "SECURITIES"). SEE "COMPANY BACKGROUND."

THE COMPANY

Allegiance Corporation is America's largest provider of health-care products
and cost-management services for hospitals and other health-care providers, with
recorded total sales of approximately $4.5 billion in 1995. Allegiance offers
more than 200,000 products -- the broadest range of medical and laboratory
products in the industry. Allegiance's offering includes its own products as
well as products manufactured by more than 2,000 independent suppliers.
Allegiance can furnish up to 80% of a hospital's total supply needs, excluding
pharmaceuticals. Allegiance operates more than 60 distribution centers across
the country, delivering products often on a just-in-time basis.

The economics of health care are undergoing rapid and fundamental change,
particularly in the United States, which is Allegiance's largest current market.
In the past, doctors and nurses were paid for their services with few cost
constraints. Today, large employers, insurance companies and HMOs are
negotiating set fees for the care of patients. For U.S. hospitals and health
systems, Allegiance's main customers, the pressure to reduce costs has never
been greater. At the same time, demand for health services is continuing to
climb with the dramatic growth of elderly populations in the United States and
abroad. This environment offers opportunities for Allegiance, which has invested
in integrated product and service programs that help medical professionals cope
with health care's new economics and demographic trends. Management believes
Allegiance, with its size, breadth of product line, customer relationships,
growing array of cost-management services and financial strength, is
well-positioned competitively for the increasingly cost-conscious health-care
marketplace.

The health-care distribution market in the United States has experienced
intense competition and a resultant erosion in its margins in recent years in
response to the growth of managed care and increased consolidation among
health-care providers. Allegiance has responded by integrating its
market-leading distribution capabilities with a broad product offering, high
levels of customer service and innovative cost-management services. Within a
larger Baxter organization, Allegiance's cost structure was higher than industry
standards. As an independent public company, Allegiance intends to realign its
cost structure, and improve returns from its distribution operations.

Allegiance's mission is to align its objectives with those of its customers
- -- to help hospitals and others throughout the health-care field fulfill their
mission of serving patients. Allegiance intends to achieve this goal by
providing high-quality products, excellent service and new ways of managing
costs. Allegiance's leading competitive position within the health-care
marketplace is a function of several key advantages, including its size and
breadth of products; an intense customer-service orientation; a growing
portfolio of cost-management services and financial strength. Allegiance is the
only health-care company that fully integrates distribution, products and
services to bring greater efficiency to health care. Management believes its key
competitive advantages and integrated product and service offerings provide a
solid platform for growth.

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<PAGE>
Allegiance's strategy is designed to continue to improve efficiency and
returns in its distribution operations, to increase market penetration for its
self-manufactured and "best value" preferred distributed products, and to expand
its ability to help health-care professionals manage costs.

Allegiance was formed in June 1996 as a wholly owned subsidiary of Baxter
consisting of Baxter's U.S. distribution, surgical and respiratory-therapy
products, and health-care cost-management services operations (the "Allegiance
Business"). These integrated businesses recorded total sales of approximately
$4.5 billion in 1995. On September 30, 1996 (the "Distribution Date"), Baxter
effected a spin-off of Allegiance through a distribution of all of the
outstanding shares of common stock of Allegiance ("Allegiance Stock") to Baxter
stockholders. Prior to the Distribution Date, Allegiance became the owner of all
of the assets, liabilities and operations of the Allegiance Business.

RISK FACTORS

Prospective purchasers of the Securities offered hereby should consider
carefully the information set forth under "Risk Factors," in addition to the
other information set forth in this Prospectus, before purchasing any of the
Securities.

THE OFFERING

<TABLE>
<CAPTION>
Securities Offered........................... $200,000,000 aggregate principal amount of
Notes, $150,000,000 aggregate principal
amount of 2016 Debentures and $150,000,000
aggregate principal amount 2026 Debentures.
<S> <C>
Interest..................................... Interest on the Notes, the 2016 Debentures
and the 2026 Debentures is payable
semiannually on and
of each year, commencing
, 1997, at an annual rate of %
for the Notes, % for the 2016 Debentures
and % for the 2026 Debentures.
Repayment.................................... The holder of each 2026 Debenture may elect
to have that 2026 Debenture, or any portion
of the principal amount thereof that is a
multiple of $1,000, repaid on
,2003 at 100% of the principal
amount thereof, together with accrued
interest to ,2003. Such
election, which is irrevocable when made,
must be made within the period commencing on
,2003 and ending at the close of
business on , 2003. The Notes
and the 2016 Debentures are not subject to
repayment at the option of their holders.
Redemption................................... The Securities are not subject to redemption
at the option of the Company prior to
maturity.
</TABLE>

4
<PAGE>

<TABLE>
<S> <C>
Ranking...................................... The Securities will be unsecured obligations
of the Company and will rank PARI PASSU with
each other and with all other unsecured and
unsubordinated debt of the Company. As of
September 30, 1996, the Company had no
outstanding indebtedness that would in
effect rank ahead of the Securities. See
"Management's Discussion and Analysis of
Financial Condition and Results of
Operations -- Liquidity and Capital
Resources."
Certain Restrictive Covenants................ The Indenture under which each series of the
Securities is to be issued contains a
limited number of restrictive covenants
regarding, among other things, the creation
and existence of additional secured
indebtedness; sale and leaseback
transactions; and mergers, consolidation and
certain sales of assets. See "Description of
Securities."
Use of Proceeds.............................. All of the net proceeds from the sale of the
Securities will be used to reduce amounts
outstanding under the Company's $1.2 billion
credit facility. See "Use of Proceeds."
</TABLE>

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<PAGE>
SUMMARY SELECTED HISTORICAL FINANCIAL DATA

The following table sets forth selected financial information with respect
to Allegiance. Selected unaudited historical financial information for the six
months ended June 30, 1996 and 1995 includes all adjustments, consisting only of
normal recurring accruals that are considered necessary for a fair presentation
of combined operating results for such interim periods. Results for the interim
periods are not necessarily indicative of results for the full year. Historical
financial information may not be indicative of Allegiance's performance as an
independent company. The information set forth below should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the "Combined Financial Statements" and related
notes thereto found elsewhere in this Prospectus. Historical per share data for
net income and dividends, and the ratio of earnings to fixed charges have not
been presented because Allegiance was not incorporated until June 1996, and did
not have significant interest expense for the periods presented below. Pro forma
long term debt and net income per share data are presented elsewhere in this
Prospectus.

SUMMARY SELECTED HISTORICAL FINANCIAL DATA (A)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEARS ENDED DECEMBER 31,
-------------------- -----------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
--------- --------- --------- --------- --------- --------- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales................................ $ 2,201 $ 2,485 $ 4,922 $ 5,109 $ 5,019 $ 4,861 $ 4,402
Gross profit............................. 455 545 1,044 1,378 1,406 1,512 1,448
Restructuring charges (b)................ -- -- 76 -- 484 -- --
Income (loss) before income taxes........ 93 140 476 338 (154) 352 366
Net income (loss) (b) (c)................ $ 57 $ 85 $ 273 $ 215 $ (73) $ 243 $ 250
Ratio of earnings to fixed charges (d)

BALANCE SHEET DATA:
Total Assets............................. $ 3,293 $ 3,765 $ 3,444 $ 4,031 $ 4,590 $ 4,287 $ 4,089
</TABLE>

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(a) See Note 1 to "Notes to the Combined Financial Statements" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
for discussions of the impact of certain divestitures on Allegiance's
revenues and expenses.

(b) See Note 4 to "Notes to the Combined Financial Statements" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
for additional information related to the restructuring charges of $76
million and $484 million that were recorded in 1995 and 1993, respectively.

(c) Net loss for 1993 reflects the impact of a charge equal to $5 million, net
of tax, resulting from the adoption of Statement of Financial Accounting
Standards No. 112, "Employers Accounting for Postemployment Benefits."

(d) Historical computation of ratio of earnings to fixed charges is not
considered meaningful as no interest costs were allocated from Baxter to
Allegiance for the historical periods presented. Pro forma ratio of earnings
to fixed charges was 1.9, 2.1 and 2.0 for the periods June 30, 1996, June
30, 1995, and December 31, 1995, respectively. For the purpose of
calculating pro forma ratio of earnings to fixed charges, "earnings"
represents pro forma earnings before income taxes, plus fixed charges.
"Fixed charges" consist of pro forma interest on all indebtedness and
estimated interest on rentals. For further information, see the unaudited
pro forma combined statements of income included in "Pro Forma Financial
Information" in this Prospectus.

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<PAGE>
SUMMARY SUPPLEMENTARY FINANCIAL DATA

Allegiance's historical results of operations include revenues and expenses
related to certain divested businesses. The Industrial and Life Sciences
division was sold in September 1995 and the diagnostics manufacturing businesses
were sold in December 1994. See Notes 1 and 3 to "Notes to the Combined
Financial Statements" for additional information related to these divestitures.
The following table presents selected supplementary financial data for
Allegiance excluding the revenue and expenses associated with these divested
businesses.

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(a) Income (loss) for 1993 excludes the impact of a charge equal to $5 million,
net of tax, resulting from the adoption of Statement of Financial Accounting
Standards No. 112, "Employers Accounting for Postemployment Benefits."

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<PAGE>
RISK FACTORS

Certain statements in this Prospectus constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Such forward looking statements involve known and unknown risks,
including, but not limited to, general economic and business conditions,
competition, changing trends in customer profiles, changes in governmental
regulations, and unfavorable foreign currency fluctuations. Although Allegiance
believes that its expectations with respect to the forward-looking statements
are based upon reasonable assumptions within the bounds of its knowledge of its
business and operations, there can be no assurance that actual results,
performance or achievements of Allegiance will not differ materially from any
future results, performance or achievements expressed or implied by such forward
looking statements.

In addition to the other information contained in this Prospectus, the
following factors should be considered carefully in evaluating an investment in
the Securities offered hereby.

UNITED STATES HEALTH-CARE ENVIRONMENT

The United States health-care system continues to undergo fundamental
change. Competition for patients among health-care providers continues to
intensify. Increasingly, providers are looking for ways to better manage costs
in areas such as materials handling, supply utilization, product standardization
for specific procedures and capital expenditures.

Accelerating cost pressures on hospitals in the United States are resulting
in increased out-patient and alternate-site health-care service delivery and a
focus on cost-effectiveness and quality. These forces increasingly shape the
demand for, and supply of, medical care. Many private health-care payors are
providing incentives for consumers to seek lower cost care outside the hospital.
Many corporations' employee health plans have been restructured to provide
financial incentives for patients to utilize the most cost-effective forms of
treatment (managed care programs, such as health maintenance organizations, have
become more common), and physicians have been encouraged to provide more cost-
effective treatments. In the past, Allegiance's distribution network has been
focused on traditional distribution to hospitals.

The future financial success of health-care product and service companies,
such as Allegiance, will depend on their ability to work with health-care
providers to help them enhance their competitiveness and to distribute products
to alternate sites as treatment moves outside the hospital. Management believes
it can help its customers achieve savings in the total health-care system by
automating supply-ordering procedures, optimizing distribution networks,
improving utilization and materials management and achieving economies through
product and procedure standardization, and performing certain non-clinical
services on an outsourced basis. Management further believes that its strategy
of providing unmatched service to its health-care customers and achieving the
best overall cost in its delivery of health-care products and services is
compatible with any anticipated realignment of the United States health-care
system that may ultimately occur. If customers do not respond favorably to the
Allegiance strategy, these changes could have a material effect on Allegiance's
business, results of operations and financial condition.

UNITED STATES COMPETITION

The changing health-care environment in recent years has led to increasingly
intense competition among health-care suppliers. Competition is focused on
price, service and product performance. Pressure in these areas is expected to
continue. There has been substantial consolidation in Allegiance's customer base
and among its competitors. In recent years, Allegiance's overall price increases
have been lower than increases in the Consumer Price Index. Industry trends and
competition may inhibit Allegiance's ability to increase prices, and may
continue to depress Allegiance's margins in the future.

In part through its previously announced and ongoing restructuring program,
Allegiance plans to continue to increase its efforts to minimize costs and
better meet accelerating price competition. Allegiance believes that its cost
position will continue to benefit from improvements in manufacturing

8
<PAGE>
technology and increased economies of scale. Allegiance continues to improve the
quality of its products and services. If Allegiance is unsuccessful in
maintaining its service and quality levels while decreasing costs, the
competitive environment may have a material adverse effect on Allegiance's
business, results of operations and financial condition. See "Allegiance
Business -- Competition."

REVENUES FROM CUSTOMERS PURCHASING THROUGH BUYING GROUPS

For the last three years, as a percentage of total revenue, sales to
customers which are members of two large hospital buying groups, Premier and
VHA, comprised 27% and 16% respectively in 1995, 23% and 13% respectively in
1994 and 23% and 13% respectively in 1993. Loss of the contracts with either or
both of these buying groups, or renegotiation of these contracts on unfavorable
terms, could have a material adverse effect on the business, results of
operations and financial condition of Allegiance. However, some member hospitals
in each group are free to purchase from the vendors of their choice. Management
believes that its relationships with its larger customers are excellent. No
other buying group or single customer currently accounts for more than 5% of
Allegiance's revenue. See "Allegiance Business -- Contractual Arrangements;
Buying Groups."

FINANCIAL LEVERAGE

As of September 30, Allegiance had outstanding indebtedness in the amount of
approximately $1.2 billion. Such indebtedness may limit Allegiance's future
financial flexibility. See "Pro-Forma Financial Information" and "Management's
Discussion and Analysis of Financial Condition -- Liquidity and Capital
Resources."

MUTUAL DISTRIBUTION ARRANGEMENTS

Allegiance and Baxter are parties to various agency and distribution
arrangements pursuant to which Allegiance will distribute certain Baxter
products in the United States and Baxter will distribute certain Allegiance
products in the United States and internationally. The compensation received by
Allegiance under the domestic distribution arrangements generally is based upon
the internal business unit revenue and expense allocations that were in effect
between the Baxter business units and the Allegiance Business prior to the date
of the Distribution, which management believes will not be materially different
than those that could be negotiated with independent third parties. The initial
terms of these agreements range from three to five years. Although the present
intention of Allegiance and Baxter is that these distribution arrangements
continue as long as the relationship between the parties is mutually beneficial,
no assurance can be given that these arrangements will be extended beyond their
original expiration dates or will not be terminated prior to their original
terms. See "Relationship with Baxter."

DEPENDENCE ON ADMINISTRATIVE SERVICES

Allegiance and Baxter rely on each other for the provision of certain
administrative services. Such services are provided, pursuant to contractual
arrangements that can be terminated by either party upon no more than 12 months
notice, at rates intended to approximate the cost of providing such services. No
assurance can be given that such arrangements will continue in the future, that
the cost of arranging substitute service either internally or from a third party
would not increase the cost to the service recipient, or that a service provider
will not be forced to absorb a greater share of its fixed overhead costs in the
event of a termination of these arrangements. See "Relationship with Baxter."

NO OPERATING HISTORY AS AN INDEPENDENT COMPANY

Allegiance does not have an operating history as an independent public
company. While Allegiance has been profitable as part of Baxter, there is no
assurance that as a stand-alone company profits will continue at the same level.
See "Combined Financial Statements."

PRODUCTS LIABILITY

On the Distribution Date, Allegiance assumed the defense of litigation
involving claims related to the Allegiance Business, including certain claims of
alleged personal injuries as a result of exposure to natural rubber latex gloves
described below. Allegiance has not been named as a defendant in this

9
<PAGE>
litigation but will be defending and indemnifying Baxter Healthcare Corporation
("BHC"), as contemplated by the Reorganization Agreement between Baxter and
Allegiance (the "Reorganization Agreement"), for all expenses and potential
liabilities associated with claims pertaining to this litigation. It is expected
that Allegiance will be named as a defendant in future litigation, and may be
added as a defendant in existing litigation.

Allegiance believes that a substantial portion of any liability and the
defense costs related to natural rubber latex gloves cases and claims will be
covered by insurance, subject to self-insurance retentions, exclusions,
conditions, coverage gaps, policy limits and insurer solvency. BHC has notified
its insurance companies that it believes that these cases and claims are covered
by BHC's insurance. Most of BHC's insurers have reserved their rights (I.E.,
neither admitted nor denied coverage), and may attempt to reserve in the future,
the right to deny coverage, in whole or in part, due to differing theories
regarding, among other things, the applicability of coverage and when coverage
may attach. Management does not expect that the outcome of these matters will
have a material adverse effect on Allegiance's business, results of operations
or financial condition.

ENVIRONMENTAL CONTINGENCIES

Under the United States Superfund statute and many state laws, generators of
hazardous waste which is sent to a disposal or recycling site are liable for
cleanup of the site if contaminants from that property later leak into the
environment. The law provides that potentially responsible parties may be held
jointly and severally liable for the costs of investigating and remediating a
site. This liability applies to the generator even if the waste was handled by a
contractor in full compliance with the law.

As of June 30, 1996, BHC has been named as a potentially responsible party
for cleanup costs at ten hazardous waste sites for which Allegiance has assumed
responsibility. Allegiance's largest exposure is at the Thermo-Chem site in
Muskegon, Michigan. Allegiance expects that the total cleanup costs for this
site will be between $44 million and $65 million, of which Allegiance's share
will be approximately $5 million. This amount, net of payments of approximately
$1 million, has been accrued and is reflected in Allegiance's combined financial
statements. The estimated exposure for the remaining nine sites is approximately
$4 million, which has been accrued and reflected in Allegiance's combined
financial statements. Management does not expect that the outcome of these
matters will have a material adverse effect on Allegiance's business, results of
operations or financial condition.

GOVERNMENT REGULATION

Significant aspects of Allegiance's businesses are subject to state and
federal statutes and regulations governing, among other things, reimbursement
under federal and state medical assistance programs, medical waste disposal,
dispensing of controlled substances, and workplace health and safety. In
addition, most of the products manufactured or sold by Allegiance in the United
States are subject to regulation by the Food and Drug Administration ("FDA"), as
well as by other federal and state agencies. The FDA has the power to seize
adulterated or misbranded drugs and devices or to require the manufacturer to
remove them from the market and the power to publicize relevant facts. In the
past, Baxter has removed products from the United States market that were found
not to meet acceptable standards. This may occur with respect to Allegiance in
the future. Product regulatory laws exist in most other countries where
Allegiance will do business. There can be no assurance that federal or state
governments will not impose additional restrictions or adopt interpretations of
existing laws that could materially adversely affect Allegiance's business,
results of operations or financial condition. See "Allegiance Business --
Government Regulation."

INTERNATIONAL EXPANSION

Allegiance currently has international sales of self-manufactured surgical
products primarily in Canada, France and Germany. Allegiance management expects
to increase its sales efforts internationally, which could expose it to greater
risks associated with government regulations and fluctuations in foreign
currency. There can be no assurance that Allegiance will be successful in
expanding its sales efforts internationally or employ a risk management strategy
that will completely eliminate its exposure to adverse movements in foreign
currency rates. See "-- Government Regulation."

10
<PAGE>
ABSENCE OF PUBLIC MARKET FOR THE SECURITIES

The Securities are new issues of securities for which there is currently no
market. If the Securities are traded after their initial issuance, they may
trade at a discount from their initial offering price, depending upon prevailing
interest rates, the market for similar securities and other factors. The
Underwriters have informed the Company that, subject to applicable laws and
regulations, they currently intend to make a market in the Securities. However,
the Underwriters are not obligated to do so, and any such market making may be
discontinued at any time without notice. Therefore, no assurance can be given as
to whether an active trading market will develop for the Securities or, if such
market develops, whether it will continue. The Company does not intend to apply
for listing of the Securities on any securities exchange or on the National
Association of Securities Dealers, Inc. automated quotation system. See
"Underwriting."

USE OF PROCEEDS

The net proceeds to the Company from the sale of the Securities offered
hereby are estimated to be approximately $ million, after deducting
underwriting discounts and estimated expenses of the Offering payable by the
Company. All of the net proceeds of the Offering will be used to reduce the
amounts outstanding under the Company's $1.2 billion credit facility. At
September 30, 1996, approximately $1.1 billion was outstanding under the
Company's $1.2 billion credit facility bearing interest at a weighted average
rate of 5.8% per annum and maturing on various dates from October 7, 1996 to
November 29, 1996. Allegiance has borrowed under this credit facility to fund
distributions to Baxter and for working capital requirements.

COMPANY BACKGROUND

Allegiance Corporation ("Allegiance" or the "Company") was incorporated in
Delaware in June 1996. Prior to September 30, 1996 (the "Distribution Date"),
Allegiance acquired the United States health-care distribution, surgical and
respiratory therapy products and health-care cost management businesses (the
"Allegiance Business") of Baxter International Inc. ("Baxter") in connection
with a spin-off by Baxter of the Allegiance Business. The spin-off was effected
on the Distribution Date through a distribution of common stock of Allegiance
("Allegiance Stock") to Baxter stockholders (the "Distribution"). Unless the
context otherwise indicates, as used in this Prospectus the terms "Allegiance"
and the "Company" mean the Allegiance Business of Baxter for periods prior to
the Distribution Date and Allegiance Corporation and its consolidated
subsidiaries for the periods following the Distribution Date, and all references
to "Baxter" include Baxter International Inc. and its consolidated subsidiaries
as of the relevant date.

Allegiance's principal executive offices are located at 1430 Waukegan Road,
MPA-1, McGaw Park, Illinois 60085 and its telephone number is (847) 689-8410.

11
<PAGE>
PRO FORMA CAPITALIZATION

The following table sets forth, as of June 30, 1996, the capitalization of
Allegiance and the pro forma capitalization after giving effect to the
Distribution and certain other transactions described in the Notes below, as
well as the application of the estimated net proceeds from the sale of the
Securities. This information should be read in conjunction with the historical
and pro forma combined financial statements and the related notes thereto of
Allegiance included elsewhere herein. The pro forma information set forth below
may not reflect the capitalization of Allegiance in the future or as it would
have been had Allegiance been a separate, independent company at June 30, 1996.

<TABLE>
<CAPTION>
JUNE 30, 1996
---------------------------------------
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
----------- ------------- -----------
(IN MILLIONS, EXCEPT SHARES)
<S> <C> <C> <C>
Long-term debt............................................................ $ -- $ 1,200(a) $ 1,200
Equity
Divisional retained earnings............................................ 1,750 (350)(a) --
(1,400)(b)
Equity investment by parent............................................. 810 (810)(a) --
Stockholders' equity
Common stock, par value $1.00, authorized 200,000,000 shares,
outstanding 54,472,353 shares.......................................... -- 54(b) 54
Retained earnings....................................................... -- 1,346(b) 1,346
----------- ------------- -----------
Total capitalization.................................................. $ 2,560 $ 40 $ 2,600
----------- ------------- -----------
----------- ------------- -----------
</TABLE>

PRO FORMA ADJUSTMENTS

(a) To record the incurrence of approximately $1.2 billion of debt to fund
distributions to Baxter and initial working capital requirements.

(b) To reflect the Distribution of 54,472,353 shares of Allegiance Stock at
$1.00 par value per share (at a distribution ratio of one share of
Allegiance Stock for every five shares of Baxter Stock held on September 26,
1996) and the elimination of divisional retained earnings and Baxter's
equity investment effected by the distribution of all outstanding shares of
Allegiance Stock to Baxter stockholders.

12
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA

SELECTED HISTORICAL FINANCIAL DATA (A)

BALANCE SHEET DATA:
Total Assets............................. $ 3,293 $ 3,765 $ 3,444 $ 4,031 $ 4,590 $ 4,287 $ 4,089
</TABLE>

(d) Historical computation of ratio of earnings to fixed charges is not
considered meaningful as no interest costs were allocated from Baxter to
Allegiance for the historical periods presented. Pro forma ratio of earnings
to fixed charges was 1.9, 2.1 and 2.0 for the periods June 30, 1996, June
30, 1995, and December 31, 1995, respectively. For the purpose of
calculating pro forma ratio of earnings to fixed charges, "earnings"
represent pro forma earnings before income taxes, plus fixed charges. "Fixed
charges" consist of pro forma interest on all indebtedness and estimated
interest on rentals. For further information, see the unaudited pro forma
combined statements of income included in "Pro Forma Financial Information"
in this Prospectus.

13
<PAGE>
SUPPLEMENTARY FINANCIAL DATA

- ------------

14
<PAGE>
PRO FORMA FINANCIAL INFORMATION

The following unaudited pro forma combined statements of income and
unaudited combined condensed balance sheet present the combined results of
Allegiance and its financial position assuming that the transactions
contemplated by the Distribution and certain significant divestitures described
below had been completed as of January 1, 1995.

The unaudited pro forma information has been prepared utilizing the
historical combined financial statements of Allegiance. This information should
be read in conjunction with the historical combined financial statements and
notes thereto, included elsewhere in this Prospectus. The unaudited pro forma
financial data has been included as required by the rules and regulations of the
Commission and is provided for comparative purposes only. The unaudited pro
forma financial data does not purport to be indicative of the results of
Allegiance in the future or what the financial position and results of
operations would have been had Allegiance been a separate, stand-alone entity
during the periods shown. See, for example, "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Adoption of New
Accounting Standards and Policies."

UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME

<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1996
----------------------------------------------------------------------
ADJUSTMENTS
FOR DIVESTED ADJUSTED PRO FORMA
HISTORICAL BUSINESSES (A) HISTORICAL ADJUSTMENTS PRO FORMA
----------- --------------- ----------- ------------ -------------
(IN MILLIONS, EXCEPT SHARES AND PER SHARE INFORMATION)
<S> <C> <C> <C> <C> <C>
Net sales.................................. $ 2,201 -- $ 2,201 $ 1(b) $2,202
Costs and expenses
Cost of goods sold....................... 1,746 -- 1,746 2(b) 1,748
Selling, general and administrative
expenses................................ 345 -- 345 4(b) 349
Interest, net............................ -- -- -- 45(d) 45
Goodwill amortization.................... 18 -- 18 -- 18
Other (income) expense................... (1) -- (1) -- (1)
----------- ------- ----------- ------------ -------------
Total costs and expenses............... 2,108 -- 2,108 51 2,159
----------- ------- ----------- ------------ -------------
Income before income taxes................. 93 -- 93 (50) 43
Income tax expense (benefit)............... 36 -- 36 (20)(f) 16
----------- ------- ----------- ------------ -------------
Net income............................. $ 57 -- $ 57 $ (30) $ 27
----------- ------- ----------- ------------ -------------
----------- ------- ----------- ------------ -------------
Share information
Shares to be issued (g).................. 54,472,353
-------------
-------------
Net income per share (g)................. $ 0.50
-------------
-------------
Ratio of earnings to fixed charges (h)..... 1.9
-------------
-------------
</TABLE>

15
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME

<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1995
------------------------------------------------------------------------
ADJUSTMENTS
FOR DIVESTED ADJUSTED PRO FORMA
HISTORICAL BUSINESSES (A) HISTORICAL ADJUSTMENTS PRO FORMA
----------- --------------- ----------- -------------- -------------
(IN MILLIONS, EXCEPT SHARES AND PER SHARE)
<S> <C> <C> <C> <C> <C>
Net sales.................................. $ 2,485 $(241) $ 2,244 $ (7)(b) $2,237
Costs and expenses
Cost of good sold........................ 1,940 (170) 1,770 (3)(b) 1,767
Selling, general and administrative
expenses................................ 384 (39) 345 2(b) 351
4(c)
Interest, net............................ -- -- -- 45(d) 45
Goodwill amortization.................... 19 -- 19 -- 19
Other (income) expense................... 2 -- 2 -- 2
----------- --------------- ----------- --- -------------
Total costs and expenses............... 2,345 (209) 2,136 48 2,184
----------- --------------- ----------- --- -------------
Income (loss) before income taxes.......... 140 (32) 108 (55) 53
Income tax expense (benefit)............... 55 (13) 42 (22)(f) 20
----------- --------------- ----------- --- -------------
Net income............................. $ 85 $ (19) $ 66 $ (33) $ 33
----------- --------------- ----------- --- -------------
----------- --------------- ----------- --- -------------
Share information
Shares to be issued (g).................. 54,472,353
-------------
-------------
Net income per share (g)................. $ 0.61
-------------
-------------
Ratio of earnings to fixed charges (h)..... 2.1
-------------
-------------
</TABLE>

16
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
----------------------------------------------------------------------
ADJUSTMENTS
FOR DIVESTED ADJUSTED PRO FORMA
HISTORICAL BUSINESSES (A) HISTORICAL ADJUSTMENTS PRO FORMA
----------- --------------- ----------- ------------ -------------
(IN MILLIONS, EXCEPT SHARES AND PER SHARE INFORMATION)
<S> <C> <C> <C> <C> <C>
Net sales.................................. $ 4,922 $(347) $ 4,575 $ (4)(b) $4,571
Costs and expenses
Cost of goods sold....................... 3,878 (253) 3,625 3,625
Selling, general and administrative
expenses................................ 756 (55) 701 3 (b) 714
10 (c)
Interest, net............................ -- -- -- 90 (d) 90
Restructuring............................ 76 (76) -- -- --
Goodwill amortization.................... 38 (1) 37 -- 37
Other (income) expense................... (302) 269 (33) 37 (e) 4
----------- --------------- ----------- ------------ -------------
Total costs and expenses............... 4,446 (116) 4,330 140 4,470
----------- --------------- ----------- ------------ -------------
Income before income taxes................. 476 (231) 245 (144) 101
Income tax expense (benefit)............... 203 (109) 94 (56)(f) 38
----------- --------------- ----------- ------------ -------------
Net income............................. $ 273 $(122) $ 151 $ (88) $ 63
----------- --------------- ----------- ------------ -------------
----------- --------------- ----------- ------------ -------------
Share information
Shares to be issued (g).................. 54,472,353
-------------
-------------
Net income per share (g)................. $ 1.16
-------------
-------------
Ratio of earnings to fixed charges (h)..... 2.0
-------------
-------------
</TABLE>

PRO FORMA ADJUSTMENTS

(a) To adjust the historical financial statements for the impact of the
divestitures of the diagnostics manufacturing business and the Industrial
and Life Sciences division for the periods presented, to reflect only those
ongoing business operations to be included in the Distribution. See Notes 1
and 3 to "Notes to the Combined Financial Statements" for additional
information related to these divestitures.

(b) To reflect the impact of various business arrangements between Allegiance
and Baxter effective on the Distribution Date for (i) product distribution
and distribution services under agency, services and distribution agreements
in the U.S. with terms from three to five years, (ii) contract manufacturing
agreements under which both Allegiance and Baxter agree to produce certain
products and components for each other for one to three years, and (iii)
agreements with terms of one to five years under which Baxter will
distribute Allegiance products in various countries around the world and
provide export services. See "Relationship with Baxter."

(c) To reflect (i) the estimated incremental costs associated with being an
independent, public company, including costs associated with corporate
administrative services such as tax, treasury, risk management and
insurance, legal, stockholder relations and human resources and (ii) the
estimated reduction in expenses related to changes in Allegiance's benefit
plans.

(d) To record the estimated interest expense which would have been incurred by
Allegiance based on the incurrence of approximately $1.2 billion of debt,
including the Securities offered hereby, at a weighted average interest rate
of 7.5%. An increase or decrease of 0.125% in the weighted average interest
rate would result in an increase or decrease in interest expense of $1.5
million.

(e) To adjust the historical financial statements for a non-recurring payment
related to the transfer of rights under various service agreements with
Alliant Foodservices, Inc., to reflect only those ongoing business
operations included in the Distribution.

(f) To reflect the estimated tax impact, at statutory rates, for pro forma
adjustments (b) through (e).

(g) Pro forma net income per share is computed as if the 54,472,353 shares of
Allegiance stock, issued in the Distribution, had been outstanding for the
periods presented.

(h) For the purposes of calculating the ratio of earnings to fixed charges,
"earnings" represent pro forma earnings before income taxes, plus fixed
charges. "Fixed charges" consist of pro forma interest on all indebtedness
and estimated interest on rentals.

17
<PAGE>
PRO FORMA COMBINED CONDENSED BALANCE SHEET

<TABLE>
<CAPTION>
JUNE 30, 1996
-----------------------------------------------------------------------
ADJUSTMENTS
FOR DIVESTED ADJUSTED PRO FORMA
HISTORICAL BUSINESSES (A) HISTORICAL ADJUSTMENTS PRO FORMA
----------- ----------------- ----------- ------------- -----------
(IN MILLIONS, EXCEPT SHARES)
<S> <C> <C> <C> <C> <C>
Current assets
Cash and equivalents.......................... $ 5 -- $ 5 $ 40 (a) $ 45
Accounts receivable, net...................... 450 -- 450 450
Notes and other current receivables........... 26 -- 26 -- 26
Inventories................................... 656 -- 656 656
Short-term deferred income taxes.............. 119 -- 119 -- 119
Prepaid expenses.............................. 16 -- 16 -- 16
----------- ------ ----------- ------------- -----------
Total current assets........................ 1,272 -- 1,272 40 1,312
----------- ------ ----------- ------------- -----------
Property, plant and equipment
Property, plant and equipment................. 1,523 -- 1,523 -- 1,523
Accumulated depreciation and amortization..... 663 -- 663 -- 663
----------- ------ ----------- ------------- -----------
Net property, plant and equipment........... 860 -- 860 -- 860
----------- ------ ----------- ------------- -----------
Other assets
Goodwill and other intangibles................ 1,096 -- 1,096 -- 1,096
Other......................................... 65 -- 65 -- 65
----------- ------ ----------- ------------- -----------
Total other assets.......................... 1,161 -- 1,161 -- 1,161
----------- ------ ----------- ------------- -----------
Total assets.............................. $ 3,293 -- $ 3,293 $ 40 $ 3,333
----------- ------ ----------- ------------- -----------
----------- ------ ----------- ------------- -----------
Current liabilities
Accounts payable and accrued liabilities...... $ 550 -- $ 550 $ 550
----------- ------ ----------- ------------- -----------
Long-term debt.................................. -- -- -- 1,200 (a) 1,200
----------- ------ ----------- ------------- -----------
Long-term deferred income taxes................. 115 -- 115 -- 115
----------- ------ ----------- ------------- -----------
Other non-current liabilities................... 68 -- 68 -- 68
----------- ------ ----------- ------------- -----------
Stockholders' equity
Divisional retained earnings.................. 1,750 -- 1,750 (350)(a) --
(1,400)(b)
Equity investment by parent................... 810 -- 810 (810)(a) --
Common stock, $1 par value, authorized
200,000,000 shares, outstanding 54,472,353
shares....................................... -- -- -- 54 (b) 54
Retained earnings............................. -- -- -- 1,346 (b) 1,346
----------- ------ ----------- ------------- -----------
Total liabilities and stockholders'
equity................................... $ 3,293 -- $ 3,293 $ 40 $ 3,333
----------- ------ ----------- ------------- -----------
----------- ------ ----------- ------------- -----------
</TABLE>

PRO FORMA ADJUSTMENTS

(a) To record the incurrence of approximately $1.2 billion of debt to fund
distributions to Baxter and initial working capital requirements.

(b) To reflect the distribution of 54,472,353 shares of common stock of
Allegiance to stockholders of Baxter and the elimination of divisional
retained earnings and Baxter's equity investment effected by the
Distribution.

18
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

The following discussion and analysis present the factors that had a
material effect on the results of operations of Allegiance during the three
years ended December 31, 1995, and for the six-month periods ended June 30, 1996
and 1995. Also discussed is Allegiance's financial position as of December 31,
1995 and 1994, and June 30, 1996. This discussion should be read in conjunction
with the historical and pro forma combined financial statements and related
notes thereto included elsewhere in this Prospectus.

OVERVIEW

Allegiance operates in a single industry segment as a leading provider of
health-care products and services that help its health-care customers manage and
reduce the total cost of providing patient care. Through its nationwide
distribution network, Allegiance distributes to hospital and alternate-care
customers a broad offering of medical, surgical and laboratory supplies,
including its own self-manufactured surgical and respiratory-therapy products.
Allegiance also provides cost management services to its health-care customers,
including inventory management programs, customized packaging, and procedure and
process consulting. The delivery of such a broad array of product and service
offerings requires focused investments in cost management services, information
systems and manufacturing efficiencies.

Accelerating cost pressures on U.S. hospitals are resulting in increased
out-patient and alternate-site health-care service delivery and an increased
focus on cost-effectiveness and quality. At the same time, the elderly segment
of the population in the U.S. and abroad is growing. These forces increasingly
shape the demand for, and supply of, medical care. Many private health-care
payors are providing incentives for consumers to seek lower cost care outside
the hospital. Many corporations' employee health plans have been restructured to
provide financial incentives for patients to utilize the most cost-effective
forms of treatment (managed care programs, such as health maintenance
organizations, have become more common), and physicians have been encouraged to
provide more cost-effective treatments. In response to these pressures, the U.S.
health-care system has undergone fundamental changes over the past several
years, and such changes and cost-containment efforts are expected to continue
throughout the foreseeable future.

While the high cost of health care is forcing hospitals and other providers
to increase their efficiency, reduce excess capacity and lower costs, management
believes that it is well-positioned to work with health-care providers to help
them enhance their competitiveness and to distribute products to alternate sites
as treatment moves outside the hospital. Management believes that it can help
its customers achieve savings in the total health-care system by automating
supply-ordering procedures, optimizing distribution networks, improving
utilization and materials management and achieving economies through product and
procedure standardization, and performing certain non-clinical services on an
outsourced basis. Management further believes that its strategy of providing
unmatched service to its health-care customers and its seeking to achieve the
lowest overall cost in its delivery of health-care products and services is
compatible with any anticipated realignment of the U.S. health-care system that
may ultimately occur.

RESULTS OF OPERATIONS

Allegiance's historical results of operations in 1995, 1994 and 1993 include
revenues and expenses related to certain divested businesses. The Industrial and
Life Sciences division of the Allegiance Business was sold in September 1995 and
the diagnostics manufacturing businesses were sold in

19
<PAGE>
December 1994. See Notes 1 and 3 to "Notes to Combined Financial Statements" for
additional information related to these divestitures. The following table
presents selected financial data for Allegiance excluding the revenue and
expenses associated with these divested businesses:

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEARS ENDED DECEMBER 31,
-------------------- -------------------------------
1996 1995 1995 1994 1993
--------- --------- --------- --------- ---------
(UNAUDITED) (IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Net sales........................................... $ 2,201 $ 2,244 $ 4,575 $ 4,314 $ 4,249
Costs and expenses
Cost of goods sold................................ 1,746 1,770 3,625 3,311 3,245
Selling, general and administrative expenses...... 345 346 701 711 746
Restructuring charge.............................. -- -- -- -- 304
Goodwill amortization............................. 18 18 37 37 37
Other (income) expense............................ (1) 2 (33) (3) (44)
--------- --------- --------- --------- ---------
Total costs and expenses........................ 2,108 2,136 4,330 4,056 4,288
--------- --------- --------- --------- ---------
Pretax income (loss)................................ 93 108 245 258 (39)
Income tax expense (benefit)........................ 36 42 94 101 (13)
--------- --------- --------- --------- ---------
Income (loss)....................................... $ 57 $ 66 $ 151 $ 157 $ (26)
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>

SALES

The following table summarizes net sales, excluding the divested businesses
discussed previously, by major geographic region:

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEARS ENDED DECEMBER 31,
---------------------- -----------------------------------
1996 1995 1995 1994 1993
----------- --------- ----------- ----------- ---------
(UNAUDITED) (IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Geographic region
United States.............................. $ 2,052 $ 2,103 $ 4,284 $ 4,043 $ 4,001
Percent increase (decrease).............. (2)% 6% 1%
International.............................. 149 141 291 271 248
Percent increase......................... 6% 7% 9%
----------- --------- ----------- ----------- ---------
Total net sales.............................. $ 2,201 $ 2,244 $ 4,575 $ 4,314 $ 4,249
Percent increase (decrease).............. (2)% 6% 2%
----------- --------- ----------- ----------- ---------
----------- --------- ----------- ----------- ---------
</TABLE>

The decline in Allegiance's domestic net sales for the six months ended June
30, 1996 as compared to the same period in the prior year, is the result of
planned attempts to reduce sales growth and improve profitability in lower
margin, distributed products in the U.S. Additionally, domestic sales of
self-manufactured surgical products continue to be unfavorably impacted by the
loss of a contract with Columbia/ HCA in February 1994. Columbia began shifting
to other vendors its purchases of surgical supplies for certain product lines in
early 1994 and for other product lines throughout 1995 and 1996. International
sales increased by 6% in the first half of 1996 as compared to 1995 as a result
of continued focus on the penetration of surgical products into international
markets.

Domestic net sales growth of 6% in 1995 is primarily due to increased sales
volume in lower margin, distributed products, resulting from an increase in
Valuelink-Registered Trademark- distribution agreements and the large supply and
service contract signed with the VHA in 1994. Domestic net sales in 1994 were
adversely affected by pricing pressures experienced in the domestic market place
and the loss of the Columbia/ HCA supply contract.

20
<PAGE>
Allegiance currently has international sales of self-manufactured surgical
products primarily in Canada, France and Germany. International sales growth of
7% in 1995 and 9% in 1994 was the result of continued focus on the penetration
of surgical products into these international markets. International sales
growth in local currency was approximately 5% in 1995 and 13% in 1994.
Allegiance expects to increase its sales efforts internationally.

COSTS AND EXPENSES

The following table summarizes Allegiance's gross margin and expense ratios,
excluding the divested businesses discussed previously:

<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE
30, YEARS ENDED DECEMBER 31,
------------------------ -------------------------------------
1996 1995 1995 1994 1993
----------- ----------- ----------- ----------- -----------
(UNAUDITED) (IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Gross margin........................................... 20.7% 21.1% 20.8% 23.2% 23.6%
Selling, general and administrative expenses........... 15.7% 15.4% 15.3% 16.5% 17.6%
</TABLE>

The gross margin declined for the six-month period ended June 30, 1996 as
compared with the same period in 1995, due to pricing pressure in the U.S.
combined with lower sales in Allegiance's higher margin surgical products as a
result of the loss of the Columbia/HCA contract. Allegiance's gross margin
decline of 2.8% between 1993 and 1995 resulted from general market conditions,
growth in lower margin sales of third party products and the loss of the
Columbia/HCA surgical supply contract. Allegiance plans to stabilize its gross
margins by offsetting pricing pressures with manufacturing cost efficiencies,
managing its product mix more effectively, and instituting price increases.

Total selling, general and administrative expenses remained flat between the
first half of 1996 and 1995. However, such costs as a percent of sales for the
period ended June 30, 1996 increased .3% from the comparable period in 1995. The
increase in the ratio for the six months ended June 30, 1996 is the result of
the decline in sales discussed above, as the timing of expense reduction
initiatives lag the planned reduction in lower-margin product sales. Selling,
general and administrative expenses in 1993 were adversely affected by a
downsizing program. Excluding the impact of the downsizing program, selling,
general and administrative expenses as a percent of sales in 1993 would have
been approximately 16.7%. The remaining 1.4% decline in selling, general and
administrative expenses that occurred between 1993 and 1995 was the result of
initiatives taken in connection with the 1993 restructuring program and leverage
on the growth in distributed products that occurred in 1994. Management plans to
continue to leverage this ratio.

RESTRUCTURING PROGRAM

In November 1993, Baxter initiated a restructuring program to improve
shareholder value and reduce costs. The strategic actions of the program were
designed in part to make the Allegiance Business more efficient and responsive
in addressing the changes occurring in the U.S. health-care system. See Note 4
to "Notes to the Combined Financial Statements" for discussions related to the
initial charge for the program, components of the charge, any resulting changes
in estimates, and cash and non-cash utilization of the related reserves.

Since the announcement of the 1993 restructuring program, Allegiance
management has implemented, or is in the process of implementing, all of the
major strategic actions associated therewith and is satisfied that the program
is progressing on schedule and will meet established financial targets. During
the first half of 1996, Allegiance utilized $55 million of restructuring
reserves, including $34 million in cash payments. In 1995, Allegiance utilized
$171 million of restructuring reserves, including $105 million in cash payments.
Cash outflows pertain primarily to employee-related costs for severance,
outplacement assistance, relocation, implementation teams and facility
consolidation. As of June 30, 1996, Allegiance had eliminated approximately
1,920 positions of the approximately 2,860 positions that were originally
expected to be affected by the program. As process changes were implemented in
connection with the restructuring program, it became apparent that, as certain
management level positions were

21
<PAGE>
eliminated, other lower cost positions were added. While this has generated
savings levels consistent with expectations, management has revised its targeted
head count reduction to 2,230 net positions. The majority of the remaining
reductions will occur in 1996 and 1997, as facility closures and consolidations
are completed as planned. In addition to improvements in the effectiveness of
its sales force and the management of customer relations, Allegiance realized
direct savings in manufacturing and administrative costs from this program of
approximately $95 million in 1995 and $40 million in 1994. These savings have
mitigated the effect of declines in gross margin and have been invested in cost
management initiatives. Management is targeting direct savings of approximately
$125 million in 1996, $155 million in 1997 and in excess of $155 million in
1998. Management anticipates that these savings will continue to offset
potential future gross margin erosion and investments into cost-management
initiatives. Management further believes that its remaining restructuring
reserves are adequate to complete the actions contemplated by the restructuring
program and that future cash expenditures related to the program will be funded
from cash generated from operations.

OTHER INCOME AND EXPENSE

Other income and expense, excluding the divested businesses discussed
previously, is principally comprised of net gains associated with the disposal
or discontinuance of minor, non-strategic businesses.

PRETAX INCOME

The following table compares pretax income, excluding divested businesses
and restructuring charges discussed previously:

<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE
30, YEARS ENDED DECEMBER 31,
---------------------- -----------------------------------
1996 1995 1995 1994 1993
----------- --------- ----------- ----------- ---------
(UNAUDITED) (IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Pretax income excluding divested businesses and
restructuring charges............................... $ 93 $ 108 $ 245 $ 258 $ 265
Percent decrease................................... (14)% (5)% (3)%
</TABLE>

Pretax income in the first six months of 1996 decreased primarily due to the
decline in net sales and gross margins discussed above. Pretax income decreased
in 1995 primarily as a result of gross margin declines, partially offset by a
higher level of net gains associated with the disposal or discontinuance of
minor, non-strategic businesses. Excluding net gains associated with the
disposal or discontinuance of minor, non-strategic businesses, 1995 pretax
income would have declined 16%. The decrease in 1994 is primarily the result of
gross margin declines, partially offset by net gains associated with the
disposal or discontinuance of minor, non-strategic businesses. Excluding these
net gains, 1994 pretax income would have declined 7%.

INCOME TAXES

Allegiance's effective tax rate, excluding divested businesses discussed
previously, was 39% for the six months ended June 30, 1996 and 1995.
Allegiance's effective tax rate, excluding divested businesses discussed
previously, was 38% in 1995, 39% in 1994 and 33% in 1993. The decline in the
effective tax rate in 1995 was a result of a larger proportion of earnings
generated in lower tax jurisdictions. The effective tax rate in 1993 was
impacted by the restructuring charge. Excluding this charge, the effective tax
rate in 1993 would have been 41%; the decrease in the 1994 effective tax rate
was the result of a larger proportion of earnings generated in lower tax
jurisdictions.

NET INCOME

Net income, excluding divested businesses discussed previously, decreased
14% for the six months ended June 30, 1996 as compared to the same period in
1995. This decrease is consistent with the decrease in pretax income discussed
above. Net income for 1995, excluding divested businesses and net gains
associated with the disposal or discontinuance of minor, non-strategic
businesses, decreased 14% as a result of gross margin declines, partially offset
by a decline in the effective tax rate.

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<PAGE>
After adjusting for the restructuring charge recorded in 1993 and net gains
associated with the disposal or discontinuance of minor, non-strategic
businesses, net income excluding divested businesses decreased by approximately
4% in 1994 as a result of gross margin declines, partially offset by the decline
in Allegiance's effective income tax rate discussed above.

ADOPTION OF NEW ACCOUNTING STANDARDS AND POLICIES

In March 1995, the Financial Accounting Standards Board ("FASB") issued
Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of," which is effective for fiscal years
beginning after December 31, 1995. Adoption of FASB No. 121 in fiscal year 1996
did not have a material impact on Allegiance.

In October 1995, the FASB issued Statement No. 123, "Accounting for
Stock-Based Compensation," which is effective for fiscal years beginning after
December 15, 1995. The statement provides management with a choice of accounting
methods for stock-based transactions with employees. Management has decided to
adopt FASB No. 123 through disclosure only and, accordingly, the required pro
forma information on net income and earnings per share will be included in
Allegiance's fiscal year 1996 financial statements.

As a subsidiary of Baxter, Allegiance followed the accounting policies
established by Baxter for its consolidated group. Management believes that the
market value of Allegiance, as a stand-alone company, could be substantially
below its stockholders' equity. While Allegiance cannot forecast its market
value, management is currently evaluating the accounting policy for assessing
impairment of goodwill to ensure that its present policy remains appropriate for
Allegiance as a separate, publicly-traded company. As of June 30, 1996, actual
goodwill was approximately $1.1 billion and pro-forma stockholders' equity was
$1.4 billion. Management is considering a change from Baxter's current
undiscounted cash flow methodology to one based upon fair value. A change to a
fair value methodology could result in a material, noncash charge to
Allegiance's results of operations which would be approximately equal to the
excess of Allegiance's pro-forma stockholders' equity value over its market
value and could have a substantial effect on its financial position. If
Allegiance were to adopt such a change in accounting policy, the current annual
amortization expense pertaining to goodwill would be reduced in future periods
by 3.4% of any resulting reduction in the value of goodwill, and would produce a
potentially significant increase in net income. Such a change in accounting
policy would be subject to the review and approval by Allegiance's board of
directors.

IMPACT OF INFLATION

In recent years, Allegiance has experienced increases in its labor and
material cost base influenced, in part, by general inflationary trends. While
not directly related to inflationary trends, Allegiance's revenue base over
recent years has been adversely affected by lower average selling prices on
certain products as a result of changes in Medicare reimbursement regulations,
economic pressures in the U.S. hospital marketplace and increased competition in
certain product lines. There is little correlation between general inflation
rates directly affecting costs and expenses and Allegiance's pricing levels for
products sold to health-care customers. Management expects that these trends
will continue.

LIQUIDITY AND CAPITAL RESOURCES

Management assesses Allegiance's liquidity in terms of its overall ability
to mobilize cash to support ongoing business levels and to fund its growth.
Management believes that it has sufficient cash flow from operations and
financial flexibility to attract long-term capital to support normal operating
activities and fund short-term and long-term growth objectives.

Allegiance's current assets exceeded current liabilities by $722 million at
June 30, 1996 versus an excess of $680 million and $1,055 million at December
31, 1995 and 1994, respectively. Current assets at June 30, 1996 included
accounts and notes receivable of $476 million and inventories of $656 million.
These sources of liquidity are convertible into cash over a relatively short
period of time and thus, will help Allegiance satisfy normal operating cash
requirements.

23
<PAGE>
DEBT AND FINANCIAL INSTRUMENTS

In connection with the Distribution, Allegiance entered into two revolving
unsecured credit facilities providing for up to $1.2 billion and $300 million
respectively (the "Credit Facilities"). The $1.2 billion credit facility expires
in September 2001 and the $300 million credit facility expires in September
1997. As of September 30, 1996, approximately $1.1 billion was outstanding under
the $1.2 billion credit facility, which bears interest at an average weighted
rate of 5.8% and matures on various dates from October 7, 1996 to November 29,
1996, and no amounts were outstanding under the $300 million credit facility.
Allegiance has borrowed under the $1.2 billion credit facility to fund
distributions to Baxter and for ongoing working capital requirements. As of
September 30, 1996, approximately $100 million was available for borrowing under
the $1.2 billion credit facility and $300 million was available for borrowing
under the $300 million credit facility. See "Description of Credit Facilities."

Assuming a debt level of $1.2 billion, Allegiance's long-term debt as a
percent of its total capitalization (the sum of long-term debt plus
stockholder's equity) would have been 46.2% at June 30, 1996. Net-
debt-to-net-capital (after consideration of cash equivalents including working
capital) would have been 44.4% at June 30, 1996. Allegiance expects to maintain
a net-debt-to-net-capital ratio between 40% and 45% over the next several years.

Allegiance intends to fund its short-term and long-term obligations as they
mature through cash flow from operations or by issuing additional debt.
Allegiance believes it will have lines of credit adequate to support ongoing
operational, capital and restructuring requirements. Beyond that, Allegiance
believes it has sufficient financial flexibility to attract long-term capital on
acceptable terms as may be needed to support its growth objectives.

CASH FLOW FROM OPERATIONS

Cash flow provided by operations (which includes working capital components)
was $136 million and $139 million for the six months ended June 30, 1996 and
1995, respectively. Cash flow provided by operations for 1995, 1994 and 1993,
was $253 million, $422 million and $336 million, respectively. The decrease in
cash flow provided by operations for the first six months of 1996 was the result
of a decline in earnings (resulting principally from the divestiture of the
Industrial and Life Sciences division), partially offset by improved balance
sheet management. The decline in cash flow provided by operations in 1995 was
primarily the result of a decline in earnings, resulting principally from the
divestitures of the Industrial and Life Sciences division and the diagnostics
manufacturing businesses. The increase in 1994 was the result of lower cash flow
from operations in 1993. The lower cash flow provided by operations in 1993 was
the result of changes in working capital components (principally inventory and
accrued liabilities).

To facilitate an emphasis on cash flow provided by operations, management
monitors an internal performance measure called "operational cash flow."
"Operational cash flow" is defined as cash flow provided by operations per
Allegiance's combined statement of cash flows, less capital expenditures and
plus the tax effect of divestiture gains (losses). This measure evaluates each
operating unit on all aspects of cash flow under its direct control. In
addition, the incentive compensation programs for Allegiance's senior management
in each operating unit include significant emphasis on the attainment of both
"operational cash flow" as well as earnings objectives.

24
<PAGE>
The following table reconciles cash flow provided by operations, as
determined by generally accepted accounting principles, to Allegiance's internal
measure of "operational cash flow" (brackets denote cash outflows):

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEARS ENDED DECEMBER 31,
-------------------- -------------------------------
1996 1995 1995 1994 1993
--------- --------- --------- --------- ---------
(UNAUDITED) (IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Cash flow provided by operations per Allegiance's
combined statements of cash flows................. $ 136 $ 139 $ 253 $ 422 $ 336
Capital expenditures............................... (33) (48) (112) (122) (273)
Other.............................................. -- (2) 41 3 15
--------- --------- --------- --------- ---------
Total "operational cash flow".................. $ 103 $ 89 $ 182 $ 303 $ 78
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>

The increase in "operational cash flow" in the first six months of 1996 as
compared to the same period in 1995 is primarily the result of reduced capital
expenditures, partially offset by the decline in cash flow provided by
operations discussed above. The decline in "operational cash flow" in 1995 was
primarily the result of the decline in cash flow provided by operations
discussed above. The increase in 1994 was the result of lower "operational cash
flow" in 1993. The lower "operational cash flow" in 1993 was the result of cash
flow provided by operations as discussed above and higher capital expenditures
resulting from the diagnostics manufacturing businesses.

INVESTMENT TRANSACTIONS

Net investment transactions for Allegiance are comprised of the following:

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31,
JUNE 30,
-------------------- -------------------------------
1996 1995 1995 1994 1993
--------- --------- --------- --------- ---------
(UNAUDITED) (IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Capital expenditures........................................ $ (33) $ (48) $ (112) $ (122) $ (273)
Acquisitions................................................ (14) -- (5) (2) (14)
Proceeds from asset dispositions............................ (10) 178 626 107 68
--- --------- --------- --------- ---------
Total investment transactions, net...................... $ (57) $ 130 $ 509 $ (17) $ (219)
--- --------- --------- --------- ---------
--- --------- --------- --------- ---------
</TABLE>

The reductions in capital expenditures in 1995 and 1994 are primarily the
result of Allegiance's divestitures of the Industrial and Life Sciences division
and the diagnostics manufacturing businesses. Management expects to invest in
capital expenditures at levels consistent with 1995 and 1994, principally for
improvements of its existing facilities, construction of new facilities and
system upgrades.

The acquisitions summarized in the above table involved no significant
change to Allegiance's strategic direction, and were made for the purpose of
acquiring technologies, broadening product lines and service offerings, or
expanding market coverage.

Proceeds from asset dispositions in the first half of 1995 primarily related
to cash received from the collection of notes receivable related to Allegiance's
divestiture of the diagnostics manufacturing businesses in December 1994. The
proceeds received from asset dispositions for the year ended December 31, 1995,
primarily related to cash received in connection with Allegiance's divestiture
of its Industrial and Life Sciences division in September 1995 and the
collection of notes receivable related to the divestiture of Allegiance's
diagnostics manufacturing businesses. See Notes 1 and 3 to "Notes to Combined
Financial Statements" for additional information related to these divestitures.

25
<PAGE>
LITIGATION

See Note 12 to "Notes to Combined Financial Statements" for a detailed
description of the status of Allegiance's litigation.

Under the U.S. Superfund statute and many state laws, generators of
hazardous waste which is sent to a disposal or recycling site are liable for
cleanup of the site if contaminants from that property later leak into the
environment. The law provides that potentially responsible parties may be held
jointly and severally liable for the costs of investigating and remediating a
site. This liability applies to the generator even if the waste was handled by a
contractor in full compliance with the law.

As of June 30, 1996, Baxter has been named as a potentially responsible
party for cleanup costs at ten hazardous waste sites, for which Allegiance has
assumed responsibility. The largest assumed exposure is at the Thermo-Chem site
in Muskegon, Michigan. Allegiance expects that the total cleanup costs for this
site will be between $44 million and $65 million, of which Allegiance's share
will be approximately $5 million. This amount, net of payments of approximately
$1 million, has been accrued and is reflected in Allegiance's combined financial
statements. The estimated exposure for the remaining nine sites is approximately
$4 million, which has been accrued and reflected in Allegiance's combined
financial statements.

Upon resolution of any of the uncertainties described in Note 12 to "Notes
to Combined Financial Statements," Allegiance may incur charges in excess of
available reserves. Management does not believe that such charges will have a
material impact on Allegiance's results of operations, cash flow or financial
position.

26
<PAGE>
BUSINESS

OVERVIEW

Allegiance is America's largest provider of health-care products and
cost-management services for hospitals and other health-care providers.
Allegiance was formed in June 1996 as a wholly owned subsidiary of Baxter
consisting of Baxter's U.S. distribution, surgical and respiratory-therapy
products, and health-care cost-management services operations. These integrated
businesses recorded total sales of approximately $4.5 billion in 1995.

The economics of health care are undergoing rapid and fundamental change,
particularly in the United States, which is Allegiance's largest current market.
In the past, doctors and nurses were paid for their services with few cost
constraints. Today, large employers, insurance companies and HMOs are
negotiating set fees for the care of patients. For U.S. hospitals and health
systems, Allegiance's main customers, the pressure to reduce costs has never
been greater. At the same time, demand for health services is continuing to
climb with the dramatic growth of elderly populations in the United States and
abroad. This environment offers opportunities for Allegiance, which has invested
in integrated product and service programs that help medical professionals cope
with health care's new economics and demographic trends. Management believes
Allegiance, with its size, breadth of product line, customer relationships,
growing array of cost-management services, and financial strength, is
well-positioned competitively for the increasingly cost-conscious health-care
marketplace.

The health-care distribution market in the United States has experienced
intense competition and a resultant erosion in its margins in recent years in
response to the growth of managed care and increased consolidation among
health-care providers. Allegiance has responded by integrating its
market-leading distribution capabilities with a broad product offering, high
levels of customer service and innovative cost-management services. Within a
larger Baxter organization, Allegiance's cost structure was higher than industry
standards. As an independent public company, Allegiance intends to realign its
cost structure in order to improve returns from its distribution operations.

STRATEGIC PROFILE

Allegiance's leading competitive position within the health-care marketplace
is a function of several key advantages, including its size and breadth of
products; an intense customer-service orientation; a growing portfolio of
cost-management services, and financial strength. Allegiance is the only
health-care company that fully integrates distribution, products and services to
bring greater efficiency to health care. Management believes its key competitive
advantages and integrated product and service offerings provide a solid platform
for growth.

SIZE AND BREADTH

Allegiance is the largest provider of health-care products and
cost-management services in the United States. Total net sales in 1995 were
approximately $4.5 billion. Allegiance offers more than 200,000 products -- the
broadest range of medical and laboratory products in the industry. Allegiance's
offering includes its own products as well as products manufactured by more than
2,000 independent suppliers. Allegiance can furnish up to 80% of a hospital's
total supply needs, excluding pharmaceuticals. Allegiance operates more than 60
distribution centers across the country, delivering products often on a
just-in-time basis. Management believes the size and scope of the Company are
key competitive advantages in the evolving health-care environment.

CUSTOMER SERVICE

Allegiance is recognized throughout the industry for its service to
customers. Allegiance develops relationships based on collaboration, quality
management processes and common goals. Its sales and

27
<PAGE>
service personnel are rewarded for achieving goals that are established jointly
with customers. Allegiance sets service standards in an industry where the time
from customer order to delivery can be critical. Management believes its focus
on customer service and satisfaction will continue to distinguish Allegiance
from competitors.

COST-MANAGEMENT SERVICES

Allegiance has pioneered a broad range of cost-management services, such as
shared-risk/shared-savings agreements that align Allegiance's goals with those
of its customers. Allegiance and its customers work together to reduce costs and
improve the quality of care. Allegiance assigns clinician consultants to these
cost-management customers. Allegiance's consultants use a proprietary "best
demonstrated practices" database of more than 500 procedures to help health-care
professionals use fewer supplies and improve outcomes. In addition to clinical
consulting, Allegiance offers a range of cost-management services, including
just-in-time delivery, procedure-based product packaging and outsourcing of
certain non-clinical functions. Management believes this portfolio of
cost-management services is a key competitive advantage in the increasingly
cost-conscious health-care market.

FINANCIAL STRENGTH

As America's leading provider of health-care products and cost-management
services, Allegiance has unparalleled opportunity to provide its services to
health-care providers. In 1995, on a pro forma basis, Allegiance achieved
approximately $4.5 billion of net sales, $950 million of gross profit and $350
million of earnings before interest, taxes, depreciation and amortization, or
EBITDA. Management believes that Allegiance's size and flexibility are important
competitive advantages in the rapidly changing health-care industry. In
addition, Allegiance has established an incentive compensation program for
senior managers that is linked to achieving certain cash-flow and earnings
objectives.

STRATEGIC PRIORITIES

Allegiance's strategy is to continue to improve the efficiency of and
returns from its distribution operations, to increase market penetration for its
self-manufactured and "best value" preferred distributed products, and to expand
its ability to help health-care professionals manage costs.

DISTRIBUTION SERVICES

Distribution services are the basis for Allegiance's relationships with
hospitals and laboratories and the starting point for strategic relationships
that align Allegiance's objectives with those of its customers. Strategic
priorities include improving the total economics of distribution; segmenting
customers based on their service needs; and increasing sales of "best value"
products, which result in better service for customers and higher returns for
Allegiance.

PRODUCT OFFERING

Allegiance's products -- from latex gloves to customized surgical-procedure
kits -- hold leadership positions in sales to U.S. hospitals. Allegiance's
strategic priorities include: (i) increasing sales through cost-management
agreements; (ii) increasing sales to non-hospital (alternate-site) health-care
providers in the United States and to customers in selected international
marketplaces; (iii) developing new integrated offerings of products and
cost-management services; (iv) selectively expanding the Allegiance product
portfolio; and (v) maintaining manufacturing operations at the highest levels of
quality and efficiency.

COST-MANAGEMENT SERVICES

Allegiance can bring to its customers more resources to control costs than
are offered by any competitor. Allegiance's strategy is to work in partnership
with hospitals and others in health care to help them become more efficient,
decrease costs and eliminate many of the logistical burdens that detract from
their primary business -- providing health care. Strategic priorities include
signing more shared-risk/shared-savings agreements and investing in new
cost-management services -- beyond supplies and logistics -- that help customers
reduce costs across a greater portion of their total operating budget.

28
<PAGE>
DISTRIBUTION SERVICES

Allegiance is the leading distributor of medical and laboratory products in
the United States. Allegiance can supply any of more than 200,000 different
products to its customers. Most items are available for shipment the same day
the customer requests them. Allegiance has more than 60 U.S. distribution
centers that deliver products to locations across the United States every day.
Each order can be tracked electronically. Allegiance has made substantial
investments in information systems to enhance its operations and improve service
to customers. In addition to its own surgical and respiratory-therapy products,
Allegiance distributes an array of products from more than 2,000 manufacturers
to a wide variety of health-care settings. Products range from full lines of
laboratory equipment and operating-room supplies to children's gift packs with
coloring books and crayons.

Allegiance divides its distributed products into two categories:
medical/surgical products ("med/ surg") and laboratory products. It is the
industry leader in both product categories. Allegiance's med/ surg portfolio
comprises a broad array of products, including sutures, endoscopy instruments,
needles and syringes, wound-care products, electrodes, face masks, bed pans,
wash basins, blood-pressure cuffs, stethoscopes, waste-disposal bags and others.
Increasingly, these products are being delivered just-in-time in ready-to-use
quantities. In some cases, Allegiance delivers the products directly to patient
floors. Allegiance distributes products not only to hospitals, but increasingly
to surgery centers, physician clinics, long-term and sub-acute care facilities,
home-care companies and other health-care providers. Laboratory products -- used
primarily to perform diagnostic tests -- are sold primarily to hospitals and
reference labs. These products include supplies such as test tubes, pipettes and
slides and equipment such as microscopes, centrifuges and scales.

THE VALUELINK-REGISTERED TRADEMARK- SERVICE

Allegiance's ValueLink-Registered Trademark- "stockless" inventory service
provides just-in-time deliveries of products in small, ready-to-use quantities
to hospitals and health-care networks primarily in metropolitan areas.
Allegiance was the first to bring just-in-time distribution to the health-care
industry and it remains the leader.

The ValueLink-Registered Trademark- service helps hospitals reduce inventory
levels and operating expenses. Orders from hospitals are transmitted
electronically and products are delivered several times a day, sometimes
directly to patient floors. In some ValueLink-Registered Trademark- accounts,
Allegiance personnel work at the hospital 24 hours a day, stocking shelves as
needed. Demand for this service has been strong. Allegiance ended 1995 with 133
ValueLink-Registered Trademark- accounts, compared with 108 in 1994 and 53 at
the end of 1993.

The ValueLink-Registered Trademark- service also serves as a channel through
which Allegiance delivers labor-saving, made-to-order packages containing
virtually every sterile and non-sterile product needed to perform dozens of
medical procedures, from open-heart bypass surgery to a hernia repair.

STRATEGIC SUPPLIER RELATIONSHIPS

In 1995, Allegiance began a process of consolidating its distribution
service around a carefully selected group of preferred suppliers, not
relinquishing product breadth, but seeking to reduce the number of suppliers
that furnish redundant items. This "best value" products strategy is designed to
strengthen Allegiance's relationships with fewer preferred suppliers, resulting
in savings to Allegiance and better service to its customers. At the same time,
Allegiance is continuing to streamline its distribution network to reduce costs,
improve service and strengthen the growing number of cost-management
relationships it is establishing with health-care providers and systems.

SUPPLY CHAIN MANAGEMENT

Supply-chain management requires precise knowledge and planning of customer
demand. Given Allegiance's size and scope, advanced information systems, and
balance of internally manufactured and externally supplied products, Allegiance
is well-positioned to maximize service to customers and minimize inventory
levels and variability. To accelerate this process, Allegiance has made major
investments in information technology that uses EDI, or electronic data
interchange, to exchange purchasing

29
<PAGE>
and inventory data with many of its suppliers and largest customers. Management
believes this integrated distribution and product offering strengthens
Allegiance's financial and competitive position. In 1995, Allegiance opened a
National Drop Ship Center in McGaw Park, Illinois, from which it distributes
less-frequently ordered items. By aggregating such products in one facility, the
amount of regional inventory variability has decreased and Allegiance has
achieved lower system-wide inventory levels.

SERVING HEALTH CARE OUTSIDE HOSPITALS

Health care increasingly is being delivered outside hospitals as health-care
providers re-evaluate their cost position and integrate into regional networks.
Many procedures previously performed in hospital operating rooms are now
performed in surgery centers, and some procedures that had been performed in
surgery centers are now taking place in physician clinics. To reach these
alternate-site customers -- surgery centers, physician clinics, subacute and
long-term care facilities, and home-care providers -- Allegiance has developed a
capability to make more frequent deliveries of smaller orders. Allegiance also
is entering into relationships with dealers that specialize in serving these
fast-growing markets. For some very small, or geographically remote customers,
Allegiance provides service through its Network Sales organization. This sales
and customer-service unit conducts business via the telephone, distributing in
some cases by commercial carrier.

PRODUCT OFFERING

Allegiance has differentiated itself by integrating its product offering
with its distribution and cost-management services. Allegiance offers the
industry's broadest range of medical and laboratory products, representing more
than 2,000 suppliers in addition to its own line of surgical and respiratory-
therapy products. In total, Allegiance can furnish up to 80 percent of a
hospital's supply needs, excluding pharmaceuticals.

Increasingly, Allegiance is working with health professionals to reduce the
variety and number of products they buy under agreements that provide incentives
for Allegiance to help customers save money. In return, customers purchase a
greater portion of their supplies from Allegiance. Allegiance's manufacturing
units custom-assemble purchased products into procedure-based modules.
Allegiance's distribution system -- the largest and most technologically
advanced of the industry -- delivers the customized packages as they are needed.
No other single company provides such a comprehensive offering.

Allegiance operates 28 manufacturing plants, producing products used in
surgery and other medical procedures. All Allegiance plants are ISO 9000
certified. Most of Allegiance's self-manufactured products hold leading sales
positions, and investing further in these product lines is a strategic priority.

Allegiance has several major product lines, most of which enjoy leading
sales positions:

CUSTOM-STERILE-TM- PRODUCTS AND THE PBDS-TM- SERVICE

Allegiance's leading Custom-Sterile-TM- products and Procedure Based
Delivery System-TM- (PBDS-TM-) service help health-care providers save time and
money by assembling customer-designated supplies into single packages for
specific procedures. Custom-Sterile-TM- packs contain sterile, disposable
supplies made by Allegiance and other manufacturers. They are used to perform
dozens of procedures, from open-heart surgery and childbirth to treating cuts
and bruises. Customers also can select items for these packs from a data base of
approximately 30,000 products from nearly 800 manufacturers. PBDS-TM- modules
contain Custom-Sterile-TM- packs along with non-sterile supplies. PBDS-TM- is
one of Allegiance's fastest-growing product-based cost-management services.
Introduced in 1993, the service was in place in 175 hospitals by the end of 1995
and is expected to be in place in 400 hospitals by the end of 1996. PBDS-TM-
modules often are delivered to operating rooms and other hospital departments on
a just-in-time basis through Allegiance's ValueLink-Registered Trademark-
distribution service.

30
<PAGE>
CONVERTORS-REGISTERED TRADEMARK- PRODUCTS

The Convertors-Registered Trademark- product line is a leading brand of
single-use surgical drapes, gowns and apparel. These products provide barrier
protection for patients, doctors and clinical staff during surgery, childbirth
and other procedures. Many of Allegiance's Convertors-Registered Trademark-
products are included in Custom Sterile-TM- packs.
Convertors-Registered Trademark- also provides clean-room apparel and equipment
covers for industrial manufacturers.

GLOVES

Allegiance is the world's largest manufacturer and marketer of medical
gloves. Allegiance produces latex surgical and exam gloves in Malaysia, the
world's biggest source of natural latex, as well as in the United States.
Allegiance also manufactures vinyl exam gloves in the United States.

MEDI-VAC-REGISTERED TRADEMARK- PRODUCTS

Allegiance is the world's leading producer of fluid suction and collection
systems. The Medi-Vac-Registered Trademark- line consists of disposable suction
canisters and liners, suction tubing, and supporting hardware and accessories.
These products are used in the operating room to remove fluids and debris from
the body during surgery. Outside the operating room, the products are used when
fluid must be removed from a patient. The Medi-Vac-Registered Trademark- product
line also includes wound-drainage tubing and reservoirs used to remove fluid
from closed wounds, preventing infection and promoting healing.
Medi-Vac-Registered Trademark- autotransfusion systems collect blood for
reinfusion to the patient after filtration, allowing patients to receive their
own blood instead of transfusions from donors.

RESPIRATORY THERAPY PRODUCTS

Allegiance is a leading manufacturer of respiratory-therapy products, which
are used primarily to deliver oxygen to patients suffering from respiratory
distress. This product line includes ventilator circuits (tubing used to connect
patients to ventilator machines), oxygen masks, cannulae, and suction catheters
used to clear the trachea.

V. MUELLER

Allegiance's V. Mueller product line consists of a broad range of
stainless-steel surgical instruments and related products and services. The
business was established in 1895 and is known worldwide for the quality of its
instruments. Allegiance's V. Mueller division manufactures about a third of its
product line; other products are sourced from contract manufacturers. V. Mueller
products include clamps, needle-holders, retractors, specialty scissors and
forceps. The business unit also manufactures and markets the cost-saving
Genesis-TM- container system -- complete instrument sets, assembled to order,
sterilized and ready for use in reusable metal containers.

SPECIAL PROCEDURE PRODUCTS

Allegiance provides specialty biopsy needles for extracting samples of bone
marrow and soft tissue, and a variety of specialty procedure trays. These
include lumbar puncture trays, for measuring pressure and taking samples of
cerebrospinal fluid; thoracentesis trays, for withdrawing fluid from chest or
abdominal cavities, or from joints or cysts; amniocentesis trays, for obtaining
amniotic fluid to assess the condition of fetuses; and other diagnostic trays
and products used by obstetricians and gynecologists.

OTHER PRODUCTS

Allegiance is a manufacturer and a marketer of a range of other leading
products. It is the world's largest producer of latex urinary drainage
catheters, and it manufactures endotracheal tubes for respiration, anesthesia
and other therapies. Allegiance produces a broad line of hot and cold packs used
to provide localized temperature therapy for orthopedic injuries and for
patients recovering from childbirth and surgical procedures. It also
manufactures and markets a broad line of patient-preparation, hair-removal and
skin-care products such as clippers, razors, and basins, as well as special
soaps, sponges and scrub brushes for surgeons and other operating-room
personnel.

31
<PAGE>
COST-MANAGEMENT SERVICES

Reducing costs while improving quality of care is the most significant
challenge facing health-care providers today. Allegiance offers the broadest
range of cost-management services in the health-care industry and is investing
significantly to expand its offering further.

Through its shared-risk/shared-savings programs, Allegiance aligns its goals
with those of its customers. Under these agreements, which Allegiance introduced
to the health-care industry in late 1994, the Company and its customers agree to
share the savings if supply and related costs fall below an agreed-upon target,
or share the overage if these costs exceed the target. As of June 1, 1996,
Allegiance had shared-risk/shared-savings agreements covering 34 hospitals. In
shared-risk/shared-savings accounts, Allegiance assigns a clinical project
manager to work with a hospital's clinical staff to identify patterns of supply
usage, reduce variation by standardizing procedures and products, and eliminate
unnecessary supplies. Product standardization involves the selection and use of
one preferred brand from many options. Savings are realized from selecting the
best-value product, cost efficiencies from increased volume for the selected
brand and dealing with fewer vendors. Procedure standardization involves helping
clinical staff reach consensus on what supplies should be used in a given
procedure, then packaging and distributing the products. A typical assignment
for a clinical project manager lasts 24 months. Hospitals ultimately buy fewer
supplies, but a greater total portion of their supplies from Allegiance. Sales
of Allegiance's surgical products, for example, have grown more than 40% in
these accounts, while the hospitals' total supply costs have decreased. To the
extent that savings do not materialize from these efforts, Allegiance will be
obligated to reimburse the customer for a portion of the shortfall.

Much of the savings generated in these cost-management accounts come from
the implementation of PBDS-TM- modules, which contain Allegiance's
self-manufactured products, "best value" products from preferred suppliers, and
other third-party distributed products. These modules reduce hospital labor,
purchasing and other product and product-management costs. Rather than ordering
products separately for a procedure, customers can order a single catalog
number. Rather than nurses having to locate and assemble individual products for
a procedure, the products arrive in one package. Additional savings are achieved
when PBDS-TM- modules are delivered just-in-time, direct to the point of use
through Allegiance's ValueLink-Registered Trademark- service. Only Allegiance
can offer such a unique combination of products and cost management services.

In addition, Allegiance offers customers professional consulting services,
including modules derived from Allegiance's proprietary database of
"best-demonstrated practices," to help hospitals improve their clinical
operations, reduce lengths of stay and improve clinical outcomes. Allegiance
also offers, through its ACCESS-TM- program, the expertise and services of
leaders in other industries such as waste management, food service and property
management.

Each of Allegiance's manufacturing units also offers programs to help
customers control costs. There are programs to help health-care providers
standardize and select the most cost-effective drapes, gowns, gloves and other
products for various procedures; identify the most cost-effective mix of
products to include in custom procedure kits; sterilize, repair and refurbish
surgical instruments; and process reusable laundry, linen and textiles. The
Right Choice-TM- glove-management program, for example, helps health-care
providers select the most cost-effective glove for various procedures while
ensuring appropriate patient care and worker safety.

CONTRACTUAL ARRANGEMENTS; BUYING GROUPS

A substantial portion of Allegiance's products are sold through contracts
with purchasers. Some of these contracts are for terms of more than one year and
include limits on price increases. In the case of hospitals, clinical
laboratories and other facilities, these contracts may provide the customer
incentives to purchase particular products or categories of products. Some of
these contracts are entered into with hospital buying groups which seek to
achieve economies of scale in aggregating multiple hospitals' purchases from
Allegiance.

32
<PAGE>
For the last three years, as a percentage of Allegiance's total revenue,
sales to customers which are members of two of the largest hospital buying
groups, Premier Purchasing Partners, LP ("Premier," which is an affiliate of
Premier, Inc.) and VHA, Inc. ("VHA"), comprised 27% and 16% respectively in
1995, 23% and 13% respectively in 1994, and 23% and 13% respectively in 1993.
Some member hospitals in each group are free to purchase from the vendors of
their choice. The loss of the relationship with either group would not
necessarily mean the loss of sales attributable to all members of such group. In
addition, management of Allegiance believes that its relationships with its
larger customers are excellent. No other buying group or single customer
currently accounts for more than 5% of Allegiance's revenue.

SALES AND MARKETING

Allegiance conducts its selling efforts through its subsidiaries. These
subsidiaries have their own sales forces and direct their own sales efforts. In
the United States, Allegiance has implemented a "team selling" approach with
many of its hospitals, health systems and multi-hospital group customers. This
approach relies on an account manager to coordinate the various Allegiance
businesses' sales efforts. The account manager assumes responsibility for all
sales and service contacts with a given customer, acting as a focal point, and
assembles cross-functional teams as needed to meet that customer's requirements.
Allegiance manages its field sales and service organization on a regional basis.
The regional sales organization is designed to develop strong strategic
relationships with customers. In addition, sales are made to independent
distributors, dealers and sales agents. Outside of the U.S., Allegiance products
are distributed through Baxter. See "Relationship with Baxter."

RAW MATERIALS SUPPLIERS

Raw materials essential to Allegiance's business are purchased worldwide in
the ordinary course of business from numerous suppliers. The vast majority of
these materials are generally available, and no serious shortages or delays have
been encountered. Certain raw materials used in producing some of Allegiance's
products, including its latex products, are available only from a small number
of suppliers.

In some of these situations, Allegiance has long-term supply contracts with
its suppliers, although it does not consider its obligations under such
contracts to be material. Allegiance does not always recover cost increases
through customer pricing due to contractual limits and market pressure on such
price increases. See "-- Contractual Arrangements; Buying Groups" and
"Relationship with Baxter."

PATENTS AND TRADEMARKS

Allegiance does not consider any one or more of the patents and trademarks
it holds, or the licenses granted to or by it with respect to any patent or
trademark to be essential to its businesses.

COMPETITION

Allegiance is faced with substantial competition in all of its markets. The
changing health-care environment in recent years has led to increasingly intense
competition among health-care suppliers. Competition is focused on price,
service and product performance. Pressure in these areas is expected to
continue. See "Risk Factors -- United States Competition."

The future financial success of health-care product and service companies,
such as Allegiance, will depend on their ability to work with health-care
customers to help them enhance their competitiveness through cost management
initiatives. Management believes it can help its customers achieve savings in
the total health-care system by automating supply-ordering procedures,
optimizing distribution networks, improving utilization and materials management
and achieving economies through product and procedure standardization, and
performing certain non-clinical services on an outsourced basis. Management
further believes that its strategy of providing high levels of service to its
health-care customers and achieving the best overall cost in its delivery of
health-care products and services is compatible with any anticipated realignment
of the U.S. health-care system that may ultimately occur.

33
<PAGE>
QUALITY CONTROL

Allegiance places great emphasis on providing quality products and services
to its customers. An integrated network of quality systems, including control
procedures that are developed and implemented by technically trained
professionals, result in rigid specifications for raw materials, packaging
materials, labels, sterilization procedures and overall process control. The
quality systems integrate the efforts of raw material and finished goods
suppliers to provide the highest value to customers. On a statistical sampling
basis, a quality assurance organization tests components and finished goods at
different stages in the manufacturing process to assure that exacting standards
are met.

GOVERNMENT REGULATION

Most of the products manufactured or sold by Allegiance in the United States
are subject to regulation by the Food and Drug Administration ("FDA"), as well
as by other federal and state agencies. The FDA regulates the introduction and
advertising of new drugs and devices as well as manufacturing procedures,
labeling and record keeping with respect to drugs and devices. The FDA has the
power to seize adulterated or misbranded drugs and devices or to require the
manufacturer to remove them from the market and the power to publicize relevant
facts. From time to time, Baxter has removed products from the market that were
found not to meet acceptable standards. This may occur with respect to
Allegiance in the future. Product regulatory laws exist in most other countries
where Allegiance will do business.

Environmental policies of Allegiance mandate compliance with all applicable
regulatory requirements concerning environmental quality and contemplate, among
other things, appropriate capital expenditures for environmental protection.
Various non-material capital expenditures for environmental protection were made
by Baxter related to the Allegiance Business during 1995 and similar
expenditures are planned for 1996. See "-- Legal Proceedings."

EMPLOYEES

As of August 1, 1996, Allegiance employed approximately 22,000 people.

LEGAL PROCEEDINGS

As of the Distribution Date, Allegiance assumed the defense of litigation
involving claims related to the Allegiance Business, including certain claims of
alleged personal injuries as a result of exposure to natural rubber latex gloves
described below. Allegiance has not been named as a defendant in this litigation
but will be defending and indemnifying Baxter Healthcare Corporation ("BHC"), as
contemplated by the Reorganization Agreement, for all expenses and potential
liabilities associated with claims pertaining to this litigation. It is expected
that Allegiance will be named as a defendant in future litigation, and may be
added as a defendant in existing litigation.

BHC was one of ten defendants named in a purported class action filed in
August 1993, on behalf of all medical and dental personnel in the state of
California who allegedly suffered allergic reactions to natural rubber latex
gloves and other protective equipment or who allegedly have been exposed to
natural rubber latex products. (KENNEDY, ET AL., V. BAXTER HEALTHCARE
CORPORATION, ET AL., Sup. Ct., Sacramento Co., Cal., #535632). The case alleges
that users of various natural rubber latex products, including medical gloves
made and sold by BHC and other manufacturers, suffered allergic reactions to the
products ranging from skin irritation to systemic anaphylaxis. The Court granted
defendants' demurrer to the class action allegations. On February 29, 1996, the
California Appellate Court upheld the trial court's ruling. In April 1994, a
similar purported class action, GREEN, ET AL. V. BAXTER HEALTHCARE CORPORATION,
ET AL., (Cir. Ct., Milwaukee Co., WI, 94CV004977) was filed against Baxter and
three other defendants. The class action allegations have been withdrawn, but
additional plaintiffs added individual claims. On July 1, 1996, the Company was
served with a similar purported class action, WOLF V. BAXTER HEALTHCARE CORP. ET
AL., Circuit Court, Wayne County, MI, 96-617844NP. The Company is the only named
defendant in that suit. As of August 19, 1996, 36 additional lawsuits have been
served on BHC containing similar allegations of sensitization to natural rubber
latex products. Allegiance intends to vigorously defend against these actions.
Since none of these cases has proceeded to a hearing on the merits, Allegiance
is unable to evaluate the extent of any potential liability, and unable to
estimate any potential loss.

34
<PAGE>
Allegiance believes that a substantial portion of the liability and defense
costs related to natural rubber latex gloves cases and claims will be covered by
insurance, subject to self-insurance retentions, exclusions, conditions,
coverage gaps, policy limits and insurer solvency. BHC has notified its
insurance companies that it believes that these cases and claims are covered by
BHC's insurance. Most of BHC's insurers have reserved their rights (i.e.,
neither admitted nor denied coverage), and may attempt to reserve in the future,
the right to deny coverage, in whole or in part, due to differing theories
regarding, among other things, the applicability of coverage and when coverage
may attach. It is not expected that the outcome of these matters will have a
material adverse effect on Allegiance's business, results of operations or
financial condition.

As of June 30, 1996, BHC has been named as a potentially responsible party
for cleanup costs at ten hazardous waste sites for which Allegiance has assumed
responsibility. Allegiance's largest exposure is at the Thermo-Chem site in
Muskegon, Michigan. Allegiance expects that the total cleanup costs for this
site will be between $44 million and $65 million, of which Allegiance's share
will be approximately $5 million. This amount, net of payments of approximately
$1 million, has been accrued and is reflected in Allegiance's combined financial
statements. The estimated exposure for the remaining nine sites is approximately
$4 million, which has been accrued and reflected in Allegiance's combined
financial statements. It is not expected that the outcome of these matters will
have a material adverse effect on Allegiance's business, results of operations
or financial condition.

BHC is a defendant in a number of other claims, investigations and lawsuits
for which Allegiance has assumed responsibility. Based on the advice of counsel,
management does not believe that the other claims, investigations and lawsuits
individually or in the aggregate, will have a material adverse effect on
Allegiance's business, results of operations or financial condition.

PROPERTIES

Allegiance owns or has long-term leases on substantially all of its major
manufacturing facilities. Allegiance maintains 28 manufacturing facilities in
the United States, and also operates manufacturing facilities in France,
Malaysia, Malta and Mexico. Allegiance owns or leases 60 distribution centers in
the United States.

Allegiance maintains a continuing program for improving its properties,
including the retirement or improvement of older facilities and the construction
of new facilities. This program includes improvement of manufacturing facilities
to enable production and quality control programs to conform with the current
state of technology and government regulations.

35
<PAGE>
MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The Company's directors and executive officers and their ages as of June 30,
1996 are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
- -------------------------------- --- ----------------------------------------------------------------

<S> <C> <C>
Lester B. Knight................ 38 Chairman of the Board and Chief Executive Officer

Joseph F. Damico................ 42 President and Chief Operating Officer

Peter B. McKee.................. 58 Senior Vice President and Chief Financial Officer

Kathy Brittain White............ 46 Senior Vice President and Chief Information Officer

Robert B. DeBaun................ 46 Corporate Vice President

Mark J. Ehlert.................. 42 Corporate Vice President

Gail Gaumer..................... 44 Corporate Vice President of Allegiance Healthcare Corporation

Robert J. Zollars............... 39 Group Vice President of Allegiance Healthcare Corporation

Richard C. Adloff............... 38 Corporate Vice President and Controller

William L. Feather.............. 49 Senior Vice President, General Counsel and Secretary

Leonard G. Kuhr................. 38 Corporate Vice President and Treasurer

Silas S. Cathcart............... 70 Director

David W. Grainger............... 68 Director

Arthur F. Golden................ 50 Director

Michael D. O'Halleran........... 46 Director

Kenneth D. Bloem................ 50 Director

Connie Curran, Ed.D............. 49 Director

Roger L. Sisterman.............. 52 Corporate Vice President of Allegiance Healthcare Corporation
</TABLE>

LESTER B. KNIGHT has been chairman of the board and chief executive officer
of Allegiance, since June 1996. From 1992 to June 1996, Mr. Knight was executive
vice president of Baxter, responsible for its U.S. Healthcare business. Mr.
Knight joined Baxter in 1981 and served in several manufacturing,
research-and-development and management positions before being named general
manager of Baxter's renal business in 1987. He was named president of the renal
business in 1988 and president of the I.V. Systems business the following year.
He was elected a corporate vice president of Baxter in 1990, and was named
executive vice president in 1992.

JOSEPH F. DAMICO has been president and chief operating officer of
Allegiance, since June 1996. From 1993 to June 1996, Mr. Damico was group vice
president, responsible for Baxter's Field Sales, Health Systems, and
Distribution organizations in the U.S. Healthcare business. Mr. Damico joined
Baxter in 1979 as a sales representative and served in a variety of management
positions before being

36
<PAGE>
named vice president and general manager of the company's Custom Sterile
division in 1987. He was named president of the Convertors/Custom Sterile
business in 1989 and also assumed responsibility for Baxter's Pharmaseal
division in 1992. He was elected a corporate vice president the same year.

PETER B. MCKEE has been senior vice president and chief financial officer of
Allegiance since September 1996. From May 1996 to June 1996, Mr. McKee worked at
Baxter. Prior to that date, he had been senior vice president and chief
financial officer at FoxMeyer Health Corporation, a leading pharmaceutical
distributor, since 1993. Mr. McKee's career as a financial executive spans more
than 35 years. Before joining Dallas-based FoxMeyer, he worked in financial
consulting and held CFO positions at Metro Airlines and Swift Independent
Packing. He also has held senior financial positions at Ford Motor Company and
Cooper Industries Inc.

KATHY BRITTAIN WHITE has been senior vice president and chief information
officer of Allegiance since September 1996. Prior to that date, Ms. White served
as corporate vice president and chief information officer of Baxter, since 1995.
She came to Baxter from AlliedSignal Corporation, where she had served as vice
president, information systems and services since 1993. Prior to that, she was
vice president, corporate services, for Guilford Mills, Inc.

ROBERT B. DEBAUN has been a corporate vice president of Allegiance,
responsible for human resources, since September 1996. Prior to that date, Mr.
DeBaun served as vice president of human resources for the U.S. Distribution
organization of Baxter, since 1991. Mr. DeBaun joined Baxter in 1981 as manager
of college relations. In 1986, after a series of increasingly responsible
positions, he was named vice president, human resources, for Baxter's I.V.
Systems group.

MARK J. EHLERT has been a corporate vice president of Allegiance,
responsible for quality assurance and regulatory affairs, since September 1996.
Prior to that date, Mr. Ehlert served as vice president, quality and regulatory
affairs, for Baxter's U.S. Sales and Distribution organization, since 1994. Mr.
Ehlert joined Baxter in 1975. In 1990, after a series of increasingly
responsible positions, he was promoted to general manager of Baxter's Singapore
manufacturing operations.

GAIL GAUMER has been a corporate vice president of a subsidiary of
Allegiance, responsible for strategy and business development as well as cost
management services, since September 1996. Prior to that date, Ms. Gaumer served
as president of marketing, strategy and business development for Baxter's U.S.
Healthcare business, since 1995. Ms. Gaumer joined Baxter in 1980 and held a
number of positions in its subsidiary's Renal business. Most recently, she was
president of Renal-Europe. Before that, she was vice president of global
marketing, planning and new business development, and then vice president and
general manager for the Renal business. Before joining Baxter, she worked for
ALZA Corporation, a drug-delivery company. Ms. Gaumer is a director of FemRx,
Inc.

ROBERT J. ZOLLARS has been a group vice president of a subsidiary of
Allegiance since September 1996. He leads the regional companies and health
systems organizations of Allegiance. Prior to that date Mr. Zollars served as
president of Baxter's U.S. Distribution, responsible for its Hospital Supply/
Scientific Products, Life Sciences, Hospitex, Dietary Products, and ValueLink
distribution businesses, since 1994. Mr. Zollars joined Baxter in 1979 as a
sales representative for the Scientific Products division and rose to vice
president and general manager of the division in 1983. In 1986, he was named
president of the Dietary Products division, and in 1990, became president of the
I.V. Therapy business. He was named president of the Hospital Supply division in
1992, and assumed additional responsibility for Scientific Products in 1993.

RICHARD C. ADLOFF has been a corporate vice president and controller of
Allegiance, since September 1996. Prior to that date, Mr. Adloff served as vice
president of finance for Baxter's U.S. Healthcare business, since 1994. Mr.
Adloff joined Baxter in 1980 with the Hospital Supply division. In 1990, after a
series of increasingly responsible positions in distribution and manufacturing,
he was promoted to vice president -- finance of IV Systems.

WILLIAM L. FEATHER has been senior vice president, general counsel and
secretary of Allegiance since June 1996 and will head its law function. Prior to
that date, Mr. Feather served as associate general

37
<PAGE>
counsel for Baxter's U.S. Healthcare business since January 1996. Mr. Feather
joined Baxter in 1986 as corporate counsel. He was promoted to senior counsel in
1990 and assistant general counsel in January 1994.

LEONARD G. KUHR has been a corporate vice president and treasurer of
Allegiance since September 1996. He will also supervise its tax function. Prior
to June 1996, Mr. Kuhr served as vice president, capital markets, in a Baxter
subsidiary's Treasury group since 1995. From 1992 to 1995, Mr. Kuhr was vice
president, finance, for Baxter's Surgical business. Mr. Kuhr joined Baxter in
1979 and served in a variety of management positions in the Corporate Tax
department, in both domestic and international functions. He was named vice
president and controller of the Specialty Business group in Baxter's U.S.
Distribution business in 1992.

SILAS S. CATHCART has been a director of Allegiance since September 1996.
Mr. Cathcart is a director of General Electric Company and The Quaker Oats
Company. Mr. Cathcart is also a trustee of Northern Funds Mutual Fund. From 1985
to 1987, and from 1990 to the present, Mr. Cathcart served as a director of
Baxter. From 1970 to 1985 he served as a director of American Hospital Supply
Corporation. Mr. Cathcart served as chairman of the board and chief executive
officer of Kidder, Peabody Group Inc., an investment banking firm, from 1988 to
1989, and as president and chief executive officer from 1987 to 1988. From 1972
to 1986, he was chairman of Illinois Tool Works, Inc.

DAVID W. GRAINGER has been a director of Allegiance since September 1996.
Since 1968, Mr. Grainger has been chairman of the board of W. W. Grainger, Inc.,
a nationwide distributor of equipment, components and supplies. He joined W. W.
Grainger, Inc. in 1952. From 1990 to the present, Mr. Grainger has served as a
director of Baxter.

ARTHUR F. GOLDEN has been a director of Allegiance since September 1996.
Since 1978, Mr. Golden has been a partner of Davis, Polk & Wardwell, a general
practice law firm. He is a director of Esco Electronics Corporation and Borg
Warner Security Corporation.

MICHAEL D. O'HALLERAN has been a director of Allegiance since September
1996. Since 1995, Mr. O'Halleran has been president of Aon Group, Inc., an
insurance holding company, and since 1988, he has been the chairman of the board
of Aon Risk Services, Inc., a subsidiary of that company.

KENNETH D. BLOEM has been a director of Allegiance since September 1996.
Since 1994, Mr. Bloem has been the chief executive officer of The Advisory Board
Company, a privately held research and publishing company. From 1989 to 1994, he
was the president of Stanford University Hospital.

CONNIE CURRAN has been a director of Allegiance since September 1996. Since
1995, Ms. Curran has been president of CurranCare, Inc., a nation-wide hospital
based home care management company. From 1990 to 1995, she was the vice
chairman/national director of patient services of APM, Inc.

ROGER L. SISTERMAN has been a corporate vice president of a subsidiary of
Allegiance, responsible for manufacturing worldwide, since September 1996. Prior
to that date, Mr. Sisterman served as vice president of manufacturing and
operations for the U.S. Healthcare business of Baxter since 1994. Mr. Sisterman
joined Baxter in 1977 and held a number of positions. In 1985, Mr. Sisterman
became director of materials management for Baxter's Pharmaseal division. In
1987, he was promoted to vice president of manufacturing for Baxter Custom
Sterile, and in 1991, for Baxter Convertors/Custom Sterile.

CLASSIFIED BOARD OF DIRECTORS

The Certificate of Incorporation of Allegiance provides that the Allegiance
directors (other than those who may be elected by the holders of any series of
Preferred Stock of Allegiance under specified circumstances), will be divided
into three classes of directors, with the classes to be as nearly equal in
number as possible. The Certificate of Incorporation provides that the term of
office of the first class will expire at the 1997 annual meeting of stockholders
("Class I"), the term of office of the second class will expire at the 1998
annual meeting of stockholders ("Class II") and the term of office of the third
class will

38
<PAGE>
expire at the 1999 annual meeting of stockholders ("Class III"). Messrs.
Cathcart and O'Halleran serve as Class I directors, Messrs. Damico and Golden
and Ms. Curran serve as Class II directors and Messrs. Knight, Grainger and
Bloem serve as Class III directors.

COMMITTEES OF THE BOARD OF DIRECTORS

The Board of Directors of Allegiance has established two Committees, the
Audit and Public Policy Committee and the Compensation and Nominating Committee.

The Audit and Public Policy Committee reviews the scope of the audit by the
independent auditors, inquires into the effectiveness of Allegiance's accounting
and internal control functions, and recommends to the Allegiance Board any
changes in the appointment of independent auditors which the committee may deem
to be in the best interests of the corporation and its stockholders. The
committee also assists the Board in establishing and monitoring compliance with
the ethical standards of Allegiance. The Audit and Public Policy Committee also
reviews the policies of Allegiance to assure they are consistent with its social
responsibility to employees, customers and to society, including policies
relating to health and safety and ethics. The committee consists solely of
directors who are independent of management. Members of this committee consist
of Mr. O'Halleran (Chairman), Mr. Cathcart, Mr. Grainger, Mr. Golden, Mr. Bloem
and Ms. Curran.

The Compensation and Nominating Committee determines the compensation of
officers, other than the chairman of the board and chief executive officer,
exercises the authority of the Board concerning employee benefit plans,
administers Allegiance's stock option plans, and advises the Board on other
compensation and employee benefit matters. In addition, the committee makes
recommendations to the Board regarding candidates for election as directors of
Allegiance. The committee also advises the Board on board committee structure
and membership. The committee consists solely of directors who are independent
of management. Members of this committee consist of Mr. Cathcart (Chairman), Mr.
Golden, Mr. O'Halleran, Mr. Bloem and Ms. Curran.

COMPENSATION OF DIRECTORS

Cash compensation of non-employee directors consists of a $1,000 fee for
each board and each committee meeting attended. Chairpersons of committees
receive an additional annual retainer of $3,000. Employee directors are not
compensated separately for their board or committee activities.

In addition, to align the directors' interests more closely with the
interest of all of the Company's stockholders, each non-employee director
receives options to purchase (at fair market value on the date of grant) 10,000
shares of Allegiance common stock under the Allegiance Corporation 1996 Outside
Director Incentive Compensation Plan. Such options vest one year after date of
grant. An aggregate of 350,000 shares of common stock are reserved for issuance
under such plan.

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<PAGE>
EXECUTIVE COMPENSATION

The following table shows the 1995 compensation for services rendered by the
chairman of the board and chief executive officer of Allegiance and the
individuals who are expected to be the next four most highly compensated
executive officers of Allegiance (collectively, the "named executive officers")
based on their 1995 Baxter compensation. The compensation shown in this table
was paid by Baxter (or its subsidiaries) for all of their services to Baxter and
its subsidiaries. References to "restricted stock" and "stock options" mean
restricted shares of common stock of Baxter ('Baxter Stock') and options to
purchase Baxter Stock. Amounts shown are for each individual in their last
position with Baxter, and do not necessarily reflect the compensation which
these five individuals will earn in their new capacities as executive officers
of Allegiance.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG TERM COMPENSATION
-----------------------------------------
AWARDS
ANNUAL COMPENSATION --------------------------
------------------------------------------------ RESTRICTED SECURITIES PAYOUTS
OTHER ANNUAL STOCK UNDERLYING ------------- ALL OTHER
NAME AND PRINCIPAL SALARY BONUS COMPENSATION AWARD(S) OPTIONS LTIP PAYOUTS COMPENSATION
POSITION YEAR ($)(1) ($)(1) ($) ($)(2) (#) ($) ($)(3)
- ---------------------- --------- --------- --------- --------------- ----------- ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Lester B. Knight 1995 $ 367,000 $ 350,000 $ 12,134 $ 23,139 44,800 -0- $ 23,241
Chairman of the Board
& Chief Executive
Officer
Joseph F. Damico 1995 $ 285,000 $ 170,000 $ 2,432 -0- 22,900 -0- $ 13,866
Chief Operating
Officer
Kathy B. White 1995 $ 182,692 $ 142,500 $ 929 $ 319,600 41,000 -0- $ 0
Corporate Vice
President
Robert J. Zollars 1995 $ 230,000 $ 43,200 -- -0- 10,000 -0- $ 9,346
Corporate Vice
President
Gail Gaumer 1995 $ 200,000 $ 43,200 -- -0- 8,500 -0- $ 8,446
Corporate Vice
President
</TABLE>

- ---------------
(1) Amounts shown include cash compensation earned by the named executive
officers during the year indicated, including amounts deferred at the
election of those officers. Bonuses are paid in the year following the year
during which they are earned.

(2) Amounts shown represent the market value at the date of grant, without
giving effect to the diminution in value attributable to the restrictions on
such stock. The amounts shown in this column include grants to the specified
named executive officers under Baxter's 1989 Long-Term Incentive Plan. The
restricted shares granted to Mr. Knight and Ms. White under that Plan could
be earned based on 1996 performance and, if so, they would ordinarily vest
on December 31, 1997. As of December 31, 1995, the number and value of the
aggregate Baxter restricted stock holdings of the named executive officers
are as follows: Mr. Knight -- 22,000 shares ($921,250); Mr. Damico -- 11,508
shares ($481,898); Ms. White -- 9,400 shares ($393,625); Mr. Zollars --
6,931 shares ($290,236); Ms. Gaumer -- 4,408 shares ($184,585). Dividends
are payable on all outstanding shares of Baxter restricted stock held by all
executives at the same rate and time and in the same form in which dividends
are payable on all outstanding shares of Baxter Stock, as required by
Baxter's 1987 Incentive Compensation Program.

(3) Amounts shown represent Baxter matching contributions in Baxter's Incentive
Investment Plan, a qualified section 401(k) profit sharing plan, additional
matching contributions in Baxter's deferred compensation plan and the dollar
value of Baxter split-dollar life insurance benefits. Those three amounts
for 1995, expressed in the same order as identified above, for the named
executive officers are as follows: Mr. Knight -- $4,500, $18,510, and $231;
Mr. Damico -- $4,500, $9,300, and $66; Ms. White -- (none); Mr. Zollars --
$4,500, $4,762, and $84; Ms. Gaumer -- $4,500, $3,852, and $94.

40
<PAGE>
Of the five named executive officers, Mr. Zollars and Ms. Gaumer are
eligible to receive a special incentive payment equal to one times annual base
salary. The payment will be made on December 31, 1996 as long as they have not
voluntarily resigned, been terminated for cause, or have accepted a position
outside of the Allegiance organization.

STOCK OPTION GRANTS

The following table contains information relating to the Baxter stock option
grants made in 1995 under Baxter's 1994 Incentive Compensation Program to the
named executive officers.

BAXTER OPTION GRANTS IN LAST FISCAL YEAR (1)(2)(3)

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------
PERCENT OF
NUMBER OF TOTAL OPTIONS POTENTIAL REALIZABLE VALUE AT ASSUMED
SECURITIES GRANTED TO ANNUAL RATES OF STOCK
UNDERLYING EMPLOYEES IN EXERCISE OR PRICE APPRECIATION FOR OPTION TERM
OPTIONS FISCAL BASE PRICE EXPIRATION --------------------------------------------
NAME GRANTED (#) YEAR (4) ($/SH)(5) DATE 0% ($) 5% ($)(6) 10% ($)(6)
- -------------------------- ------------ ------------- ----------- ----------- ----------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Mr. Knight................ 44,800 0.9% $ 37.25 7/29/05 $ -0- $ 1,049,498 $ 2,659,637
Mr. Damico................ 22,900 0.4% $ 37.25 7/29/05 $ -0- $ 536,462 $ 1,359,502
21,000 0.4% $ 37.25 7/29/05 $ -0- $ 491,952 $ 1,246,705
Ms. White (7)............. 20,000 0.4% $ 34.00 4/24/05 $ -0- $ 427,648 $ 1,083,744
Mr. Zollars............... 10,000 0.2% $ 37.25 7/29/05 $ -0- $ 234,263 $ 593,669
Ms. Gaumer................ 8,500 0.2% $ 37.25 7/29/05 $ -0- $ 199,124 $ 504,619
</TABLE>

- ---------------
(1) No SARs were granted by Baxter in 1995.

(2) All options shown in this table except for the 20,000 share grant to Ms.
White, become exercisable five years from the date of grant, subject to
accelerated vesting as follows. One hundred percent of the option will
become exercisable on the first business day after the ninetieth consecutive
calendar day during which the average fair market value of Baxter Stock
equals or exceeds $50 per share. Ms. White's 20,000 share grant becomes
exercisable five years from the date of grant, subject to accelerated
vesting as follows. Fifty percent of the option became exercisable on
December 27, 1995; fifty percent of the option will become exercisable on
the first business day after the ninetieth consecutive calendar day during
which the average fair market value of Baxter Stock equals or exceeds $50
per share. The exercise price may be paid in cash or shares of Baxter Stock.
Baxter's 1994 Program provides that if specified corporate control changes
occur, all outstanding options will become exercisable immediately.

(3) The Compensation Committee of the Board of Directors of Baxter adopted an
equitable adjustment formula applicable to all options to purchase Baxter
Stock which are outstanding as of the Distribution Date. The formula, which
is consistent with tax and accounting rules, is intended to preserve the
value of the options after the Distribution Date.

(4) In 1995, Baxter granted options on approximately 5.2 million shares of
Baxter Stock to approximately 6,400 employees.

(5) The exercise price shown is the closing price of Baxter Stock on the date of
grant, which was July 31, 1995 for all options except the option granted to
Ms. White for 20,000 shares. The exercise price shown for the 20,000 shares
granted to Ms. White is the closing price of Baxter Stock on the date of
grant which was April 24, 1995.

(6) The amounts shown in these two columns represent the potential realizable
values using the options granted and the exercise price. The assumed rates
of stock price appreciation are set by the Commission's executive
compensation disclosure rules and are not intended to forecast the future
appreciation of Baxter Stock.

(7) The 20,000 share grant to Ms. White was an element of the compensation
package provided to her upon joining Baxter in her current role. The 21,000
share grant she received was part of Baxter's normal option grant process.

41
<PAGE>
STOCK OPTION EXERCISES

The following table contains information relating to the exercise of Baxter
stock options by the named executive officers in 1995 as well as the number and
value of their unexercised Baxter options as of December 31, 1995.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS
SHARES FISCAL YEAR-END (#)(1) AT FISCAL YEAR END ($)(2)
ACQUIRED ON VALUE ---------------------------- ----------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------- ------------ ------------ ------------ -------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Mr. Knight............... -0- N/A 46,757 53,800 $ 619,426 $ 350,075
Mr. Damico............... -0- N/A 32,140 27,733 $ 486,278 $ 182,652
Ms. White................ -0- N/A 10,000 31,000 $ 78,750 $ 175,875
Mr. Zollars.............. -0- N/A 27,784 12,534 $ 429,462 $ 82,722
Ms. Gaumer............... -0- N/A 20,320 9,867 $ 310,449 $ 61,014
</TABLE>

- ------------
(1) The sum of the numbers under the Exercisable and Unexercisable columns of
this heading represents each named executive officer's total outstanding
Baxter options.

(2) The dollar amounts shown under the Exercisable and Unexercisable columns
represent the number of exercisable and unexercisable Baxter options,
respectively, which were "In-the-Money" on December 31, 1995, multiplied by
the difference between the closing price of Baxter Stock on December 31,
1995, which was $41.875 per share, and the exercise price of the Baxter
options. For purposes of these calculations, In-the-Money options are those
with an exercise price below $41.875 per share.

BAXTER PENSION PLAN

The Baxter International Inc. and Subsidiaries Pension Plan's (the "Baxter
Pension Plan") normal retirement benefit equals 1.75% of the average of an
employee's five highest consecutive calendar years of earnings out of his or her
last ten calendar years of earnings ("Final Average Pay"), multiplied by the
employee's years of benefit service, as determined by the Baxter Pension Plan.
In general, the earnings covered by the Baxter Pension Plan include salary,
annual cash bonuses and other regular pay. The figures shown include benefits
payable under the Baxter Pension Plan and Baxter's related defined benefit
excess pension plan. The estimates assume that benefit payments begin at age 65
under a single life annuity form. The figures are net of the Social Security
offset specified by the Baxter Pension Plan's benefit formula and therefore do
not include Social Security benefits payable from the federal government. The
primary Social Security amount used in the calculations is that payable for an
individual attaining age 65 in 1995.

Eligible Allegiance employees (transferring employees) will continue to
participate for purposes of benefit accruals in the Baxter Pension Plan through
the Distribution Date. All benefit accruals for Allegiance employees in the
Baxter Pension Plan cease as of the Distribution Date and all Allegiance
employees will be fully vested in their accrued benefits under the Baxter
Pension Plan as of such date. The terms of the Baxter Pension Plan will be
amended with respect to Allegiance employees to impute certain compensation paid
by Allegiance during 1996 in order to provide for a full year's earnings for
1996 to be included in determining the Final Average Pay of transferring
employees. Allegiance employees with vested accrued benefits in the Baxter
Pension Plan will have those benefits maintained by the Baxter Pension Plan
until they are eligible or required to receive them.

42
<PAGE>
PENSION PLAN TABLE
Estimated Annual Retirement Benefits
Years of Pension Plan Participation (1)

<TABLE>
<CAPTION>
FINAL AVERAGE
PAY (1) 15 20 25 30 35
- -------------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
$ 100,000 $ 22,300 $ 29,800 $ 37,200 $ 44,700 $ 52,300
200,000 48,600 64,800 81,000 97,200 113,500
300,000 74,800 99,800 124,700 149,700 174,800
400,000 101,100 134,800 168,500 202,200 236,000
500,000 127,300 169,800 212,200 254,700 297,300
600,000 153,600 204,800 256,000 307,200 358,500
700,000 179,800 239,800 299,700 359,700 419,800
</TABLE>

- ------------
(1) As of January 1, 1996, the named executive officers' years of Baxter Pension
Plan participation and Final Average Pay for purposes of calculating annual
retirement benefits payable under the Baxter Pension Plan are as follows:
Mr. Knight -- 13 years and $538,702; Mr. Damico -- 16 years and $370,048;
Ms. White -- 0 years and $0; Mr. Zollars -- 16 years and $254,798; Ms.
Gaumer -- 16 years and $216,743.

Although age 65 is the normal retirement age under the Baxter Pension Plan,
the Baxter Pension Plan has early retirement provisions based on a "point"
system. Under the point system, each participant is awarded one point for each
year of benefit service as determined by the Baxter Pension Plan and one point
for each year of age. Participants who terminate employment after accumulating
65 points, and who wait to begin receiving their Baxter Pension Plan benefits
until they have 85 points, receive the same Baxter Pension Plan benefits they
would otherwise receive at age 65, regardless of their actual age when they
begin receiving their Baxter Pension Plan benefits.

BAXTER STOCK HELD BY ALLEGIANCE EMPLOYEES

Baxter restricted stock held by Allegiance employees will continue to be
earned, based upon performance through December 31, 1996, and vested, in
accordance with the terms and conditions of those grants, as if the employee's
service with Allegiance were service with Baxter. Allegiance employees holding
Baxter Stock Options will, as of the Distribution Date, be considered terminated
and, as such, vesting and exercise will be in accordance with the terms and
conditions of the outstanding grants.

COMPENSATION OF EXECUTIVE OFFICERS

The compensation of Allegiance's executive officers for periods beginning on
and after the Distribution Date will be determined by the Board of Directors or
its Compensation and Nominations Committee.

COMPENSATION PHILOSOPHY. Allegiance's philosophy is to provide compensation
opportunities supporting Allegiance's values. Forms and levels of total
compensation will be structured to be competitive when compared to other
companies of similar focus and size. These companies are reported in surveys
whose participants include many companies in the Fortune 500 as well as other
companies with which Allegiance and its subsidiaries compete for executive
talent ("comparable companies"). This philosophy is intended to assist
Allegiance in attracting, retaining and motivating executives with superior
leadership and management abilities. Consistent with this philosophy, a total
compensation structure has been determined for each officer, including Mr.
Knight, consisting primarily of salary, cash bonus, stock options and benefits.
The proportions of these elements of compensation will vary among the officers
depending upon their levels of responsibility. The senior executive officers
will receive a larger portion of their total compensation through
performance-based incentive plans, which place a greater percentage of their
compensation at risk while more closely aligning their interests with the
interests of Allegiance's stockholders.

Allegiance's philosophy with respect to the cap on the tax-deductibility of
executive compensation will be to maximize the benefit of tax laws for
Allegiance's stockholders by seeking performance-based

43
<PAGE>
exemptions where consistent with Allegiance's compensation policies and
practices. Allegiance will adopt performance goals for the officer cash bonus
plan which are expected to satisfy the deductibility requirements with respect
to any payments under those plans.

COMPENSATION ELEMENTS. Salaries will be established each year at a level
primarily intended to be competitive at the 50th percentile with salaries of
executive officers in comparable companies. In addition, officer salaries will
be based on the officer's individual performance. Bonuses are intended to
provide executive officers with an opportunity to receive additional cash
compensation but only if they earn it through Allegiance's achievement of strong
performance results as measured by key financial indicators. Each year, a bonus
target will be established for each executive officer at the 50th percentile of
the market data of comparable companies. After year-end results are calculated,
each officer's bonus will be determined based on Allegiance's performance
against the key financial indicators established for the year. Achievement of
the performance objective will determine an officer's opportunity to earn bonus
compensation either significantly above or below the 50th percentile of
opportunity within comparable companies.

Stock options will be granted under the Allegiance Corporation's 1996
Incentive Compensation Program. They represent a vehicle for more closely
aligning management's and stockholders' interests, specifically motivating
executives to remain focused on the market value of Allegiance Stock. The number
of stock options granted to executive officers is expected to be formula-driven.
The formula is designed to provide an opportunity to earn stock-based
compensation at a third-quartile level compared to executives in comparable
companies.

1996 INCENTIVE COMPENSATION PROGRAM

The Company's 1996 Incentive Compensation Program (the "Program") is
designed to promote success and enhance the value of Allegiance by linking
participants' interests more closely to those of Allegiance stockholders and by
providing participants with an incentive for excellence.

The Program is administered by the Compensation Committee of Allegiance
("Committee"). Incentives may consist of the following: (a) stock options; (b)
restricted stock; (c) stock awards; (d) performance shares; and (e) other
incentives, including cash. Incentives may be granted to any employee of
Allegiance (including directors of Allegiance who are also employees of
Allegiance) selected from time to time by the Committee. The Company has
authorized 9,683,000 shares for issuance under the Program.

Under the Program, the Committee may grant non-qualified and incentive stock
options to eligible employees to purchase shares of Allegiance Stock from
Allegiance. The Program gives the Committee discretion, with respect to any such
stock option, to determine the number and purchase price of the shares subject
to the option, the term of each option and the time or times during its term
when the option becomes exercisable, subject to the following limitations. No
stock option may be granted with a purchase price less than the fair market
value of the shares subject to the option on the date of grant and the term may
not exceed 10 years and one day from the date of grant. Except to the extent
that the Committee determines that another value is more appropriate given the
circumstances, the fair market value of shares on the date of a grant shall mean
the closing sale price of Allegiance Stock as reported on the New York Exchange
composite reporting tape. The initial option grant to the named executive
officers will be as follows: Mr. Knight, 514,000 shares; Mr. Damico, 330,000
shares; Ms. White, 124,000 shares; Mr. Zollars, 106,000; and Ms. Gaumer, 80,000
shares. These grants are intended to cover a two-year period.

SARs may be granted by the Committee pursuant to the Program in such number
and on such terms as the Committee may decide, provided that the term of an SAR
may not exceed 10 years and one day from the date of grant. SARs may be granted
together with or independently of any stock option. SARs may be paid in
Allegiance Stock or cash, as determined by the Committee.

Restricted stock consists of the sale or transfer by Allegiance to an
eligible employee of one or more shares of Allegiance Stock which are subject to
restrictions on their sale or other transfer by the

44
<PAGE>

employee. The price, if any, at which restricted stock will be sold will be
determined by the Committee, and it may vary from time to time and among
employees and may require no payment or be less than the fair market value of
the shares at the date of sale.

Stock awards consist of the transfer by Allegiance to an eligible employee
of shares of Allegiance Stock, without payment, as additional compensation for
his or her services to Allegiance or a subsidiary of Allegiance.

Performance shares consist of the grant by Allegiance to an eligible
employee of a contingent right to receive payment of shares of Allegiance Stock.
The performance shares will be paid in shares of Allegiance Stock, or cash
equivalents in the Committee's discretion, to the extent performance goals set
forth in the grant are achieved.

CHANGE OF CONTROL PLAN

Under Allegiance's Change of Control Plan ("Change of Control Plan"), the
Company entered into agreements with certain employees of the Company selected
to participate (including each of the named executive officers) which entitles
such employees to separation pay and benefits following a change of control in
Allegiance and the employee's subsequent termination of employment unless such
termination is voluntary and unprovoked or results from death, disability,
retirement or cause. The eligible termination must occur within 24 months of the
change of control or the agreement is void. Each agreement continues for three
years from the Distribution Date and automatically renews every three years from
that date unless the participants receive written notice of termination at least
ninety days prior to the renewal date. The separation pay provided will equal
either the employee's three years' annualized base salary and target cash bonus
or one years' annualized base salary and target cash bonus (as determined by the
Committee in its discretion depending on the employee's position) plus the value
of all deferred or unvested awards under all incentive compensation plans per
the terms of the Program. In the event that any payments would be subject to an
excise tax under the Code, the Company will pay an additional gross-up amount
for any excise tax and federal, state and local income taxes, such that the net
amount of the payments would be equal to the net payments after income taxes had
the excise tax and resulting gross-up not been imposed.

ALLEGIANCE RETIREMENT PLAN

Allegiance's qualified defined contribution retirement plan (the "Allegiance
Retirement Plan") for its United States employees includes a section 401(k)
deferred compensation account ("401(k) account"), a company matching
contribution account, a performance account, and a transition account for each
eligible employee as described below.

The defined contribution accounts for transferring employees under the
Baxter International Inc. and Subsidiaries Incentive Investment Plan (the
"Baxter Incentive Investment Plan"), Baxter's qualified section 401(k) profit
sharing plan, were transferred to the Allegiance Retirement Plan. The Allegiance
Retirement Plan has established a fund to hold the Baxter stock currently held
on behalf of Allegiance employees in the Baxter Incentive Investment Plan. The
Allegiance Retirement Plan allows participants to redirect the balances of their
Allegiance Retirement Plan accounts that are invested in the Baxter stock fund
but will not allow participants to direct that their plan accounts make new
investments in Baxter stock within the Allegiance Retirement Plan.

401(k) ACCOUNT AND COMPANY MATCHING CONTRIBUTION ACCOUNT

Employees of Allegiance are eligible to contribute to the Allegiance 401(k)
account. Participants may elect to contribute, on a before-tax basis, up to
twelve percent of their annual base compensation into their 401(k) accounts.
Allegiance will match the first three percent of the participant's annual base
compensation contributed to the plan on a dollar for dollar basis.

45
<PAGE>
PERFORMANCE ACCOUNT

Subject to the terms of the Allegiance Retirement Plan, employees of
Allegiance are eligible to receive contributions to their performance accounts
under such plan. Allegiance will make annual contributions to each performance
account equal to three percent of a participant's annual base compensation.

In addition, Allegiance may make additional performance account
contributions on a discretionary basis as certain performance measures are
achieved. The additional contributions will be allocated to each eligible
participant's account in proportion to each participant's annual base
compensation. These additional discretionary contributions may be made more
frequently or less frequently than the annual three percent contribution.

TRANSITION ACCOUNT

Allegiance recognizes that certain longer service employees need additional
benefits to assist in transitioning from Baxter's United States Pension Plan to
Allegiance's Retirement Plan. Contributions to a transition account within
Allegiance's Retirement Plan are provided by the Company to two groups of
Allegiance employees.

Employees with at least 55 "points" and 10 years of "benefit service" (as
determined under the terms of the Baxter Pension Plan explained under "-- Baxter
Pension Plan") as of the Distribution Date will have transition profit sharing
contributions made annually over an eight year period, and each of these
contributions will be equal to not less than 3% and not more than 8% of the
participant's annual base compensation, depending on the participant's points
under the Baxter Pension Plan as of the Distribution Date. The named executive
officers eligible to receive contributions to the transition account are as
follows: Mr. Knight -- 0%; Mr. Damico -- 3%; Ms. White -- 0%; Mr. Zollars -- 3%;
and Ms. Gaumer -- 3%.

Allegiance employees who have at least 15 years of "benefit service" but
less than 55 "points" (as determined under the terms of the Baxter Pension Plan
explained on page 49) as of the Distribution Date will receive transition profit
sharing contributions made annually over an eight year period, and each of these
contributions will be equal to 2% of the participant's annual base compensation.

ALLEGIANCE EXCESS PLAN

Federal income tax laws limit the amount Allegiance may contribute to the
accounts of certain highly compensated participants under the Allegiance
Retirement Plan. Federal income tax laws also limit the amount participants may
contribute to their accounts under the Allegiance Retirement Plan. Allegiance
will adopt an unfunded non-qualified excess plan (the "Allegiance Excess Plan")
that will credit participants affected by the limits with the amount of
contributions that the participants would have contributed or that Allegiance
would have contributed on their behalf to the Allegiance Retirement Plan but for
such limits.

EMPLOYEE STOCK PURCHASE PLAN

Allegiance will adopt an employee stock purchase plan for its United States
employees, as described in Section 423 of the Code. All active employees of
Allegiance and its United States subsidiaries will be eligible to participate in
the Company's Employee Stock Purchase Plan. The Employee Stock Purchase Plan
makes available shares of Allegiance Stock for purchase by eligible employees
through payroll deductions at a maximum rate to be determined by the Committee.
The purchase price per share will be equal to 85% of the lesser of the fair
market value of Allegiance Stock on the effective date of subscription or the
fair market value of Allegiance Stock on the date of exercise. 2,000,000 shares
will be reserved for issuance under this plan.

COMPENSATION COMMITTEE INTERLOCKS DISCLOSURE AND INSIDER PARTICIPATION

There are no compensation committee interlocks.

46
<PAGE>
RELATIONSHIP WITH BAXTER

Allegiance and Baxter have entered into various agreements for the purpose
of governing certain of the ongoing relationships between Baxter and Allegiance
after the Distribution, and to provide mechanisms for an orderly transfer of the
Allegiance Business from Baxter to Allegiance and facilitate an orderly
transition to the status of two separate, publicly traded companies.

Allegiance has significant continuing relationships with Baxter as an agent,
distributor, customer and supplier for a wide array of health-care products and
services, and for certain administrative support services. Allegiance is
Baxter's primary agent in distributing Baxter's intravenous solutions,
cardiovascular devices and other products in the United States and provides
Baxter with certain administrative services including credit and collection,
accounts payable, information technology and telecommunications. Baxter
distributes Allegiance's products in many countries around the world and
provides various administrative services to Allegiance. Baxter does not have any
ownership interest in Allegiance.

REORGANIZATION AGREEMENT

Subject to certain exceptions, the Reorganization Agreement provides for
certain cross-indemnities (including an indemnity of Baxter by Allegiance with
respect to certain guarantees by Baxter in connection with certain Allegiance
agreements and certain financial guarantees) principally designed to place
financial responsibility for the liabilities of the Allegiance Business with
Allegiance and financial responsibility for the obligations and liabilities of
Baxter's retained businesses and its other subsidiaries with Baxter.
Specifically, Allegiance has agreed to assume liability for, and to indemnify
Baxter against, any and all liabilities associated with the Allegiance Business,
including any litigation, proceedings or claims relating to the products and
operations thereof whether or not the underlying basis for such litigation,
proceeding or claim arose prior to or after the Distribution Date. Baxter has
agreed to indemnify Allegiance against any and all liabilities associated with
Baxter's retained businesses. Specifically, Baxter has retained liability for,
and agreed to indemnify Allegiance against, proceedings or claims relating to
allegations of disease transmission through blood products and silicon-gel
mammary implants. See "Business -- Legal Proceedings."

Pursuant to the Reorganization Agreement, Allegiance assumed all
environmental liabilities that arise from or are attributable to the operations
of the Allegiance Business, including, but not limited to, off-site waste
disposal liabilities. Allegiance also has agreed to indemnify Baxter against any
and all such environmental liabilities. Baxter has agreed to indemnify
Allegiance against any and all environmental liabilities associated with the
retained Baxter businesses. In addition, the Reorganization Agreement provides
that each of Baxter and Allegiance will indemnify the other in the event of
certain liabilities arising under the Exchange Act.

The Reorganization Agreement provides, among other things, that, in order to
avoid potentially adverse tax consequences relating to the Distribution, for a
period of two years after the Distribution Allegiance will not: (i) cease to
engage in an active trade or business within the meaning of the Internal Revenue
Code of 1966, as amended (the "Code"); (ii) issue or redeem any share of stock
of Allegiance, except for certain issuances and redemptions for the benefit of
Allegiance's employees or to effect acquisitions by Allegiance in the ordinary
course of business or in connection with the issuance of any convertible debt by
Allegiance or in accordance with the requirements for permitted purchases of
Allegiance 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 (a) an opinion is
obtained from counsel to Baxter, or (b) 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 Allegiance Stock or Allegiance. Allegiance expects that these
limitations will not significantly constrain its activities or its ability to
respond to unanticipated developments.

The Reorganization Agreement also provides that if, as a result of certain
transactions occurring after the Distribution Date involving either the stock or
assets of either Allegiance or any of its subsidiaries, or any combination
thereof, the Distribution fails to qualify as tax-free under the provisions of
Section

47
<PAGE>
355 of the Code, then Allegiance 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. The Reorganization Agreement further provides that if the Distribution
fails to qualify as tax-free under the provisions of Section 355 of the Code,
other than as a result of a transaction occurring after the Distribution Date
involving either the stock or assets of Allegiance or any of its subsidiaries,
or any combination thereof, then Allegiance shall not be liable for such taxes,
liabilities, or expenses.

The Reorganization Agreement also provides for the allocation of benefits
between Baxter and Allegiance under existing insurance policies after the
Distribution Date for claims made or occurrences prior to the Distribution Date
and sets forth procedures for the administration of insured claims. In addition,
the Reorganization Agreement provides that Baxter will use its reasonable
efforts to maintain directors' and officers' insurance at substantially the
level of Baxter's current directors' and officers' insurance policy for a period
of six years with respect to the directors and officers of Baxter who will
become directors and officers of Allegiance as of the Distribution Date for acts
relating to periods prior to the Distribution Date.

The Reorganization Agreement also addresses the treatment of employee
benefit matters and other compensation arrangements for certain former and
current Allegiance employees and their beneficiaries and dependents, as well as
certain former employees of certain former Allegiance businesses and their
beneficiaries and dependents (collectively, the "Allegiance Participants"). The
Reorganization Agreement provides that the account balances (including
outstanding loans) of all Allegiance Participants in the Baxter International
Inc. and Subsidiaries Incentive Investment Plan (the "IIP"), and the plan assets
related to such liabilities will be transferred to Allegiance's new retirement
savings plan. The Reorganization Agreement also generally provides that
Allegiance will assume all liabilities for benefits under any welfare plans
related to Allegiance Participants, other than certain claims incurred on or
before the Distribution Date. Moreover, the Reorganization Agreement provides
that, effective as of the Distribution Date, Allegiance will become responsible
for all other liabilities to Allegiance Participants (including unfunded
supplemental retirement benefits), other than certain accruals under the Baxter
Defined Benefit Excess Plan.

TAX SHARING AGREEMENT

Baxter and Allegiance have entered into a tax sharing agreement (the "Tax
Sharing Agreement") which allocates tax liabilities and responsibility for tax
audits for periods prior to, and subsequent to the Distribution Date. The Tax
Sharing Agreement also allocates consolidated alternative minimum tax and other
tax credit carry-forwards as of the Distribution Date between Baxter and
Allegiance.

AGENCY, SERVICES AND DISTRIBUTION AGREEMENTS

Baxter's principal domestic operating subsidiary, Baxter Healthcare
Corporation ("BHC"), and an Allegiance subsidiary have entered into an Agency,
Services and Distribution Agreement (the "Domestic Distribution Agreements") for
each of Baxter's four primary domestic business units, I.V. Systems, Renal,
Cardiovascular, and Biotechnology, pursuant to which Baxter supplies products to
Allegiance, and Allegiance, as agent or distributor for Baxter, provides
physical distribution and various sales and sales support services to Baxter.
The Domestic Distribution Agreements cover substantially all of the existing
products of each of the foregoing business units.

In most instances, Allegiance will act as Baxter's agent for the physical
distribution of Baxter's products in return for a fee. In such situations,
Baxter will maintain the contractual relationship with the customer, will manage
sales, order-taking, and billing and collections, and will retain title to the
products until shipment to the ultimate customer. In certain situations,
Allegiance will act as a full-service, value-added distributor for Baxter
products with a direct contractual relationship with the ultimate customer. In
these situations, Allegiance will provide additional sales, sales support, and
other customer and product-related services to the customer and will purchase
the products from Baxter at specified prices. In addition, Baxter will pay to
Allegiance the fee described above. Such additional services may include

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aggregating Baxter's products with others to be sold as "kits" for a given
medical procedure or other cost management services which assist the customer in
reducing product consumption, improving utilization of assets, improving
logistics, and reducing or eliminating operating costs.

The initial term of the Domestic Distribution Agreements range from three
years (Renal and Biotechnology) to five years (I.V. Systems and Cardiovascular).
The agreements may be renewed upon expiration upon the mutual agreement of the
parties. In the event of a Change In Control of one of the parties to the
Domestic Distribution Agreements or certain of their affiliates, the other party
to such agreement will have the right, subject to certain notice periods and
other restrictions, to terminate all, or in certain cases only the affected
portion, of such agreement prior to its normal expiration. In the case of a
Change In Control involving a competitor of the non-affected party, the notice
period required for termination may be shorter than if such a competitor was not
involved. For purposes of these agreements, a "Change In Control" includes the
acquisition of more than 30 per cent of the stock of either party or one of its
affiliates, certain mergers or consolidations involving either party or one of
its affiliates, the acquisition by either party of certain significant
subsidiaries, and, in the case of an affiliate of either of the parties, the
disposition of substantially all of its business and assets.

Under the Domestic Distribution Agreements, Baxter is required within the
Territory to distribute all covered I.V. Systems and Cardiovascular products
(including any line extensions of such products) through Allegiance, subject to
certain exceptions. In addition, Allegiance may not market, promote or solicit
orders for any product that competes with any covered I.V. Systems or
Cardiovascular product. Allegiance may however take orders for, stock and sell
competing products in response to customer requests. For purposes of the
Domestic Distribution Agreements, the "Territory" is defined as the 50 states
comprising the United States of America and the District of Columbia.
Allegiance's right to distribute the covered products is limited to the
Territory.

The compensation received by Allegiance under the Domestic Distribution
Agreements generally approximates or is based upon the internal business unit
revenue and expense allocations that were in effect between the Baxter business
units and the Allegiance Business prior to the date of the Distribution.
Similarly, the service levels and performance standards remain as they were
prior to the date of the Distribution.

In addition to the Domestic Distribution Agreements, Baxter and Allegiance
have entered into agreements pursuant to which Baxter has agreed to distribute
Allegiance's surgical and other products outside of the United States and to
distribute certain surgical products to the long-term, sub-acute and home care
markets within the United States.

SERVICES AGREEMENTS

Baxter and Allegiance have entered into several services agreements, to be
effective from and after the Distribution Date, pursuant to which Baxter
provides to Allegiance, and Allegiance provides to Baxter, certain
administrative services necessary for the conduct of Baxter's and Allegiance's
businesses. Services provided to Baxter by Allegiance include credit, collection
and cash application, accounts payable, telecommunications, and information
technology services. Services provided to Allegiance by Baxter include payroll,
sales and use tax, human resources (including international expatriate
services), research and development, travel, property management, and other
services. These agreements have varying terms and, subject to certain
exceptions, are generally terminable by either party upon 12 months or less
notice. Under certain circumstances involving a Change In Control the agreements
may be terminated earlier than normal. The agreements may be renewed upon
expiration upon the mutual agreement of the parties. The prices at which such
services will be provided generally will be equal to or based on the actual cost
of rendering such services.

In addition, Baxter leases from Allegiance, for a term of ten years, a
217,000 square foot office building at Allegiance's McGaw Park, Illinois
headquarters site. The leased building will continue to be occupied by Baxter's
Renal Division. Allegiance subleases from Baxter all or a substantial part of an
85,000 square foot office building located in Deerfield, Illinois. This building
is part of a three building complex leased by Baxter, and Allegiance's sublease
is for the remainder of the current term of Baxter's

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lease. Baxter and Allegiance may also lease or sublease to each other
miscellaneous office or other space for use in connection with various services
performed for one another pursuant to the agreements described above.

PRINCIPAL STOCKHOLDERS

The following table sets forth certain information as of September 30, 1996
regarding the beneficial ownership of Allegiance Stock by (i) each director of
the Company, (ii) each named executive officer and (iii) all directors and
executive officers of the Company as a group. Except as otherwise indicated, the
Company believes that the beneficial owners of the Allegiance Stock listed
below, based on information provided by such owners, have sole investment and
voting power with respect to such shares, subject to community property laws
where applicable. The address of each of the stockholders named below is the
Company's principal executive offices. The Company is not aware of any
stockholders who beneficially own 5% or more of the Allegiance Stock.

<TABLE>
<CAPTION>
NAME NUMBER PERCENT
- ------------------------------------------------------------------------------------------ --------- -----------------
<S> <C> <C>
Lester B. Knight.......................................................................... 56,348 *
Joseph F. Damico.......................................................................... 39,083 *
Silas Cathcart............................................................................ 1,466 *
David W. Grainger......................................................................... 6,500 *
Arthur F. Golden.......................................................................... -- *
Michael D. O'Halleran..................................................................... -- *
Kenneth D. Bloem.......................................................................... -- *
Connie Curran, Ed.D....................................................................... -- *
Kathy Brittain White...................................................................... 3,880 *
Gail Gaumer............................................................................... 17,366 *
Robert J. Zollars......................................................................... 18,142 *
All directors and executive officers as a group (18 persons).............................. 188,252 *
</TABLE>

- ------------
* less than 1%

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DESCRIPTION OF CREDIT FACILITIES

On September 23, 1996, the Company entered into two unsecured revolving
credit agreements (the "Credit Facilities"), providing for up to an aggregate of
$1.5 billion in borrowings, with the financial institutions listed therein (the
"Banks"), the First National Bank of Chicago, as Syndication Agent, NationsBank
of Texas, N.A., as Documentation Agent, Morgan Guaranty Trust Company of New
York, as Co-Syndication Agent, and Bank of America National Trust and Savings
Association, as Administrative Agent, and as arranged by BA Securities, Inc. The
following summary of the Credit Facilities does not purport to be complete and
is subject to the detailed provisions of the Credit Facilities, copies of which
are exhibits to the Registration Statement of which this Prospectus is a part.

One of the Credit Facilities provides for borrowings up to an aggregate of
$1.2 billion and expires in September 2001. The other Credit Facility provides
for borrowings up to an aggregate of $300 million and expires in September 1997.
As of September 30, 1996, approximately $1.1 billion was outstanding under the
$1.2 billion credit facility and no amounts were outstanding under the $300
million credit facility. Amounts borrowed under the Credit Facilities may be
used only to repay indebtedness owing to Baxter at the time of the Distribution,
for the payment of fees and expenses related to the Distribution and for general
corporate purposes of Allegiance. As of September 30, 1996, approximately $400
million was available for borrowing under the Credit Facilities.

Borrowings under the Credit Facilities are unsecured obligations of
Allegiance and rank PARI PASSU with all other unsecured and unsubordinated
indebtedness of Allegiance, including the Securities offered pursuant to this
Prospectus.

Borrowings under the Credit Facilities typically bear interest at either the
"Base Rate" or the "Euro Dollar Rate," at the option of the Company, plus
applicable interest margin. The Base Rate is the higher of (i) the reference
rate of Bank of America National Trust and Savings Association or (ii) the sum
of the latest Federal Funds Rate and 0.50%. In addition, same day, short term
(seven days or less) borrowings under the Credit Facilities bear interest at the
"IBOR Rate" plus 1%. The IBOR Rate is defined as a Bank's cost of funds in the
interbank market for a same day borrowing of the type requested by Allegiance.
Furthermore, at the request of Allegiance, any of the Banks may offer to loan to
Allegiance amounts available for borrowing under the Credit Facilities at
interest rates agreed upon by Allegiance through a competitive bid process
initiated by Allegiance.

The Credit Facilities contain a number of covenants that, amount other
things, restrict Allegiance's ability to dispose of its assets, incur additional
indebtedness, create liens on assets, engage in mergers or consolidations or
change the businesses conducted by Allegiance, and otherwise restrict certain
corporate activities by Allegiance. In addition, under the Credit Facilities,
Allegiance is required to comply with and maintain specified financial ratios
and tests, including, without limitation, an interest expense coverage ratio, a
leverage ratio and subsidiary debt levels thresholds.

The Credit Facilities specify certain customary events of default,
including, without limitation, non-payment of principal, interest or fees,
violation of covenants, inaccuracy of representations and warranties in any
material respect, cross default and cross-acceleration to certain other
indebtedness and agreements, bankruptcy and insolvency events, material
judgments and liabilities, changes of control and unenforceability of certain
documents under the Credit Facilities.

DESCRIPTION OF SECURITIES

The Notes, the 2016 Debentures and the 2026 Debentures (together, the
"Securities") will each constitute a series of senior debt securities of the
Company, and will rank PARI PASSU with each other and with all other unsecured
and unsubordinated indebtedness of the Company. The Securities of each series
will be issued pursuant to an Indenture, to be dated as of October 1, 1996
between Allegiance and PNC Bank, Kentucky, Inc., as Trustee (the "Trustee"), a
copy of which is filed as an exhibit to the

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Registration Statement of which this Prospectus is a part. The Indenture
provides for the issuance from time to time in one or more series of unsecured
debentures, notes or other evidences of indebtedness and does not limit the
aggregate principal amount of securities that may be issued thereunder.

The following summaries of certain provisions of the Securities and the
Indenture do not purport to be complete and are subject, and are qualified in
their entirety by reference, to all the provisions of the Securities and the
Indenture, including the definitions therein of certain terms. Wherever
particular Sections or defined terms of the Indenture are referred to herein,
such Sections or defined terms are incorporated by reference.

NOTES

The Notes will be unsecured obligations of the Company, will be limited to
$200,000,000 aggregate principal amount and will mature on ,
2006 . The Notes will bear interest at the rate per annum shown on the front
cover of this Prospectus from , 1996 or from the most recent
Interest Payment Date to which interest has been paid or provided for, payable
semi-annually on and of each year,
commencing , 1997, to the Persons in whose names the Notes (or
any predecessor Notes) are registered at the close of business on the preceding
or , as the case may be. The Notes will not
be redeemable at the option of the Company prior to maturity and are not subject
to any sinking fund.

DEBENTURES

The 2016 Debentures and the 2026 Debentures will each be unsecured
obligations of the Company, will be limited to $150,000,000 aggregate principal
amount and $150,000,000 aggregate principal amount, respectively, and will
mature on , 2016 and , 2026, respectively. The
2016 Debentures and the 2026 Debentures will bear interest at the respective
rates per annum shown on the front cover of this Prospectus from
, 1996 or from the most recent Interest Payment Date to which
interest has been paid or provided for, payable semi-annually on
and of each year, commencing ,
1997, to the Persons in whose names such Debentures (or any predecessor
Debentures) are registered at the close of business on the preceding
or , as the case may be. The 2016 Debentures and
the 2026 Debentures will not be redeemable at the option of the Company. The
2026 Debentures may be repaid on , 2003, at the option of the
registered holders of the 2026 Debentures, at 100% of their principal amount,
together with accrued interest to , 2003. In order for a holder to
exercise this option, the Company must receive at its office or agency in New
York, New York, during the period beginning on , 2003 and ending at
5:00 p.m. (New York City time) on , 2003 (or, if ,
2003 is not a Business Day, the next succeeding Business Day), the certificate
representing the 2026 Debenture subject to repayment with the form "Option to
Elect Repayment on , 2003" on such certificate duly completed.
Any such notice received by the Company during the period beginning on
, 2003 and ending at 5:00 p.m. (New York City time) on
, 2003 shall be irrevocable. See "-- Book Entry, Delivery and Form".
The repayment option may be exercised by the holder of a 2026 Debenture for less
than the entire principal amount of the 2026 Debenture held by such holder, so
long as the principal amount that is to be repaid is equal to $1,000 or an
integral multiple of $1,000. All questions as to the validity, form, eligibility
(including time of receipt) and acceptance of any 2026 Debenture for repayment
will be determined by the Company, whose determination will be final and
binding.

Failure by the Company to repay the 2026 Debentures when required as
described in the preceding paragraph will result in an Event of Default under
the Indenture.

As long as the 2026 Debentures are represented by a Global Debenture (as
defined below), the Depositary or the Depositary's nominee will be the
registered holder of the 2026 Debentures and therefore will be the only entity
that can exercise a right to repayment. See "-- Book Entry, Delivery and Form."

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No similar right of repayment is available to holders of the Notes or the
2016 Debentures.

RESTRICTIVE COVENANTS

LIMITATIONS ON LIENS

The Company covenants that it will not issue, incur, create, assume or
guarantee, and will not permit any Restricted Subsidiary (as defined below) to
issue, incur, create, assume or guarantee, any debt for borrowed money secured
by a mortgage, security interest, pledge, lien, charge or other encumbrance
("mortgages") upon any Principal Property (as defined below) of the Company or
any Restricted Subsidiary or upon any shares of stock or indebtedness of any
Restricted Subsidiary (whether such Principal Property, shares or indebtedness
are now existing or owned or hereafter created or acquired) without in any such
case effectively providing concurrently with the issuance, incurrence, creation,
assumption or guarantee of any such secured debt, or the grant of a mortgage
with respect to any such indebtedness, that the Securities (together with, if
the Company shall so determine, any other indebtedness of or guarantee by the
Company or such Restricted Subsidiary ranking equally with the Securities) shall
be secured equally and ratably with (or, at the option of the Company, prior to)
such secured debt. The foregoing restriction, however, will not apply to: (a)
mortgages on property existing at the time of acquisition thereof by the Company
or any Subsidiary, provided that such mortgages were in existence prior to the
contemplation of such acquisition; (b) mortgages on property, shares of stock or
indebtedness or other assets of any corporation existing at the time such
corporation becomes a Restricted Subsidiary, provided that such mortgages are
not incurred in anticipation of such corporation becoming a Restricted
Subsidiary; (c) mortgages on property, shares of stock or indebtedness existing
at the time of acquisition thereof by the Company or a Restricted Subsidiary or
mortgages thereon to secure the payment of all or any part of the purchase price
thereof, or mortgages on property, shares of stock or indebtedness to secure any
indebtedness for borrowed money incurred prior to, at the time of, or within 270
days after, the latest of the acquisition thereof, or, in the case of property,
the completion of construction, the completion of improvements, or the
commencement of substantial commercial operation of such property for the
purpose of financing all or any part of the purchase price thereof, such
construction, or the making of such improvements; (d) mortgages to secure
indebtedness owing to the Company or to a Restricted Subsidiary; (e) mortgages
existing at the date of the Indenture; (f) mortgages on property of a
corporation existing at the time such corporation is merged into or consolidated
with the Company or a Restricted Subsidiary or at the time of a sale, lease or
other disposition of the properties of a corporation as an entirety or
substantially as an entirety to the Company or a Restricted Subsidiary, provided
that such mortgage was not incurred in anticipation of such merger or
consolidation or sale, lease or other disposition; (g) mortgages in favor of the
United States or any State, territory or possession thereof (or the District of
Columbia), or any department, agency, instrumentality or political subdivision
of the United States or any State, territory or possession thereof (or the
District of Columbia), to secure partial, progress, advance or other payments
pursuant to any contract or statute or to secure any indebtedness incurred for
the purpose of financing all or any part of the purchase price or the cost of
constructing or improving the property subject to such mortgages; (h) mortgages
created in connection with the acquisition of assets or a project financed with,
and created to secure, a Nonrecourse Obligation (as defined below); and (i)
extensions, renewals, refinancings or replacements of any mortgage referred to
in the foregoing clauses (a), (b), (c) (e), (f), (g) and (h); provided, however,
that any mortgages permitted by any of the foregoing clauses (a), (b), (c) (e),
(f), (g) and (h) shall not extend to or cover any property of the Company or
such Restricted Subsidiary, as the case may be, other than the property, if any,
specified in such clauses and improvements thereto, and provided further that
any refinancing or replacement of any mortgages permitted by the foregoing
clauses (g) and (h) shall be of the type referred to in such clauses (g) or (h),
as the case may be.

Notwithstanding the restrictions described in the preceding paragraph, the
Company or any Restricted Subsidiary will be permitted to issue, incur, create,
assume or guarantee debt secured by a mortgage which would otherwise be subject
to such restrictions, without equally and ratably securing the Securities,
provided that after giving effect thereto, the aggregate amount of all debt so
secured by

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mortgages (not including mortgages permitted under clauses (a) through (i)
above) does not exceed 10% of the Consolidated Net Tangible Assets (as defined
below) of the Company as most recently determined on or prior to such date.

LIMITATIONS ON SALE AND LEASE-BACK TRANSACTIONS

The Company covenants that it will not, nor will it permit any Restricted
Subsidiary to, enter into any Sale and Lease-Back Transaction (as defined below)
with respect to any Principal Property, other than any such transaction
involving a lease for a term of not more than three years or any such
transaction between the Company and a Restricted Subsidiary or between
Restricted Subsidiaries, unless: (a) the Company or such Restricted Subsidiary
would be entitled to incur indebtedness secured by a mortgage on the Principal
Property involved in such transaction at least equal in amount to the
Attributable Debt (as defined below) with respect to such Sale and Lease-Back
Transaction, without equally and ratably securing the Securities, pursuant to
the limitation on liens in the Indenture; or (b) the Company shall apply an
amount equal to the greater of the net proceeds of such sale or the Attributable
Debt with respect to such Sale and Lease-Back Transaction within 180 days of
such sale to either (or a combination of) the retirement (other than any
mandatory retirement, mandatory prepayment or sinking fund payment or by payment
at maturity) of debt for borrowed money of the Company or a Restricted
Subsidiary that matures more than 12 months after the creation of such
indebtedness or the purchase, construction or development of other comparable
property.

CERTAIN DEFINITIONS APPLICABLE TO COVENANTS

The term "Attributable Debt" when used in connection with a Sale and
Lease-Back Transaction involving a Principal Property shall mean, at the time of
determination, the lesser of: (a) the fair value of such property (as determined
in good faith by the Board of Directors of the Company); or (b) the present
value of the total net amount of rent required to be paid under such lease
during the remaining term thereof (including any renewal term or period for
which such lease has been extended), discounted at the rate of interest set
forth or implicit in the terms of such lease or, if not practicable to determine
such rate, the weighted average interest rate per annum (in the case of Original
Issue Discount Securities, the imputed interest rate) borne by the Securities of
each series outstanding pursuant to the Indenture compounded semi-annually. For
purposes of the foregoing definition, rent shall not include amounts required to
be paid by the lessee, whether or not designated as rent or additional rent, on
account of or contingent upon maintenance and repairs, insurance, taxes,
assessments, water rates and similar charges. In the case of any lease which is
terminable by the lessee upon the payment of a penalty, such net amount shall be
the lesser of the net amount determined assuming termination upon the first date
such lease may be terminated (in which case the net amount shall also include
the amount of the penalty, but no rent shall be considered as required to be
paid under such lease subsequent to the first date upon which it may be so
terminated) and the net amount determined assuming no such termination.

The term "Consolidated Net Tangible Assets" shall mean, as of any particular
time, total assets (excluding applicable reserves and other properly deductible
items) less: (a) total current liabilities, except for (1) notes and loans
payable, (2) current maturities of long-term debt, and (3) current maturities of
obligations under capital leases; and (b) goodwill, patents and trademarks, to
the extent included in total assets; all as set forth on the most recent
consolidated balance sheet of the Company and its Restricted Subsidiaries and
computed in accordance with generally accepted accounting principles.

The term "Nonrecourse Obligation" means indebtedness or other obligations
substantially related to (i) the acquisition of assets not previously owned by
the Company or any Restricted Subsidiary or (ii) the financing of a project
involving the development or expansion of properties of the Company or any
Restricted Subsidiary, as to which the obligee with respect to such indebtedness
or obligation has no recourse to the Company or any Restricted Subsidiary or any
assets of the Company or any Restricted Subsidiary other than the assets which
were acquired with the proceeds of such transaction or the project financed with
the proceeds of such transaction (and the proceeds thereof).

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The term "Principal Property" shall mean the land, land improvements,
buildings and fixtures (to the extent they constitute real property interests,
including any leasehold interest therein) constituting the principal corporate
office, any manufacturing facility or any distribution center (whether now owned
or hereafter acquired) which: (a) is owned by the Company or any Subsidiary; (b)
is located within any of the present 50 states of the United States (or the
District of Columbia); (c) has not been determined in good faith by the Board of
Directors of the Company not to be materially important to the total business
conducted by the Company and its Subsidiaries taken as a whole; and (d) has a
market value on the date as of which the determination is being made in excess
of 1.0% of Consolidated Net Tangible Assets of the Company as most recently
determined on or prior to such date.

The term "Restricted Subsidiary" shall mean any Subsidiary that owns any
Principal Property.

The term "Sale and Lease-Back Transaction" shall mean any arrangement with
any person providing for the leasing by the Company or any Restricted Subsidiary
of any Principal Property which property has been or is to be sold or
transferred by the Company or such Restricted Subsidiary to such person.

The term "Subsidiary" shall mean any corporation of which at least a
majority of the outstanding voting stock having the power to elect a majority of
the board of directors of such corporation is at the time owned, directly or
indirectly, by the Company or by one or more other Subsidiaries, or by the
Company and one or more other Subsidiaries. For the purposes of this definition,
"voting stock" means stock which ordinarily has voting power for the election of
directors, whether at all times or only so long as no senior class of stock has
such voting power by reason of any contingency.

CONSOLIDATION, MERGER AND SALE OF ASSETS

The Company may not consolidate with or merge into, or convey, transfer or
lease its properties and assets substantially as an entirety to, any Person (a
"successor Person"), and may not permit any Person to consolidate with or merge
into, or convey, transfer or lease its properties and assets substantially as an
entirety to, the Company, unless (i) the successor Person (if any) is a
corporation, partnership, trust or other entity organized and validly existing
under the laws of any domestic jurisdiction and assumes the Company's
obligations on the Securities and under the Company's obligations on the
Securities and under the Indenture, (ii) immediately after giving effect to the
transaction, no Event of Default, and no event which, after notice or lapse of
time or both, would become an Event of Default, shall have occurred and be
continuing, (iii) if, as a result of the transaction, property of the Company
would become subject to a mortgage, pledge, lien, security interest or other
encumbrance that would not be permitted under the limitation on mortgage,
pledge, lien, security interest or other encumbrance described above under
"Restrictive Covenants," the Company takes such steps as shall be necessary to
secure the Securities equally and ratably with (or prior to) the indebtedness
secured by such mortgage, pledge, lien, security interest or other encumbrance
and (iv) certain other conditions are met. (Section 801)

EVENTS OF DEFAULT

Each of the following will constitute an Event of Default under the
Indenture with respect to Securities of any series: (a) failure to pay principal
of or any premium on any Security of that series at its Maturity; (b) failure to
pay any interest on any Securities of that series when due, continued for 30
days; (c) failure to deposit any sinking fund payment, when due, in respect of
any Security of that series; (d) failure to perform, or the breach of, any
covenant or warranty of the Company in the Indenture (other than a covenant or
warranty included in the Indenture solely for the benefit of a series of
Securities other than that series), continued for 60 days after written notice
has been given by the Trustee, or the Holders of at least 10% in principal
amount of the Outstanding Securities of that series, as provided in the
Indenture; (e) failure to pay when due (subject to any applicable grace period)
the principal of, or acceleration of, any indebtedness for money borrowed by the
Company (including a default with respect to Securities of any series other than
that series) having an aggregate principal amount outstanding of at least
$10,000,000, if, in the case of any such failure, such indebtedness has not been
discharged or, in the case of any such acceleration, such indebtedness has not
been discharged or such acceleration has not been rescinded or annulled, in each
case within 10 days after written notice has been given by the

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Trustee, or the Holders of at least 10% in principal amount of the Outstanding
Securities of that series, as provided in the Indenture; and (f) certain events
in bankruptcy, insolvency or reorganization of the Company or any Restricted
Subsidiary. (Section 501)

If an Event of Default (other than an Event of Default described in clause
(f) above) with respect to the Securities of any series at the time Outstanding
shall occur and be continuing, either the Trustee or the Holders of at least 25%
in principal amount of the Outstanding Securities of that series by notice as
provided in the Indenture may declare the principal amount of the Securities of
that series (or, if any Securities of that series are Original Issue Discount
Securities, such portion of the principal amount of such Securities, as may be
specified in the terms of such Securities) to be due and payable immediately. If
an Event of Default described in clause (f) above with respect to the Securities
of any series at the time Outstanding occurs, the principal amount of all the
Securities of that series (or, in the case of any such Original Issue Discount
Security, such specified amount) will automatically, and without any action by
the Trustee or any Holder, become immediately due and payable. After any such
acceleration, but before a judgment or decree based on acceleration, the Holders
of a majority in principal amount of the Outstanding Securities of that series
may, under certain circumstances, rescind and annul such acceleration if all
Events of Default, other that the non-payment of accelerated principal (or other
specified amount), have been cured or waived as provided in the Indenture.
(Section 502) For information as to waiver of defaults, see "Modification and
Waiver."

Subject to the provisions of the Indenture relating to the duties and
responsibilities of the Trustee, the Trustee will be under no obligation to
exercise any of its rights or powers under the Indenture at the request or
direction of any of the Holders, unless such Holders shall have offered to the
Trustee reasonable indemnity. (Section 603) Subject to such provisions of the
Indenture, the Holders of a majority in principal amount of the Outstanding
Securities of any series will have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee with respect to the
Securities of that series. (Section 512)

No Holder of a Security of any series will have any right to institute any
proceeding with respect to the Indenture, or for the appointment of a receiver
or a trustee, or for any other remedy thereunder, unless (i) such Holder has
previously given to the Trustee written notice of a continuing Event of Default
with respect to the Securities of that series, (ii) the Holders of at least 25%
in principal amount of the Outstanding Securities of that series have made
written request, and such Holder or Holders have offered reasonable indemnity,
to the Trustee to institute such proceeding as trustee and (iii) the Trustee has
failed to institute such proceeding, and has not received from the Holders of a
majority in principal amount of the Outstanding Securities of that series a
direction inconsistent with such request, within 60 days after such notice,
request and offer. (Section 507) However, such limitations do not apply to a
suit instituted by a Holder of a Security for the enforcement of payment of the
principal of or any premium or interest on such Security on or after the
applicable due date specified in such Security. (Section 508)

The Company will be required to furnish to the Trustee annually a statement
by certain of its officers as to whether or not the Company, to the best of
their knowledge, is in default in the performance or observance of any of the
terms, provisions and conditions of the Indenture and, if so, specifying all
such known defaults. (Section 1004)

MODIFICATION AND WAIVER

Modifications and amendments of the Indenture may be made by the Company and
the Trustee with the consent of the Holders of not less than 66 2/3% in
principal amount of the Outstanding Securities of each series affected by such
modification or amendment; PROVIDED, HOWEVER, that no such modification or
amendment may, without the consent of the Holder of each Outstanding Security
affected thereby, (a) change the Stated Maturity of the principal of, or any
instalment of principal of or interest on, any Security, (b) reduce the
principal amount of, or any premium or interest on, any Security, (c) reduce the
amount of principal of an Original Issue Discount Security or any other Security
payable upon acceleration of the Maturity thereof, (d) change the place or
currency of payment of principal of, or any

56
<PAGE>
premium or interest on, any Security, (e) impair the right to institute suit for
the enforcement of any payment on or with respect to any Security, (f) reduce
the percentage in principal amount of Outstanding Securities of any series, the
consent of whose Holders is required for modification or amendment of the
Indenture, (g) reduce the percentage in principal amount of Outstanding
Securities of any series necessary for waiver of compliance with certain
provisions of the Indenture or for waiver of certain defaults or (h) modify such
provisions with respect to modification and waiver. (Section 902)

The Holders of not less than 66 2/3% in principal amount of the Outstanding
Securities of any series may waive compliance by the Company with certain
restrictive provisions of the Indenture. (Section 1010) The Holders of not less
than a majority in principal amount of the Outstanding Securities of any series
may waive any past default under the Indenture, except a default in the payment
of principal, premium or interest and certain covenants and provisions of the
Indenture which cannot be amended without the consent of the Holder of each
Outstanding Security of such series affected. (Section 513)

The Indenture provides that in determining whether the Holders of the
requisite principal amount of the Outstanding Securities have given or taken any
direction, notice, consent, waiver or other action under the Indenture as of any
date, (i) the principal amount of an Original Issue Discount Security that will
be deemed to be Outstanding will be the amount of the principal thereof that
would be due and payable as of such date upon acceleration of the Maturity
thereof to such date, (ii) is, as of such date, the principal amount payable at
the Stated Maturity of a Security is not determinable (for example, because it
is based on an index), the principal amount of such Security deemed to be
Outstanding as of such date will be an amount determined in the manner
prescribed for such Security and (iii) the principal amount of a Security
denominated in one or more foreign currencies or currency units that will be
deemed to be Outstanding will be the U.S. dollar equivalent, determined as of
such date in the manner of such Security (or, in the case of a Security
described in clause (i) or (ii) above, of the amount described in such clause).
Certain Securities, including those for whose payment or redemption money has
been deposited or set aside in trust for the Holders and those that have been
fully defeased pursuant to Section 1302, will not be deemed to be Outstanding.
(Section 101)

Except in certain limited circumstances, the Company will be entitled to set
any day as a record date for the purpose of determining the Holders of
Outstanding Securities of any series entitled to give or take any demand,
authorization, direction, notice, consent, waiver or other action under the
Indenture, in the manner and subject to the limitations provided in the
Indenture. In certain limited circumstances, the Trustee will be entitled to set
a record date for action by Holders. If a record date is set for any action to
be taken by Holders of a particular series, such action may be taken only by
persons who are Holders of Outstanding Securities of that series on the record
date. To be effective, such action must be taken by Holders of the requisite
principal amount of such Securities within a specified period following the
record date. For any particular record date, this period will be 180 days or
such shorter period as may be specified by the Company (or the Trustee, if it
set the record date), and may be shortened or lengthened (but not beyond 180
days) from time to time. (Section 104)

DEFEASANCE AND COVENANT DEFEASANCE

The Company has elected, in the Board Resolution establishing the terms of
each series of Securities, to have the provisions of Section 1302, relating to
defeasance and discharge of indebtedness and Section 1303, relating to
defeasance of certain restrictive covenants in the Indenture, applied to the
Securities of each series, or to any specified part of a series at the option of
the Company at any time. (Section 1301)

DEFEASANCE AND DISCHARGE. Upon the Company's exercise of its option to have
Section 1302 applied to any Securities or any series of Securities, the Company
will be discharged from all its obligations with respect to such Securities
(except for certain obligations to exchange or register the transfer of
Securities, to replace stolen, lost or mutilated Securities, to maintain paying
agencies and to hold moneys for payment in trust) upon the deposit in trust for
the benefit of the Holders of such Securities of money or U.S. Government
Obligations, or both, which, through the payment of principal and interest in
respect thereof in accordance with their terms, the terms of the Indenture and
such

57
<PAGE>
Securities. Such defeasance or discharge may occur only if, among other things,
the Company has delivered to the Trustee an Opinion of Counsel to the effect
that the Company has received from, or there has been published by, the United
States Internal Revenue Service a ruling, or there has been a change in tax law,
in either case to the effect that Holders of such Securities will not recognize
gain or loss for federal income tax purposes as a result of such deposit,
defeasance and discharge and will be subject to federal income tax on the same
amount, in the same manner and at the same times as would have been the case if
such deposit, defeasance and discharge were not to occur. (Sections 1302 and
1304)

DEFEASANCE OF CERTAIN COVENANTS. Upon the Company's exercise of its option
to have Section 1303 applied to any Securities or any series of Securities, the
Company may omit to comply with certain restrictive covenants, including those
described under "Restrictive Covenants" and in the last sentence under
"Consolidation, Merger and Sale of Assets", and the occurrence of certain Events
of Default, which are described above in clause (d) (with respect to such
restrictive covenants) and clause (e) under "Events of Default," will be deemed
not to be or result in an Event of Default, in each case with respect to such
Securities. The Company, in order to exercise such option, will be required to
deposit, in trust for the benefit of the Holders of such Securities, money or
U.S. Government Obligations, or both, which, through the payment of principal
and interest in respect thereof in accordance with their terms, will provide
money in an amount sufficient to pay the principal of and any premium and
interest on such Securities on the respective Stated Maturities in accordance
with the terms of the Indenture and such Securities. The Company will also be
required, among other things, to deliver to the Trustee an Opinion of Counsel to
the effect that Holders of such Securities will not recognize gain or loss for
federal income tax purposes as a result of such deposit and defeasance of
certain obligations and will be subject to federal income tax on the same
amount, in the same manner and at the same times as would have been the case if
such deposit and defeasance were not to occur. In the event the Company
exercised this option with respect to any Securities and such Securities were
declared due and payable because of the occurrence of any Event of Default, the
amount of money and U.S. Government Obligations so deposited in trust would be
sufficient to pay amounts due on such Securities at the time of their respective
Stated Maturities but may not be sufficient to pay amounts due on such
Securities upon any acceleration resulting from such Event of Default. In such
case, the Company would remain liable for such payments. (Sections 1303 and
1304)

BOOK ENTRY, DELIVERY AND FORM

The Notes and Debentures will each be issued in the form of one or more
fully registered certificates registered in the name of Cede & Co., the nominee
of The Depository Trust Company (the "Depository"). Except as provided below,
owners of beneficial interests in the certificates for the Notes registered in
the name of the Depository ("Global Notes") or in the certificates for the
Debentures registered in the name of the Depository ("Global Debentures") will
not be entitled to have either the Global Notes or the Global Debentures, as the
case may be, registered in their names and will not receive or be entitled to
receive physical delivery of either the Global Notes or the Global Debentures in
definitive form. Unless and until definitive Notes or Debentures are issued to
owners of beneficial interests in the Global Notes or the Global Debentures,
such owners of beneficial interests will not be recognized as Holders of either
the Notes or the Debentures, as the case may be, by the Trustee. Hence, until
such time, owners of beneficial interests in either the Global Notes or the
Global Debentures will only be able to exercise the rights of Holders indirectly
through the Depository and its participating organizations. Except as set forth
below, the certificates may not be transferred except as a whole by the
Depository to a nominee of the Depository or by a nominee of the Depository to
the Depository or another nominee of the Depository or by the Depository or any
nominee to a successor or the Depository or a nominee of such successor.

The Depository has advised the Company that it is a limited-purpose trust
Company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Securities Exchange Act of 1934, as amended.
The Depository was created to hold securities for its participants and to
facilitate the clearance and settlement of securities transaction among its
participants in such securities through electronic book-entry

58
<PAGE>
changes in accounts of the participants, thereby eliminating the need for
physical movement of securities certificates. The Depository's participants
include securities brokers and dealers (including the Underwriters), banks,
trust companies, clearing corporations and certain other organizations, some of
which (and/or their representatives) own the Depository. Access to the
Depository's book-entry system is also available to others, such as banks,
brokers, dealers and trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly. Persons who are
not participants may beneficially own securities held by the Depository only
through participants.

The Depository advises that pursuant to procedures established by it (i)
upon the issuance of the Notes and the Debentures by the Company, the Depository
will credit the accounts of participants designated by the Underwriters with the
amount of the Global Notes and the Global Debentures purchased by the
Underwriters, and (ii) ownership of beneficial interests in the certificates
representing the Global Notes and the Global Debentures will be shown on, and
the transfer of that ownership will be effected only through, records maintained
by the Depository (with respect to participants' interests) and the participants
and the indirect participants (with respect to beneficial owners' interests).
The laws of some states require that certain persons take physical delivery in
definitive form of securities which they own. Consequently, the ability to
transfer beneficial interests in such certificates is limited to such extent.

Neither the Company, the Trustee, any Payment Agent, nor the Security
Registrar will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests in the certificates representing the Global Notes or the Global
Debentures or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.

Principal and interest payments on the Global Notes and the Global
Debentures registered in the name of the Depository's nominee will be made by
the Trustee to the Depository's nominee as the registered owner of the
certificates relating to the Global Notes and the Global Debentures. The Senior
Indenture provides that the Company and the Trustee will treat the persons in
whose names either the Global Notes or the Global Debentures are registered (the
Depository or its nominee) as the owners of the Global Notes or the Global
Debentures, as the case may be, for the purpose of receiving payment of
principal and interest on either the Global Notes or the Global Debentures and
for all other purposes whatsoever. Therefore, neither the Company, the Trustee
nor any Paying Agent has any direct responsibility or liability for the payment
of principal or interest on the Global Notes or the Global Debentures to owners
of beneficial interests in the certificates relating to the Global Notes or the
Global Debentures. The Depository has advised the Company, and the Trustee that
its present practice is, upon receipt of any payment of principal or interest,
to immediately credit the accounts of the participants with such payment in
amounts proportionate to their respective holdings in principal amount of
beneficial interests in the certificates relating to the Global Notes the Global
Debentures, as shown on the records of the Depository. Payments by participants
and indirect participants to owners of beneficial interests in the certificates
relating to the Global Notes and the Global Debentures will be governed by
standing instructions and customary practices, as is now the case with
securities held for the accounts of customers in bearer form or registered in
"street name," and will be the responsibility of the participants or indirect
participants.

If the Depository is at any time unwilling or unable to continue as
depository and a successor depository is not appointed by the Company, the
Company will issue Notes and Debentures in definitive form in exchange for the
total amount of the certificates representing the Global Notes and the Global
Debentures. In addition, the Company may at any time determine not to have Notes
or Debentures represented by Global Notes or Global Debentures, as the case may
be, and, in such event, the Company will issue Notes or Debentures in definitive
form in exchange for the total amount of the certificates representing the
Global Notes or the Global Debentures. In addition, if any event shall have
happened and be continuing that constitutes an Event of Default with respect to
the Notes or the Debentures, the owners of beneficial interests in certificates
for the Global Notes or the Global Debenture will be entitled to receive Notes
or Debentures, as the case may be, in certificated form in exchange for the
Book-Entry certificate or certificates representing the Global Notes or the
Global Debentures, as

59
<PAGE>
the case may be. In any such instance, an owner of a beneficial interest in such
certificates will be entitled to physical delivery in definitive form of Notes
or Debentures equal in amount to such beneficial interest and to have such Notes
or Debentures registered in its name.

EXCHANGE AND TRANSFER

At the option of the Holder, subject to the terms of the Indenture and the
limitations applicable to Global Securities, Securities of each series will be
exchangeable for other Securities of the same series of any authorized
denomination and of like tenor and aggregate principal amount. (Section 305)

Subject to the terms of the Indenture and the limitations applicable to
Global Securities, Securities may be presented for exchange as provided above or
for registration of transfer (duly endorsed or with the form of transfer
endorsed thereon duly executed) at the office of the Security Registrar or at
the office of any transfer agent designated by the Company for such purpose. No
service charge will be made for any registration of transfer or exchange of
Securities, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith. Such transfer
or exchange will be effected by the Security Registrar or such transfer agent,
as the case may be, being satisfied with the documents of title and identity of
the person making the request. The Company has appointed the Trustee as Security
Registrar. The Company may at any time designate additional transfer agents or
rescind the designation of any transfer agent or approve a change in the office
through which any transfer agent acts, except that the Company will be required
to maintain a transfer agent in each Place of Payment for the Securities of each
series. (Sections 305 and 1002)

If the Securities of any series (or of any series and specified terms) are
to be redeemed in part, the Company will not be required to (i) issue, register
the transfer of or exchange any Security of that series (or of that series and
specified tenor, as the case may be) during a period beginning at the opening of
business 15 days before the day of mailing of a notice of redemption of any such
Security that may be selected for redemption and ending at the close of business
on the day of such mailing or (ii) register the transfer of or exchange any
Security so selected for redemption, in whole or in part, except the unredeemed
portion of any such Security being redeemed in part. (Section 305)

PAYMENT AND PAYING AGENTS

Payment of interest on a Security on any Interest Payment Date will be made
to the Person in whose name such Security (or one or more Predecessor
Securities) is registered at the close of business on the Regular Record Date
for such interest. (Section 307)

Principal of and any premium and interest on the Securities of a particular
series will be payable at the office or agency of such Paying Agent or Paying
Agents as the Company may designate for such purpose from time to time. The
corporate trust office of the Trustee will be designated as the Company's sole
Paying Agent for payments with respect to Securities of each series. The Company
may at any time designate additional Paying Agents or rescind the designation of
any Paying Agent or approve a change in the office through which any Paying
Agent acts, except that the Company will be required to maintain an office or
agency in each Place of Payment for the Securities of any series. (Sections 1002
and 1003)

All moneys paid by the Company to a Paying Agent for the payment of the
principal of or any premium or interest on any Security which remain unclaimed
at the end of two years after such principal, premium or interest has become due
and payable will be repaid to the Company, and the Holder of such Security
thereafter may look only to the Company for payment thereof as an unsecured
general creditor. (Section 1003)

NOTICES TO HOLDERS

Notices to Holders of Securities will be given in writing and mailed,
first-class postage prepaid, to the addresses of such Holders as they may appear
in the Security Register. (Section 106)

60
<PAGE>
TITLE

Prior to due presentment of a Security for registration of transfer, the
Company, the Trustee and any agent of the Company or the Trustee may treat the
Person in whose name such Security is registered as the owner thereof, whether
or not such Security may be overdue, for the purpose of making payment and for
all other purposes. (Section 308)

GOVERNING LAW

The Indenture and the Securities will be governed by and construed in
accordance with the law of the State of New York. (Section 112)

REGARDING THE TRUSTEE

The Company maintains a banking relationship with PNC Bank, Kentucky, Inc.

61
<PAGE>
UNDERWRITING

Subject to the terms and conditions set forth in the Underwriting Agreement
dated the date hereof, the Company has agreed to sell to each of the
Underwriters named below, and each of such Underwriters has severally agreed to
purchase, the respective principal amount of each series of the Securities set
forth opposite its name below:

<TABLE>
<CAPTION>
PRINCIPAL PRINCIPAL PRINCIPAL
AMOUNT OF AMOUNT OF 2016 AMOUNT OF 2026
UNDERWRITER NOTES DEBENTURES DEBENTURES
- -------------------------------------------------- ---------------- ---------------- ----------------
<S> <C> <C> <C>
Goldman, Sachs & Co............................... $ $ $
J.P. Morgan Securities Inc........................
Smith Barney Inc..................................
BA Securities, Inc................................
First Chicago Capital Markets, Inc................
NationsBanc Capital Markets, Inc..................
---------------- ---------------- ----------------
Total......................................... $ $ $
---------------- ---------------- ----------------
---------------- ---------------- ----------------
</TABLE>

Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all of each series of the
Securities, if any are taken.

The Underwriters propose to offer each series of the Securities in part
directly to the public at the respective initial public offering price set forth
on the cover page of this Prospectus and in part to certain securities dealers
at such prices less a concession not to exceed 0. % of the principal amount of
the Notes, not to exceed 0. % of the principal amount of the 2016 Debentures,
and not to exceed 0. % of the principal amount of the 2026 Debentures. The
Underwriters may allow, and such dealers may reallow, a concession not to exceed
0. % of the principal amount of the Notes, not to exceed 0. % of the principal
amount of the 2016 Debentures, and not to exceed 0. % of the principal amount
of the 2026 Debentures to certain brokers and dealers. After the Securities are
released for sale to the public, the offering prices and other selling terms may
from time to time be varied by the Underwriters.

Each series of Securities is a new issue of securities with no established
trading market. The Company has been advised by the Underwriters that the
Underwriters intend to make a market in each series of the Securities but are
not obligated to do so and may discontinue market making at any time without
notice. No assurance can be given as to the liquidity of the trading market for
each series of the Securities.

The Company has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.

62
<PAGE>
VALIDITY OF SECURITIES

The validity of the Securities offered hereby will be passed upon for the
Company by McDermott, Will & Emery, Chicago, Illinois and for the Underwriters
by Sullivan & Cromwell, New York, New York.

EXPERTS

The financial statements as of December 31, 1995 and 1994 and for each of
the three years in the period ended December 31, 1995 included in this
Prospectus have been so included in reliance on the report of Price Waterhouse
LLP, independent accountants, given on the authority of said firm as experts in
auditing and accounting.

63
<PAGE>
ALLEGIANCE CORPORATION
INDEX TO COMBINED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Report of Independent Accountants.......................................................................... F-2

Combined Statements of Income.............................................................................. F-3

Combined Balance Sheets.................................................................................... F-4

Combined Statements of Cash Flows.......................................................................... F-5

Combined Statements of Equity.............................................................................. F-6

Notes to Combined Financial Statements..................................................................... F-7

Schedule II -- Valuation and Qualifying Accounts........................................................... F-19
</TABLE>

F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders of
Baxter International Inc.

In our opinion, the accompanying combined balance sheets and the related
combined statements of income, cash flows and equity present fairly, in all
material respects, the financial position of Allegiance Corporation at December
31, 1995 and 1994, and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 1995, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of Baxter International Inc.'s management; our responsibility is
to express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.

Our audits of the combined financial statements of Allegiance also included
an audit of Financial Statement Schedule II appearing on page F-19 of this
Prospectus. In our opinion, this Financial Statement Schedule presents fairly,
in all material respects, the information set forth therein when read in
conjunction with the related combined financial statements.

Price Waterhouse LLP
Chicago, Illinois
June 26, 1996

F-2
<PAGE>
ALLEGIANCE CORPORATION
COMBINED STATEMENTS OF INCOME
(IN MILLIONS)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEARS ENDED DECEMBER 31,
-------------------- -------------------------------
1996 1995 1995 1994 1993
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales..................................................... $ 2,201 $ 2,485 $ 4,922 $ 5,109 $ 5,019
Costs and expenses
Cost of goods sold.......................................... 1,746 1,940 3,878 3,731 3,613
Selling, general and administrative expenses................ 345 384 756 1,005 1,061
Restructuring charges....................................... -- -- 76 -- 484
Goodwill amortization....................................... 18 19 38 41 41
Other (income) expense...................................... (1) 2 (302) (6) (26)
--------- --------- --------- --------- ---------
Total costs and expenses.................................. 2,108 2,345 4,446 4,771 5,173
--------- --------- --------- --------- ---------
Income (loss) before income taxes............................. 93 140 476 338 (154)
Income tax expense (benefit).................................. 36 55 203 123 (86)
--------- --------- --------- --------- ---------
Income (loss) before cumulative effect of accounting change... 57 85 273 215 (68)
Cumulative effect of change in accounting for other
postemployment benefits, net of income tax benefit of $3..... -- -- -- -- (5)
--------- --------- --------- --------- ---------
Net income (loss)......................................... $ 57 $ 85 $ 273 $ 215 $ (73)
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>

The accompanying notes are an integral part of these combined financial
statements.

F-3
<PAGE>
ALLEGIANCE CORPORATION
COMBINED BALANCE SHEETS
(IN MILLIONS)

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1994
JUNE 30, --------- ---------
1996
------------
(UNAUDITED)
<S> <C> <C> <C>
Current assets
Cash and equivalents......................................................... $ 5 $ 1 $ 3
Accounts receivable, net of allowance for doubtful accounts of $27 at June
30, 1996, and $18 and $17 at December 31, 1995 and 1994, respectively....... 450 487 635
Notes and other current receivables.......................................... 26 59 246
Inventories.................................................................. 656 684 721
Short-term deferred income taxes............................................. 119 129 145
Prepaid expenses............................................................. 16 12 25
------------ --------- ---------
Total current assets....................................................... 1,272 1,372 1,775
------------ --------- ---------
Property, plant and equipment
Property, plant and equipment................................................ 1,523 1,307 1,330
Accumulated depreciation and amortization.................................... 663 429 410
------------ --------- ---------
Net property, plant and equipment............................................ 860 878 920
------------ --------- ---------
Other assets
Goodwill and other intangibles............................................... 1,096 1,116 1,214
Other........................................................................ 65 78 122
------------ --------- ---------
Total other assets......................................................... 1,161 1,194 1,336
------------ --------- ---------
Total assets............................................................. $ 3,293 $ 3,444 $ 4,031
------------ --------- ---------
------------ --------- ---------
Current liabilities
Accounts payable and accrued liabilities..................................... $ 550 $ 692 $ 720
Long-term deferred income taxes................................................ 115 110 54
Other noncurrent liabilities................................................... 68 64 188
Equity
Divisional retained earnings................................................. 1,750 1,768 2,259
Equity investment by parent.................................................. 810 810 810
------------ --------- ---------
Total equity............................................................... 2,560 2,578 3,069
------------ --------- ---------
Total liabilities and equity............................................. $ 3,293 $ 3,444 $ 4,031
------------ --------- ---------
------------ --------- ---------
</TABLE>

The accompanying notes are an integral part of these combined financial
statements.

F-4
<PAGE>
ALLEGIANCE CORPORATION
COMBINED STATEMENTS OF CASH FLOWS
(IN MILLIONS)

<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, YEARS ENDED DECEMBER 31,
-------------------------- -------------------------------
1996 1995 1995 1994 1993
--------------- --------- --------- --------- ---------
(UNAUDITED)
(BRACKETS DENOTE CASH OUTFLOWS)
<S> <C> <C> <C> <C> <C>
Cash flow provided by operations
Income (loss) before cumulative effect of accounting
change...................................................... $ 57 $ 85 $ 273 $ 215 $ (68)
Adjustments
Depreciation and amortization.............................. 73 83 165 223 221
Deferred income taxes...................................... 16 19 50 3 (199)
Gain on asset dispositions, net............................ -- 4 (263) (11) (36)
Restructuring charges...................................... -- -- 76 -- 484
Other...................................................... -- 2 5 2 11
Changes in balance sheet items
Accounts receivable........................................ 69 31 73 8 (6)
Inventories................................................ 24 (76) 29 86 (124)
Accounts payable and other current liabilities............. (88) 14 (120) (43) 78
Restructuring program payments............................. (21) (29) (62) (54) (18)
Other...................................................... 6 6 27 (7) (7)
--- --------- --------- --------- ---------
Cash flow provided by operations............................. 136 139 253 422 336
--- --------- --------- --------- ---------
Investment transactions
Capital expenditures......................................... (33) (48) (112) (122) (273)
Acquisitions (net of cash received).......................... (14) -- (5) (2) (14)
Proceeds from asset dispositions............................. (10) 178 626 107 68
--- --------- --------- --------- ---------
Investment transactions, net................................. (57) 130 509 (17) (219)
--- --------- --------- --------- ---------
Financing transactions
Payments to Baxter International Inc......................... (75) (268) (764) (402) (119)
--- --------- --------- --------- ---------
Financing transactions, net.................................. (75) (268) (764) (402) (119)
--- --------- --------- --------- ---------
Increase (decrease) in cash and equivalents.................... 4 1 (2) 3 (2)
Cash and equivalents at beginning of period.................... 1 3 3 -- 2
--- --------- --------- --------- ---------
Cash and equivalents at end of period.......................... $ 5 $ 4 $ 1 $ 3 $ --
--- --------- --------- --------- ---------
--- --------- --------- --------- ---------
</TABLE>

The accompanying notes are an integral part of these combined financial
statements.

F-5
<PAGE>
ALLEGIANCE CORPORATION
COMBINED STATEMENTS OF EQUITY
(IN MILLIONS)

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1995 1994 1993
SIX MONTHS --------- --------- ---------
ENDED JUNE 30,
1996
--------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Divisional retained earnings
Beginning balance............................................... $ 1,768 $ 2,259 $ 2,446 $ 2,633
Net income (loss)............................................... 57 273 215 (68)
Payments to Baxter International Inc............................ (75) (764) (402) (119)
------- --------- --------- ---------
Ending balance.................................................. 1,750 1,768 2,259 2,446
------- --------- --------- ---------
Equity investment of parent....................................... 810 810 810 810
------- --------- --------- ---------
Total equity.................................................. $ 2,560 $ 2,578 $ 3,069 $ 3,256
------- --------- --------- ---------
------- --------- --------- ---------
</TABLE>

The accompanying notes are an integral part of these combined financial
statements.

F-6
<PAGE>
ALLEGIANCE CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS

1. DESCRIPTION OF THE BUSINESS
On November 27, 1995, the board of directors of Baxter International Inc.
("Baxter") approved in principle a plan to distribute to Baxter stockholders all
of the outstanding stock of its health-care cost management business in a
spin-off transaction (the "Distribution") which is expected to be tax-free.
Allegiance Corporation ("Allegiance" or the "Company") operates in a single
industry segment as a leading provider of medical products and services that
help its health-care customers manage and reduce the total cost of providing
patient care. Through its nationwide distribution network, Allegiance
distributes a broad offering of medical, surgical and laboratory supplies,
including its own self-manufactured surgical and respiratory-therapy products,
to hospital and alternate-care customers. Allegiance also provides cost
management services to its health-care customers through inventory management
programs, customized packaging, and procedure and process consulting. The
delivery of such a broad array of product and service offerings requires focused
investments in cost management services, information systems and manufacturing
efficiencies.

The Distribution is expected to occur in late 1996 and will result in
Allegiance operating as an independent entity with publicly traded common stock.
Baxter will have no ownership interest in Allegiance after the spin-off but will
continue to conduct business as described in the Reorganization and other
agreements outlined in Note 8 to the Combined Financial Statements. However,
Baxter will, unless released by third parties, remain liable for certain lease,
guarantee and other obligations and liabilities that are transferred to and
assumed by Allegiance. Allegiance will be obligated by the Reorganization
agreement to indemnify Baxter against liabilities related to those transferred
obligations and liabilities.

Allegiance's historical results of operations in 1995, 1994 and 1993 include
revenues and expenses related to certain divested businesses. The Industrial and
Life Sciences division was sold in September 1995 and the diagnostics
manufacturing businesses were sold in December 1994. See Note 3 to the Combined
Financial Statements for additional information related to these divestitures.

The following table presents selected financial data for Allegiance
excluding the revenue and expenses associated with these divested businesses:

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEARS ENDED DECEMBER 31,
-------------------- -------------------------------
1996 1995 1995 1994 1993
--------- --------- --------- --------- ---------
(UNAUDITED) (IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Net sales..................................................... $ 2,201 $ 2,244 $ 4,575 $ 4,314 $ 4,249
Costs and expenses
Cost of goods sold.......................................... 1,746 1,770 3,625 3,311 3,245
Selling, general and administrative expenses................ 345 346 701 711 746
Restructuring charges....................................... -- -- -- -- 304
Goodwill amortization....................................... 18 18 37 37 37
Other (income) expense...................................... (1) 2 (33) (3) (44)
--------- --------- --------- --------- ---------
Total costs and expenses.................................. 2,108 2,136 4,330 4,056 4,288
--------- --------- --------- --------- ---------
Pretax income (loss).......................................... 93 108 245 258 (39)
Income tax expense (benefit).................................. 36 42 94 101 (13)
--------- --------- --------- --------- ---------
Income (loss)............................................. $ 57 $ 66 $ 151 $ 157 $ (26)
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies is presented to assist the
reader in understanding and evaluating the combined financial statements. These
policies are in conformity with generally

F-7
<PAGE>
ALLEGIANCE CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
accepted accounting principles and have been applied consistently in all
material respects. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

BASIS OF PRESENTATION

The accompanying combined financial statements include those assets,
liabilities, revenues and expenses directly attributable to Allegiance's
operations. These financial statements have been prepared as if Allegiance had
operated as a free-standing entity for all periods presented. Operations outside
the United States and Puerto Rico, which are not significant, are included in
the combined financial statements on the basis of fiscal years ending November
30.

The financial information included herein does not necessarily reflect what
the financial position and results of operations of Allegiance would have been
had it operated as a stand-alone entity during the periods covered, and may not
be indicative of future operations or financial position.

INTERIM FINANCIAL STATEMENTS

In the opinion of management, the interim combined financial statements
reflect all adjustments necessary for a fair presentation of the interim
periods. All such adjustments are of a normal, recurring nature. The results of
operations for the interim periods are not necessarily indicative of the results
of operations to be expected for the full year.

CASH AND EQUIVALENTS

Cash and equivalents include cash, cash investments and marketable
securities with original maturities of three months or less. Cash payments for
income taxes related to Allegiance's operations were made by Baxter.

INVENTORIES

Inventories are stated at the lower of cost (first-in, first-out method) or
market. Market for raw materials is based on replacement costs and for other
inventory classifications on net realizable value. Appropriate consideration is
given to deterioration, obsolescence and other factors in evaluating net
realizable value.

Inventories consisted of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1994
--------- ---------
JUNE 30,
1996
-------------
(UNAUDITED)
(IN MILLIONS)
<S> <C> <C> <C>
Raw materials................................................... $ 63 $ 54 $ 64
Work in process................................................. 53 49 55
Finished products............................................... 540 581 602
----- --------- ---------
Total inventories........................................... $ 656 $ 684 $ 721
----- --------- ---------
----- --------- ---------
</TABLE>

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are stated at cost. Depreciation and
amortization are provided for financial reporting purposes principally on the
straight-line method over the following estimated useful lives: buildings and
leasehold improvements, 20 to 44 years; machinery and other equipment, 3 to 20

F-8
<PAGE>
ALLEGIANCE CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
years; equipment leased or rented to customers, 1 to 5 years. Leasehold
improvements are depreciated over the life of the related facility leases or the
asset whichever is shorter. Straight-line and accelerated methods of
depreciation are used for income tax purposes.

Property, plant and equipment consisted of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1994
--------- ---------
(IN MILLIONS)
<S> <C> <C>
Land.................................................................. $ 102 $ 104
Buildings and leasehold improvements.................................. 396 386
Machinery and equipment............................................... 724 778
Equipment leased or rented to customers............................... 14 16
Construction in progress.............................................. 71 46
--------- ---------
Total property, plant and equipment, at cost........................ 1,307 1,330
Accumulated depreciation and amortization............................. (429) (410)
--------- ---------
Net property, plant and equipment................................. $ 878 $ 920
--------- ---------
--------- ---------
</TABLE>

Depreciation expense was $106, $154 and $156 million in 1995, 1994 and 1993,
respectively. Repairs and maintenance expense was $36 million in 1995, $30
million in 1994 and $33 million in 1993.

GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill represents the excess of cost over the fair value of net assets
acquired and is amortized on a straight-line basis over estimated useful lives
not exceeding 40 years. Based upon management's assessment of the future
undiscounted operating cash flows of acquired businesses, the carrying value of
goodwill at December 31, 1995, has not been impaired. As of December 31, 1995
and 1994, goodwill was $1,092 million and $1,170 million, respectively, net of
accumulated amortization of $369 million and $345 million, respectively.

Other intangible assets include purchased patents, trademarks, deferred
charges and other identified rights which are amortized on a straight-line basis
over their legal or estimated useful lives, whichever is shorter (generally not
exceeding 17 years). As of December 31, 1995 and 1994, other intangibles were
$24 million and $44 million, respectively, net of accumulated amortization of
$46 million and $38 million, respectively.

INCOME TAXES

Allegiance's operations were historically included in Baxter's consolidated
U.S. federal and state income tax returns and in the tax returns of certain
Baxter foreign subsidiaries. The provision for income taxes has been determined
as if Allegiance had filed separate tax returns under its existing structure for
the periods presented. Accordingly, the effective tax rate of Allegiance in
future years could vary from its historical effective rates depending on
Allegiance's future legal structure and tax elections. All income taxes are
settled with Baxter on a current basis through the "Divisional Retained
Earnings" account.

Provision has been made for income taxes in accordance with Financial
Accounting Standards Board ("FASB") Statement No. 109, "Accounting for Income
Taxes."

DERIVATIVES

Gains and losses on hedges of existing assets or liabilities are included in
the carrying amounts of those assets or liabilities and are ultimately
recognized in income as part of those carrying amounts.

F-9
<PAGE>
ALLEGIANCE CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Gains and losses relating to qualifying hedges of firm commitments or
anticipated transactions also are deferred and are recognized in income or as
adjustments of carrying amounts when the hedged transaction occurs.

3. ACQUISITIONS, INVESTMENTS IN AFFILIATES AND DIVESTITURES

ACQUISITIONS

Allegiance invested $5 million in 1995, $2 million in 1994 and $14 million
in 1993 for acquisitions accounted for as purchase transactions and investments
in affiliated companies. Had the acquisitions taken place on January 1,
consolidated results in the year of acquisition would not have been materially
different from reported results. These acquisitions involved no significant
change in Allegiance's strategic direction and were made to acquire
technologies, broaden product lines and expand market coverage.

DIVESTITURES

In 1995, Allegiance disposed of several businesses or product lines which
resulted in a net gain of $141 million (net of $122 million in related income
tax expense). The majority of the net gain for 1995 related to the divestiture
of Allegiance's Industrial and Life Sciences Division ("Industrial") to VWR
Corporation for approximately $400 million in cash and $25 million in deferred
payments, resulting in a gain of $268 million. As part of the divestiture,
Allegiance will continue to supply its self-manufactured products and supplies
sold in non-health-care markets to VWR Corporation under a long-term
distribution agreement. Allegiance disposed of or discontinued several minor
non-strategic or unprofitable product lines or investments which resulted in a
net gain of $8 million (net of $3 million in related income tax expense) in 1994
and $22 million (net of $14 million in related income tax expense) in 1993. The
majority of these transactions resulted in the disposition of Allegiance's
entire interest in such product lines and investments.

Proceeds from divestitures were $626 million in 1995, $107 million in 1994
and $68 million in 1993. Proceeds in 1995 included approximately $400 million
for the Industrial divestiture discussed earlier. The divestiture of the
diagnostics manufacturing business discussed in Note 4 to the Combined Financial
Statements included proceeds of approximately $200 million in 1995 and $44
million in 1994.

4. RESTRUCTURING CHARGES
In November 1993, Baxter's board of directors approved a series of strategic
actions to improve shareholder value and reduce costs. The strategic actions of
the program were designed in part to make the Allegiance Business more efficient
and responsive in addressing the changes occurring in the U.S. health-care
system. In November 1993, a $484 million pretax provision was recorded to cover
costs associated with these restructuring initiatives. Since the announcement of
the 1993 restructuring program, Allegiance has implemented, or is in the process
of implementing, all of the major strategic actions associated with the
restructuring program, which is expected to be completed in 1997.

Included in the 1993 restructuring plan was the intent to divest the
diagnostics manufacturing businesses and a valuation allowance was established
as a component of the 1993 restructuring charge. In December 1994, subject to
certain settlement provisions, the divestiture of these businesses was completed
and net proceeds were received of approximately $44 million in cash, $200
million in installment notes (which were collected in cash during January 1995)
and $40 million in face value of preferred stock. In addition, accounts
receivable were retained of approximately $85 million, which was collected from
customers in the normal course of business. Allegiance has retained the rights
to distribute all current diagnostics products in the U.S.

F-10
<PAGE>
ALLEGIANCE CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

4. RESTRUCTURING CHARGES (CONTINUED)
Throughout 1995, active discussions took place with the buyer of the
diagnostics businesses related to interpretations of and responsibility relative
to the settlement provisions contained in the purchase and sale and related
agreements. The divestiture was also significantly complicated by a dispute
between the diagnostics manufacturing businesses and one of its major suppliers,
which ultimately led to a lower than expected final valuation of the business.
This dispute has been settled. In the third quarter of 1995, settlement
negotiations were completed with the buyer of the diagnostics businesses and
adjustments to the purchase price were finalized along with a revision of cost
estimates to complete the divestiture. This resulted in an additional
restructuring charge of approximately $76 million.

Employee-related costs include provisions for severance, outplacement
assistance, relocation and retention payments for employees in the affected
operations worldwide. Since the inception of the restructuring program,
approximately 1,920 of the 2,860 positions that were originally expected to be
affected by the program have been eliminated. As process changes were
implemented in connection with the restructuring program, it became apparent
that, as certain management level positions were eliminated, other lower cost
positions were added. While this has generated savings levels consistent with
expectations, management has revised its targeted head count reduction to 2,230
net positions. The majority of the remaining reductions will occur in 1996 and
1997, as facility closures and consolidations are completed as planned.

Noncash restructuring reserve utilization with respect to divestitures and
asset write-downs of $160 million, $66 million and $21 million in 1994 and 1995,
and for the six months ended June 30, 1996, respectively, included $118 million,
$16 million and $3 million, respectively, relating to the divestiture of the
diagnostics manufacturing businesses. Also included was $42 million in 1994, $50
million in 1995 and $16 million for the six months ended June 30, 1996, relating
primarily to the closure of a manufacturing facility and consolidations or
certain distribution facilities. The utilization relating to the diagnostics
divestiture primarily represents the excess of the net assets of the businesses
sold over the proceeds received. The utilization relating to the manufacturing
facility closure and distribution facility consolidations primarily represents
fixed asset and inventory write-downs.

F-11
<PAGE>
ALLEGIANCE CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

4. RESTRUCTURING CHARGES (CONTINUED)
The following table summarizes the 1993 restructuring program for Allegiance
businesses:

<TABLE>
<CAPTION>
DIVESTITURES
EMPLOYEE- AND ASSET OTHER
RELATED COSTS WRITE- DOWNS COSTS TOTAL
--------------- ------------- --------- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Initial restructuring charge................... $ 103 $ 278 $ 103 $ 484
Utilization:
Cash......................................... (31) (22) (23) (76)
Noncash...................................... -- (160) -- (160)
----- ------ --------- ---------
December 31, 1994.............................. $ 72 $ 96 $ 80 $ 248
----- ------ --------- ---------
Utilization:
Cash......................................... (29) (43) (33) (105)
Noncash...................................... -- (66) -- (66)
Adjustment to reserve.......................... -- 76 -- 76
----- ------ --------- ---------
December 31, 1995.............................. $ 43 $ 63 $ 47 $ 153
----- ------ --------- ---------
Utilization:
Cash......................................... (11) (13) (10) (34)
Noncash...................................... -- (21) -- (21)
----- ------ --------- ---------
June 30, 1996.................................. $ 32 $ 29 $ 37 $ 98
----- ------ --------- ---------
----- ------ --------- ---------
</TABLE>

The 1995 restructuring reserve balance consisted of $89 million of current
and $64 million noncurrent liabilities. The balance in the 1994 reserves
consisted of $80 million of current and $168 million of non-current liabilities.

5. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities consisted of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
1995 1994
--------- ---------------
(IN MILLIONS)
<S> <C> <C>
Accounts payable, principally trade................................... $ 378 $ 390
Employee compensation and withholdings................................ 88 109
Restructuring......................................................... 89 80
Property, payroll and other taxes..................................... 40 37
Other................................................................. 97 104
--------- -----
Accounts payable and accrued liabilities.............................. $ 692 $ 720
--------- -----
--------- -----
</TABLE>

6. LEASE OBLIGATIONS
Certain facilities and equipment are leased under operating leases expiring
at various dates. Most of the operating leases contain renewal options. Total
expense for all operating leases was $26 million in 1995, $38 million in 1994
and $38 million in 1993.

F-12
<PAGE>
ALLEGIANCE CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

6. LEASE OBLIGATIONS (CONTINUED)
Future minimum lease payments (including interest) under noncancelable
operating leases at December 31, 1995 were as follows:

<TABLE>
<CAPTION>
OPERATING
LEASES
---------------
(IN MILLIONS)
<S> <C>
1996.................................................................. $ 20
1997.................................................................. 15
1998.................................................................. 11
1999.................................................................. 6
2000.................................................................. 4
Thereafter............................................................ 6
---
Total obligations and commitments..................................... $ 62
---
---
</TABLE>

7. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

CONCENTRATIONS OF CREDIT RISK

Allegiance provides credit, in the normal course of business, to hospitals,
private and government institutions, health-care agencies, insurance agencies
and doctors' offices. Allegiance performs ongoing credit evaluations of its
customers and maintains reserves for potential credit losses which, when
realized, have been within the range of management's allowance for doubtful
accounts.

FINANCIAL INSTRUMENT USE

For all periods presented, Allegiance has been considered in Baxter's
overall risk management strategy. As part of this strategy, Baxter uses certain
financial instruments to reduce its exposure to adverse movements in foreign
exchange rates. These financial instruments are not used for trading purposes.

FOREIGN EXCHANGE RISK MANAGEMENT

As part of implementing its strategy, Baxter has allocated to Allegiance the
income and expense associated with certain option contracts used to hedge
anticipated cost of production expected to be denominated in foreign currencies.
The terms of these financial instruments were less than one year. Allocated net
expense and the related notional amounts for these options were immaterial in
all years presented. Subsequent to year-end 1995, Baxter entered into options to
reduce its foreign exchange exposures. Baxter allocated to Allegiance options
with a notional value of approximately $40 million to hedge anticipated costs of
production expected to be denominated in foreign currency.

FAIR VALUES OF FINANCIAL INSTRUMENTS

<TABLE>
<CAPTION>
CARRYING AMOUNTS APPROXIMATE FAIR VALUES
------------------------ ------------------------
AS OF DECEMBER 31 (IN MILLIONS) 1995 1994 1995 1994
- ---------------------------------------------------------- ----- ----- ----- -----
<S> <C> <C> <C> <C>
Investment in affiliates.................................. $ 15 $ 9 $ 15 $ 9
</TABLE>

The carrying values of cash and cash equivalents, accounts receivable and
payable, and accrued liabilities, approximate fair value due to the short-term
maturities of these assets and liabilities.

Investments in affiliates are accounted for by both the cost and equity
methods and pertain to several minor equity investments in companies for which
fair values are determined by quoted market prices and others for which fair
values are not readily available, but are believed to exceed carrying amounts.

F-13
<PAGE>
ALLEGIANCE CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

8. RELATED PARTY TRANSACTIONS
Baxter has provided to Allegiance certain legal, treasury, insurance and
administrative services. Charges for these services are based on actual costs
incurred by Baxter. In addition, Allegiance is the primary distributor of
Baxter's intravenous solutions, cardiovascular devices and other products in the
United States and also provides other services to Baxter. Negotiated fees for
these distribution services have generally been under the same terms and
conditions granted to independent third parties. Additionally, these fees are
not materially different than the terms of the Distribution Agreement subsequent
to the Distribution. A summary of related party transactions, all of which are
with Baxter or Baxter affiliates, is shown in the table below (in millions):

<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Allegiance provided:
Distribution services to Baxter in the U.S......................... $ 214 $ 206 $ 201
Administrative services to Baxter.................................. $ 25 $ 24 $ 23
Allegiance received:
Administrative services from Baxter................................ $ 48 $ 46 $ 44
International distribution services from Baxter.................... $ 26 $ 25 $ 23
</TABLE>

Management believes that the basis used for allocating corporate services is
reasonable. However, the terms of these transactions may differ from those that
would result from transactions among unrelated parties.

Allegiance participates in a centralized cash management program
administered by Baxter. Short-term advances from Baxter or excess cash sent to
Baxter has been treated as an adjustment to the "Divisional Retained Earnings"
account through the Balance Sheet date. No interest is charged on this balance.

Effective on the Distribution Date, Baxter and Allegiance will enter into a
series of administrative services agreements pursuant to which Baxter and
Allegiance will continue to provide, for a specified period of time, certain
administrative services which each entity historically has provided to the
other. These agreements require both parties to pay to each other a fee which
approximates the actual costs of these services. Additionally, subsequent to the
spin-off, Allegiance will have continuing significant relationships with Baxter
as a distributor, customer and supplier for a wide array of health-care products
and services, and for specified transitional administrative support services.
See "Arrangements Between Baxter and Allegiance" included elsewhere in this
Information Statement, for detailed descriptions of the related agreements.

9. RETIREMENT AND OTHER BENEFIT PROGRAMS
Allegiance participated in Baxter-sponsored non-contributory, defined
benefit pension plans covering substantially all employees in the U.S. and
Puerto Rico. The benefits were based on years of service and the employee's
compensation during 5 of the last 10 years of employment as defined by the
plans. Plan assets, which are maintained in a trust administered by Baxter,
consist primarily of equity and fixed income securities. Baxter and Allegiance
have announced their intent to freeze benefits under these plans at the date of
the spin-off for Allegiance employees. Allegiance has also announced that it
will not have a defined benefit pension plan to replace the Baxter plan. The
pension liability related to Allegiance employees' service prior to the spin-off
date will remain with Baxter.

Pension expense associated with the Baxter-sponsored plans prior to its
being frozen was $17 million, $22 million and $28 million for 1995, 1994 and
1993, respectively. The assumed discount rate applied to benefit obligations to
determine 1995 pension expense was 9% and the assumed long-term rate of return
on assets was 9.5% for the U.S. and Puerto Rico plans.

F-14
<PAGE>
ALLEGIANCE CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

9. RETIREMENT AND OTHER BENEFIT PROGRAMS (CONTINUED)
In addition to pension benefits, Allegiance participated in Baxter-sponsored
contributory health-care and life insurance benefits for substantially all
domestic retired employees. Baxter and Allegiance have announced that they will
freeze benefits under these plans at the date of the spin-off for Allegiance
employees. Expense associated with these benefits prior to the date of the
spin-off were $9 million in 1995, $9 million in 1994 and $11 million in 1993.
Allegiance has announced its intention not to establish new health-care and life
insurance plans for employees retiring subsequent to the Distribution Date.

Effective, January 1, 1993, Allegiance adopted FASB Statement No. 112,
"Employers' Accounting for Postemployment Benefits" which requires accrual
accounting for postemployment benefits such as disability related and
workers-compensation payments. The company recorded the obligation as a
cumulative effect of an accounting change for $5 million (net of $3 million in
related income tax benefits). The effect of this change on 1993 operating income
versus the prior method of accounting for these benefits was not material. The
liability associated with these benefits was $14 million for 1995 and 1994.

Most U.S. employees are eligible to participate in a qualified 401(k) plan.
Participants may contribute up to 12% of their annual compensation (limited in
1995 to $9,240 per individual) to the plan and Allegiance matches participants'
contributions, up to 3% of compensation. Matching contributions made by
Allegiance were $11 million in 1995, $14 million in 1994 and $14 million in
1993.

10. OTHER (INCOME) EXPENSE
Components of other (income) expense are as follows:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1995 1994 1993
--------- --------- ---------
(IN MILLIONS)
<S> <C> <C> <C>
Asset dispositions, net.............................................. $ (263) $ (11) $ (36)
Foreign exchange..................................................... -- 5 --
Other................................................................ (39) -- 10
--------- --- ---
Total other income................................................... $ (302) $ (6) $ (26)
--------- --- ---
--------- --- ---
</TABLE>

11. INCOME TAXES
Income (loss) before tax expense by category is as follows:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1995 1994 1993
--------- --------- ---------
(IN MILLIONS)
<S> <C> <C> <C>
U.S................................................................. $ 434 $ 292 $ (191)
International....................................................... 42 46 37
--------- --------- ---------
Income (loss) before income tax expense............................. $ 476 $ 338 $ (154)
--------- --------- ---------
--------- --------- ---------
</TABLE>

F-15
<PAGE>
ALLEGIANCE CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

11. INCOME TAXES (CONTINUED)
Income tax expense before cumulative effect of accounting change by category
and by income statement classification is as follows:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1995 1994 1993
--------- --------- ---------
(IN MILLIONS)
<S> <C> <C> <C>
Current
U.S.
Federal......................................................... $ 124 $ 91 $ 79
State and local, including Puerto Rico.......................... 34 26 29
International..................................................... (5) 3 5
--------- --------- ---------
Current income tax expense........................................ 153 120 113
--------- --------- ---------
Deferred
U.S.
Federal......................................................... 38 (5) (164)
State and local, including Puerto Rico.......................... 8 4 (34)
International..................................................... 4 4 (1)
--------- --------- ---------
Deferred income tax expense (benefit)............................. 50 3 (199)
--------- --------- ---------
Income tax expense (benefit)........................................ $ 203 $ 123 $ (86)
--------- --------- ---------
--------- --------- ---------
</TABLE>

The income tax expense shown above was calculated as if Allegiance were a
stand-alone entity.

The components of deferred tax assets and liabilities are as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
1995 1994 1993
--------- --------- ---------
(IN MILLIONS)
<S> <C> <C> <C>
Deferred tax assets
Accrued expenses................................................... $ 70 $ 60 $ 60
Restructuring costs................................................ 57 77 111
Other.............................................................. -- -- 1
--------- --------- ---------
Total deferred tax assets........................................ 127 137 172
--------- --------- ---------
Deferred tax liabilities
Asset basis differences............................................ 107 46 70
Other.............................................................. 1 -- 8
--------- --------- ---------
Total deferred tax liabilities................................... 108 46 78
--------- --------- ---------
Net deferred tax assets.......................................... $ 19 $ 91 $ 94
--------- --------- ---------
--------- --------- ---------
</TABLE>

In 1995, $22 million of deferred tax assets were transferred to Baxter. The
deferred tax assets related to the asset basis difference associated with
preferred stock received in connection with the divestiture of the diagnostics
manufacturing businesses. Since agreements entered into with the buyer of the
diagnostics manufacturing businesses require that the preferred stock be
retained by Baxter for a prescribed period of time, the related deferred tax
assets were transferred to Baxter.

F-16
<PAGE>
ALLEGIANCE CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

11. INCOME TAXES (CONTINUED)
Income tax expense differs from income tax expense calculated by using the
U.S. federal income tax rate for the following reasons:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1995 1994 1993
--------- --------- ---------
(IN MILLIONS)
<S> <C> <C> <C>
Income tax expense (benefit) at statutory rate....................... $ 166 $ 118 $ (54)
Tax-exempt operations................................................ (17) (23) (37)
Non deductible goodwill.............................................. 28 14 14
State and local taxes................................................ 27 15 (12)
Foreign tax (benefit)................................................ (1) (2) (2)
Other................................................................ -- 1 5
--------- --------- ---------
Income tax expense (benefit)....................................... $ 203 $ 123 $ (86)
--------- --------- ---------
--------- --------- ---------
</TABLE>

Allegiance has manufacturing operations outside the U.S. that benefit from
reductions in local tax rates under tax incentives that will continue at least
through 1998. U.S. federal income taxes, net of available foreign tax credits,
on unremitted earnings deemed permanently reinvested would not be material.

12. LEGAL PROCEEDINGS
Upon the Distribution, Allegiance will assume the defense of litigation
involving claims related to Allegiance Business, including certain claims of
alleged personal injuries as a result of exposure to natural rubber latex gloves
described below. Allegiance has not been named as a defendant in this litigation
but will be defending and indemnifying Baxter Healthcare Corporation ("BHC"), as
contemplated by the Reorganization Agreement, for all expenses and potential
liabilities associated with claims pertaining to this litigation. It is expected
that Allegiance will be named as a defendant in future litigation and may be
added as a defendant in existing litigation. (Information subsequent to June 26,
1996 is unaudited).

BHC was one of ten defendants named in a purported class action filed in
August 1993, on behalf of all medical and dental personnel in the state of
California who allegedly suffered allergic reactions to natural rubber latex
gloves and other protective equipment or who allegedly have been exposed to
natural rubber latex products. (KENNEDY, ET AL., V. BAXTER HEALTHCARE
CORPORATION, ET AL., Sup. Ct., Sacramento Co., Cal., #535632). The case alleges
that users of various natural rubber latex products, including medical gloves
made and sold by BHC and other manufacturers, suffered allergic reactions to the
products ranging from skin irritation to systemic anaphylaxis. The Court granted
defendants' demurrer to the class action allegations. On February 29, 1996, the
California Appellate Court upheld the trial court's ruling. In April 1994, a
similar purported class action, GREEN, ET AL. V. BAXTER HEALTHCARE CORPORATION,
ET AL., (Cir. Ct., Milwaukee Co., WI, 94CV004977) was filed against Baxter and
three other defendants. The class action allegations have been withdrawn, but
additional plaintiffs added individual claims. On July 1, 1996, the Company was
served with a similar purported class action, WOLF V. BAXTER HEALTHCARE CORP. ET
AL., Circuit Court, Wayne County, MI, 96-617844NP. The Company is the only named
defendant in that suit. As of August 19, 1996, 36 additional lawsuits have been
served on BHC containing similar allegations of senseitization to natural rubber
latex products. Allegiance intends to vigorously defend against these actions.
Since none of these cases has proceeded to a hearing on the merits, Allegiance
is unable to evaluate the extent of any potential liability, and unable to
estimate any potential loss.

Allegiance believes that a substantial portion of the liability and defense
costs related to natural rubber latex gloves cases and claims will be covered by
insurance, subject to self-insurance retentions, exclusions, conditions,
coverage gaps, policy limits and insurer solvency. BHC has notified its
insurance

F-17
<PAGE>
ALLEGIANCE CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

12. LEGAL PROCEEDINGS (CONTINUED)
companies that it believes that these cases and claims are covered by BHC's
insurance. Most of BHC's insurers have reserved their rights (i.e., neither
admitted nor denied coverage), and may attempt to reserve in the future, the
right to deny coverage, in whole or in part, due to differing theories
regarding, among other things, the applicability of coverage and when coverage
may attach. It is not expected that the outcome of these matters will have a
material adverse effect on Allegiance's business, cash flow, results of
operations or financial condition.

As of June 30, 1996, BHC has been named as a potentially responsible party
for cleanup costs at ten hazardous waste sites, for which Allegiance has assumed
responsibility. Allegiance's largest assumed exposure is at the Thermo-Chem site
in Muskegon, Michigan. Allegiance expects that the total cleanup costs for this
site will be between $44 million and $65 million, of which Allegiance's share
will be approximately $5 million. This amount, net of payments of approximately
$1 million, has been accrued and is reflected in Allegiance's combined financial
statements. The estimated exposure for the remaining nine sites is approximately
$4 million, which has been accrued and reflected in Allegiance's combined
financial statements.

13. INDUSTRY INFORMATION
Allegiance operates in a single industry segment as a leading provider of
medical products and services that help its health-care customers manage and
reduce the total cost of providing patient care. Through its nationwide
distribution network, Allegiance distributes a broad offering of hospital
supplies, including its own self-manufactured surgical and respiratory-therapy
products, to hospital and alternate-care customers. Allegiance also provides
cost management services to its health-care customers through inventory
management programs, customized packaging, and procedure and process consulting.

International sales from self-manufactured products are primarily in Canada,
France and Germany. For surgical products, the majority of raw materials used
for the manufacture of latex gloves are located in Malaysia. None of these
geographic locations represent 10% or more of net sales or identifiable assets
of Allegiance.

For the last three years, sales to customers which are members of two large
hospital buying groups, Premier and VHA, Inc. ("VHA"), as a percentage of total
sales were 27% and 16%, respectively in 1995, 23% and 13%, respectively in 1994,
and 23% and 13%, respectively in 1993. Premier and VHA each are comprised of a
group of health-care organizations which benefit from the pricing and other
benefits available to members of the group. However, some members are free to
purchase from the vendors of their choice. The loss of the relationship with
either group would not necessarily mean the loss of sales attributable to all
members of such group.

F-18
<PAGE>
SCHEDULE II

VALUATION AND QUALIFYING ACCOUNTS
(IN MILLIONS OF DOLLARS)

<TABLE>
<CAPTION>
ADDITIONS
---------------------------------------------------------------------------------
BALANCE AT CHARGED TO CHARGED TO DEDUCTIONS BALANCE
BEGINNING COSTS AND OTHER FROM AT END OF
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS (A) RESERVES PERIOD
- ----------------------------------------------- ------------- --------------- ----------------- --------------- -------------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1995:
Accounts receivable.......................... $ 17 $ 3 $ -- $ (2) $ 18
-- --
-- --
--- --- ---
--- --- ---
Year ended December 31, 1994:
Accounts receivable.......................... $ 13 $ 7 $ 1 $ (4) $ 17
-- --
-- --
--- --- ---
--- --- ---
Year ended December 31, 1993:
Accounts receivable.......................... $ 12 $ 3 $ -- $ (2) $ 13
-- --
-- --
--- --- ---
--- --- ---
</TABLE>

- ------------
(A) Valuation accounts of acquired or divested companies and foreign currency
translation adjustments. Reserves are deducted from assets to which they
apply.

F-19
<PAGE>
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES
DESCRIBED IN THIS PROSPECTUS OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER
TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION
IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.

--------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Available Information.......................... 2
Prospectus Summary............................. 3
Risk Factors................................... 8
Use of Proceeds................................ 11
Company Background............................. 11
Capitalization................................. 12
Selected Historical Financial Data............. 13
Pro Forma Financial Information................ 15
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 19
Business....................................... 27
Management..................................... 36
Relationship with Baxter....................... 47
Principal Stockholders......................... 50
Description of Credit Facilities............... 51
Description of Securities...................... 51
Underwriting................................... 62
Validity of Securities......................... 63
Experts........................................ 63
Index to Financial Statements.................. F-1
</TABLE>

THROUGH AND INCLUDING (THE 40TH DAY AFTER THE DATE OF THIS
PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE SECURITIES, WHETHER OR
NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER
A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.

$500,000,000

ALLEGIANCE CORPORATION

$200,000,000
% NOTES DUE , 2006
$150,000,000
% DEBENTURES DUE , 2016
$150,000,000
% DEBENTURES DUE , 2026

--------------

[LOGO]

--------------

GOLDMAN, SACHS & CO.
J.P. MORGAN & CO.
SMITH BARNEY INC.
BA SECURITIES, INC.
FIRST CHICAGO
CAPITAL MARKETS, INC.
NATIONSBANC
CAPITAL MARKETS, INC.

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following are the estimated expenses (other than the SEC registration
fee) of the issuance and distribution of the securities being registered, all of
which will be paid by the Company.

<TABLE>
<S> <C>
SEC registration fee........................................... $ 206,897
Printing expenses.............................................. 50,000
Fees and expenses of counsel................................... 75,000
Fees and expenses of accountants............................... 25,000
Trustee fees and expenses...................................... 15,000
Rating Agency Fees............................................. 250,000
Blue sky fees and expenses..................................... 18,000
Miscellaneous.................................................. 10,103
---------
Total.......................................................... $ 650,000
---------
---------
</TABLE>

- ------------

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

The Allegiance Certificate of Incorporation provides that a director of
Allegiance will not be personally liable to Allegiance or its stockholders for
monetary damages for breach of fiduciary duty as a director, except for
liability (i) for any breach of the director's duty of loyalty to Allegiance or
its stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the Delaware Law, which concerns unlawful payments of dividends, stock purchases
or redemptions, or (iv) for any transaction from which the director derived an
improper personal benefit.

While the Certificate of Incorporation provides directors with protection
from awards for monetary damages for breaches of their duty of care, it does not
eliminate such duty. The provisions of the Certificate of Incorporation
described above apply to an officer of Allegiance only if he or she is a
director of Allegiance and is acting in his or her capacity as director, and do
not apply to officers of Allegiance who are not directors.

The Allegiance Certificate of Incorporation provides that each person who is
or was or had agreed to become a director or officer of Allegiance, and each
person who serves or may have served at the request of Allegiance as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, will be indemnified by Allegiance to the fullest
extent permitted from time to time by Delaware law, as the same exists or may
hereafter be amended, except with respect to an action commenced by such
directors or officers against Allegiance or by such directors or officers as a
derivative action.

The Certificate of Incorporation provides that the right to indemnification
and the payment of expenses conferred in the Certificate of Incorporation will
not be exclusive of any other right which any person may have or may in the
future acquire under any agreement, vote of stockholders or disinterested
directors or otherwise. The Certificate of Incorporation permits Allegiance to
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of Allegiance, or is serving at the request of Allegiance as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any expense, liability or loss,
whether or not Allegiance would have the power to indemnify such person against
such liability under the Certificate of Incorporation or Delaware Law.

Under Delaware law, a corporation may indemnify any person who was or is a
party or is threatened to be made a party to an action (other than an action by
or in the right of the corporation) by reason of his

II-1
<PAGE>
service as a director or officer of the corporation, or his service, at the
corporation's request, as a director, officer, employee or agent of another
corporation or other enterprise, against expenses (including attorneys' fees)
that are actually and reasonably incurred by him ("Expenses"), and judgments,
fines and amounts paid in settlement that are actually and reasonably incurred
by him, in connection with the defense or settlement of such action, provided
that he acted in good faith and in a manner he reasonably believed to be in or
not opposed to the corporation's best interests and, with respect to any
criminal action or proceeding, had no reasonable cause to believe that his
conduct was unlawful. Although Delaware law permits a corporation to indemnify
any person referred to above against Expenses in connection with the defense or
settlement of an action by or in the right of the corporation, provided that he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the corporation's best interests, if such person has been judged
liable to the corporation, indemnification is only permitted to the extent that
the Court of Chancery (or the court in which the action was brought) determines
that, despite the adjudication of liability, such person is entitled to
indemnity for such Expenses as the court deems proper. The determination as to
whether a person seeking indemnification has met the required standard of
conduct is to be made (1) by a majority vote of a quorum of disinterested
members of the board of directors, or (2) by independent legal counsel in a
written opinion, if such a quorum does not exist or if the disinterested
directors so direct, or (3) by the stockholders. The General Corporation Law of
the State of Delaware also provides for mandatory indemnification of any
director, officer, employee or agent against Expenses to the extent such person
has been successful in any proceeding covered by the statute. In addition, the
General Corporation Law of the State of Delaware provides the general
authorization of advancement of a director's or officer's litigation expenses in
lieu of requiring the authorization of such advancement by the board of
directors in specific cases, and that indemnification and advancement of
expenses provided by the statute shall not be deemed exclusive of any other
rights to which those seeking indemnification or advancement of expenses may be
entitled under any bylaw, agreement or otherwise.

The Company intends to enter into agreements to indemnify its directors and
certain officers, in addition to the indemnification provided for in the
Company's Amended Certificate and Amended By-Laws. Under these agreements, the
Company will, among other things, indemnify the Company's directors and officers
for all direct and indirect expenses and costs (including, without limitation,
all reasonable attorneys' fees and related disbursements, other out of pocket
costs and reasonable compensation for time spent by such persons for which they
are not otherwise compensated by the Company or any third person) and
liabilities of any type whatsoever (including, but not limited to, judgments,
fines and settlement fees) actually and reasonably incurred by such person in
connection with either the investigation, defense, settlement or appeal of any
threatened, pending or completed action, suit or other proceeding, including any
action by or in the right of the corporation, arising out of such person's
services as a director, officer, employee or other agent of the Company, any
subsidiary of the Company or any other company or enterprise to which the person
provides services at the request of the Company. The Company believes that these
provisions and agreements are necessary to attract and retain talented and
experienced directors and officers.

The Company maintains liability insurance for the benefit of its directors
and officers.

Under the terms of the Underwriting Agreement, the Underwriters have agreed
to indemnify, under certain conditions, the Company, its directors, certain of
its officers and persons who control the Company within the meaning of the
Securities Act of 1933, as amended (the "Securities Act") against certain
liabilities.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

In June 1996, Allegiance issued shares of common stock to Baxter
International, Inc. in consideration of the transfer of the assets of the
Allegiance Business to Allegiance. Allegiance has not sold or issued any
securities except for the shares of common stock issued to Baxter.

II-2
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Exhibits:

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------
<C> <S>
1.1 Underwriting Agreement
2.1 Form of Reorganization Agreement between Baxter International, Inc. and
Allegiance Corporation
3.1 Certificate of Incorporation of Allegiance Corporation
3.2 By-Laws of Allegiance Corporation
4.1 Indenture of Allegiance Corporation
4.2 Forms of Board Resolution creating the respective series of Securities
5.1 Opinion of McDermott, Will & Emery regarding legality
10.1 Allegiance Corporation 1996 Outside Director Incentive Compensation Plan
10.2 Allegiance Corporation 1996 Incentive Compensation Plan
10.3 Allegiance Change of Control Plan
10.4 Retention Agreement for Ms. Gaumer
10.5 Retention Agreement for Mr. Zollars
10.6* Form of Agency, Services and Distribution Agreement
10.7 $1.2 Billion Credit Agreement dated as of September 23, 1996 among Allegiance
Corporation and the financial institution named therein.
10.8 $300 Million Credit Agreement dated as of September 23, 1996 among Allegiance
Corporation and the financial institutions named therein.
10.9 Form of Rights Agreement, by and between Allegiance Corporation and the rights
agent named therein
+11.1 Statement regarding Computation of Per Share Earnings
+12.1 Statement regarding Computation of Ratios of Earnings to Fixed Charges
21.2 Subsidiaries of Allegiance Corporation
23.1 Consent of Price Waterhouse LLP
23.2 Consent of McDermott, Will & Emery (included in Exhibit 5.1)
+24.1 Power of Attorney
25.1 Statement of eligibility and qualification of Trustee relating to the
Securities.
+27.1 Financial Data Schedule
</TABLE>

- ------------

+ Previously Filed.

* Confidential treatment requested for certain portions of this document.

(b) Financial Statement Schedules:

Not applicable.

ITEM 17. UNDERTAKINGS.

(a) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered hereunder, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.

II-3
<PAGE>
(b) The undersigned Registrant hereby undertakes that for purposes of
determining any liability under the Securities Act, (i) the information omitted
from the form of prospectus filed as part of this Registration Statement in
reliance upon Rule 430A and contained in a form of prospectus filed by the
Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act
shall be deemed to be part of this Registration Statement as of the time it was
declared effective and (ii) each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.

II-4
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in McGaw Park, Illinois on September 27,
1996.

ALLEGIANCE CORPORATION

By /s/ LEONARD G. KUHR

----------------------------------------------------------------

Leonard G. Kuhr

Corporate Vice President and Treasurer

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated and on September 27, 1996.

SIGNATURE TITLE
- ------------------------------ ---------------------------------------------
*
- ------------------------------ Chairman of the Board and
Lester B. Chief Executive Officer
Knight (Principal Executive Officer)
*
- ------------------------------ Senior Vice President and Chief Financial
Peter B. Officer
McKee (Principal Financial Officer)
*
- ------------------------------ Corporate Vice President and Controller
Richard C. (Principal Accounting Officer)
Adloff
*
- ------------------------------
Joseph F. Director
Damico
*
- ------------------------------
Silas S. Director
Cathcart
*
- ------------------------------
David W. Director
Grainger
*
- ------------------------------
Arthur F. Director
Golden
*
- ------------------------------
Michael D. Director
O'Halleran
*
- ------------------------------
Kenneth D. Director
Bloem
*
- ------------------------------
Connie Curran, Ed. Director
D.

*By Power of Attorney

/s/ LEONARD G.
KUHR
- ------------------------------
Leonard G.
Kuhr
ATTORNEY-IN-FACT

II-5

<PAGE>
ALLEGIANCE CORPORATION

$________ ___% NOTES DUE 200_
$________ ___% DEBENTURES DUE 200_
$________ ___% DEBENTURES DUE 200_

----------------------------------------
UNDERWRITING AGREEMENT
October __, 1996
Goldman, Sachs & Co.,
J.P. Morgan Securities Inc.
Smith Barney Inc.
BA Securities, Inc.
First Chicago Capital Markets, Inc.
NationsBank Capital Markets, Inc.
As representatives of the several Underwriters
named in Schedule I hereto,
c/o Goldman, Sachs & Co.,
85 Broad Street,
New York, New York 10004.

Ladies and Gentlemen:

Allegiance Corporation, a Delaware corporation (the "Company"), proposes,
subject to the terms and conditions stated herein, to issue and sell to the
Underwriters named in Schedule I hereto (the "Underwriters") an aggregate of
$________ principal amount of the ___% Notes due 200_ (the "Notes"),
$________ principal amount of the ___% Debentures due 200_ (the "200_
Debentures") and $________ principal amount of the ___% Debentures due 200_
(the "200_ Debentures") of the Company (the Notes, the 200_ Debentures and
the 200_ Debentures, collectively, the "Securities").

1. The Company represents and warrants to, and agrees with, each of the
Underwriters that:

(a) A registration statement on Form S-1 (File No. 333-___) (including
all pre-effective amendments thereto, if any, the "Initial Registration
Statement") in respect of the Securities has been filed with the Securities
and Exchange Commission (the "Commission"); the Initial Registration
Statement and any post-effective amendment thereto, each in the form
heretofore delivered to you, and, excluding exhibits thereto, to you for
each of the other Underwriters, have been declared effective by the
Commission in such form; other than a registration statement, if any,
increasing the size of the offering (a "Rule 462(b) Registration
Statement"), filed pursuant to Rule 462(b) under the Securities Act of 1933,
as amended (the "Act"), which will become effective upon filing, no other
document with respect to the Initial Registration Statement has heretofore
been filed with the Commission; and no stop order suspending the
effectiveness of the Initial Registration Statement, any post-effective
amendment thereto or the Rule 462(b) Registration Statement, if any, has
been issued and no proceeding for that purpose has been initiated or
threatened by the Commission (any preliminary prospectus included in

<PAGE>

the Initial Registration Statement and incorporated by reference in the Rule
462(b) Registration Statement, if any, or filed with the Commission
pursuant to Rule 424(a) of the rules and regulations of the Commission
under the Act, is hereinafter called a "Preliminary Prospectus"; the
various parts of the Initial Registration Statement and the Rule 462(b)
Registration Statement, if any, including all exhibits thereto but
excluding Form T-1 and including the information contained in the form of
final prospectus filed with the Commission pursuant to Rule 424(b) under
the Act in accordance with Section 5(a) hereof and deemed by virtue of
Rule 430A under the Act to be part of the Initial Registration Statement
at the time it was declared effective or the Rule 462(b) Registration
Statement, if any, at the time it became effective, each as amended at
the time such part of such registration statement became effective, are
hereinafter collectively called the "Registration Statement"; and such
final prospectus, in the form first filed pursuant to Rule 424(b) under
the Act, is hereinafter called the "Prospectus";

(b) No order preventing or suspending the use of any Preliminary
Prospectus has been issued by the Commission, and each Preliminary
Prospectus, at the time of filing thereof, conformed in all material
respects to the requirements of the Act and the Trust Indenture Act of 1939,
as amended (the "Trust Indenture Act"), and the rules and regulations of the
Commission thereunder, and did not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; PROVIDED, HOWEVER, that this
representation and warranty shall not apply to any statements or omissions
made in reliance upon and in conformity with information furnished in
writing to the Company by an Underwriter through Goldman, Sachs & Co.
expressly for use therein;

(c) The Registration Statement conforms, and the Prospectus and any
further amendments or supplements to the Registration Statement or the
Prospectus will conform, in all material respects to the requirements of the
Act and the Trust Indenture Act and the rules and regulations of the
Commission thereunder and do not and will not, as of the applicable
effective date as to the Registration Statement and any amendment thereto
and as of the applicable filing date as to the Prospectus and any amendment
or supplement thereto, contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading; PROVIDED, HOWEVER, that this
representation and warranty shall not apply to any statements or omissions
made in reliance upon and in conformity with information furnished in
writing to the Company by an Underwriter through Goldman, Sachs & Co.
expressly for use therein;

(d) Neither the Company nor any of its subsidiaries has sustained since
the date of the latest audited financial statements included in the
Prospectus any material loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by insurance, or
from any labor dispute or court or governmental action, order or decree,
otherwise than as set forth or contemplated in the Prospectus; and, since
the respective dates as of which information is given in the Registration
Statement and the Prospectus, there has not been any change in the capital
stock or long-term debt of the Company or any of its subsidiaries or any
material adverse change, or any development involving a prospective material
adverse change, in or affecting the general affairs, management, financial
position, stockholders' equity or results of operations of the Company and
its subsidiaries, otherwise than as set forth or contemplated in the
Prospectus;

(e) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware, with
power and authority (corporate and other) to own its properties and conduct
its business as described in the Prospectus, and

<PAGE>

has been duly qualified as a foreign corporation for the transaction of
business and is in good standing under the laws of each other jurisdiction
in which it owns or leases properties or conducts any business so as to
require such qualification, or is subject to no material liability or
disability by reason of the failure to be so qualified in any such
jurisdiction;

(f) The Company has an authorized capitalization as set forth in the
Prospectus, and all of the issued shares of capital stock of the Company
have been duly and validly authorized and issued and are fully paid and non-
assessable;

(g) The Securities have been duly authorized and, when issued and
delivered pursuant to this Agreement, will have been duly executed,
authenticated, issued and delivered and will constitute valid and legally
binding obligations of the Company entitled to the benefits provided by the
indenture to be dated as of October 1, 1996 (the "Indenture") between the
Company and PNC Bank, Kentucky, Inc., as Trustee (the "Trustee"), under
which they are to be issued, which will be substantially in the form filed
as an exhibit to the Registration Statement; the Indenture has been duly
authorized and duly qualified under the Trust Indenture Act and, when
executed and delivered by the Company and the Trustee, will constitute a
valid and legally binding instrument, enforceable in accordance with its
terms, subject, as to enforcement, to bankruptcy, insolvency, reorganization
and other laws of general applicability relating to or affecting creditors'
rights and to general equity principles; and the Securities and the
Indenture will conform to the descriptions thereof in the Prospectus;

(h) The issue and sale of the Securities and the compliance by the
Company with all of the provisions of the Securities, the Indenture and this
Agreement and the consummation of the transactions herein and therein
contemplated will not conflict with or result in a breach or violation of
any of the terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Company or any of its subsidiaries is a party or by
which the Company or any of its subsidiaries is bound or to which any of the
property or assets of the Company or any of its subsidiaries is subject, nor
will such action result in any violation of the provisions of the
Certificate of Incorporation or By-laws of the Company or any statute or any
order, rule or regulation of any court or governmental agency or body having
jurisdiction over the Company or any of its subsidiaries or any of their
properties; and no consent, approval, authorization, order, registration or
qualification of or with any such court or governmental agency or body is
required for the issue and sale of the Securities or the consummation by the
Company of the transactions contemplated by this Agreement or the Indenture,
except the registration under the Act of the Securities, such as have been
obtained under the Trust Indenture Act and such consents, approvals,
authorizations, registrations or qualifications as may be required under
state securities or Blue Sky laws in connection with the purchase and
distribution of the Securities by the Underwriters;

(i) Neither the Company nor any of its subsidiaries is in violation of
its Certificate of Incorporation or By-laws or in default in the performance
or observance of any material obligation, covenant or condition contained in
any indenture, mortgage, deed of trust, loan agreement, lease or other
agreement or instrument to which it is a party or by which it or any of its
properties may be bound;

(j) The statements set forth in the Prospectus under the caption
"Description of Notes and Debentures", insofar as they purport to constitute
a summary of the terms of the Securities, are accurate, complete and fair;

<PAGE>

(k) Other than as set forth in the Prospectus, there are no legal or
governmental proceedings pending to which the Company or any of its
subsidiaries is a party or of which any property of the Company or any of
its subsidiaries is the subject which, if determined adversely to the
Company or any of its subsidiaries, would individually or in the aggregate
have a material adverse effect on the current or future financial position,
stockholders' equity or results of operations of the Company and its
subsidiaries; and, to the best of the Company's knowledge, no such
proceedings are threatened or contemplated by governmental authorities or
threatened by others;

(l) The Company is not and, after giving effect to the offering and sale
of the Securities, will not be an "investment company" or an entity
"controlled" by an "investment company", as such terms are defined in the
Investment Company Act of 1940, as amended (the "Investment Company Act");

(m) Neither the Company nor any of its affiliates does business with the
government of Cuba or with any person or affiliate located in Cuba within
the meaning of Section 517.075, Florida Statutes; and

(n) Price Waterhouse LLP, who have certified certain financial
statements of the Company and its subsidiaries, are, independent public
accountants as required by the Act and the rules and regulations of the
Commission thereunder.

2. Subject to the terms and conditions herein set forth, the Company agrees
to issue and sell to each of the Underwriters, and each of the Underwriters
agrees, severally and not jointly, to purchase from the Company, at a purchase
price of ___% of the principal amount thereof, plus accrued interest[, IF ANY,]
from ___________, 1996 to the Time of Delivery hereunder, the principal amount
of Securities set forth opposite the name of such Underwriter in Schedule I
hereto.

3. Upon the authorization by you of the release of the Securities, the
several Underwriters propose to offer the Securities for sale upon the terms and
conditions set forth in the Prospectus.

4. (a) The Securities to be purchased by each Underwriter hereunder will be
represented by one or more definitive global Securities in book-entry form which
will be deposited by or on behalf of the Company with The Depository Trust
Company ("DTC") or its designated custodian. The Company will deliver the
Securities to Goldman, Sachs & Co., for the account of each Underwriter, against
payment by or on behalf of such Underwriter of the purchase price therefor by
certified or official bank check or checks, payable to the order of the Company
in Federal (same day) funds, by causing DTC to credit the Securities to the
account of Goldman, Sachs & Co. at DTC. The Company will cause the certificates
representing the Securities to be made available to Goldman, Sachs & Co. for
checking at least twenty-four hours prior to the Time of Delivery (as defined
below) at the office of DTC or its designated custodian (the "Designated
Office"). The time and date of such delivery and payment shall be 9:30 a.m., New
York City time, on ___________, 1996 or such other time and date as Goldman,
Sachs & Co. and the Company may agree upon in writing. Such time and date are
herein called the "Time of Delivery".

(b) The documents to be delivered at the Time of Delivery by or on behalf of
the parties hereto pursuant to Section 7 hereof, including the cross-receipt for
the Securities and any additional documents requested by the Underwriters
pursuant to Section 7(j) hereof, will be delivered at the offices of McDermott,
Will & Emery, 277 W. Monroe, Chicago, Illinois 60606 (the "Closing Location"),
and the Securities will be delivered at the Designated Office, all at the Time
of Delivery. A meeting will be held at the Closing Location at 3:00 p.m.,
Chicago time, on the New York Business Day next

<PAGE>

preceding the Time of Delivery, at which meeting the final drafts of the
documents to be delivered pursuant to the preceding sentence will be available
for review by the parties hereto. For the purposes of this Section 4, "New York
Business Day" shall mean each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in New York City are generally
authorized or obligated by law or executive order to close.

5. The Company agrees with each of the Underwriters:

(a) To prepare the Prospectus in a form approved by you and to file such
Prospectus pursuant to Rule 424(b) under the Act not later than the Commission's
close of business on the second business day following the execution and
delivery of this Agreement, or, if applicable, such earlier time as may be
required by Rule 430A(a)(3) under the Act; to make no further amendment or any
supplement to the Registration Statement or Prospectus which shall be
disapproved by you promptly after reasonable notice thereof; to advise you,
promptly after it receives notice thereof, of the time when any amendment to the
Registration Statement has been filed or becomes effective or any supplement to
the Prospectus or any amended Prospectus has been filed and to furnish you with
copies thereof; to advise you, promptly after it receives notice thereof, of the
issuance by the Commission of any stop order or of any order preventing or
suspending the use of any Preliminary Prospectus or prospectus, of the
suspension of the qualification of the Securities for offering or sale in any
jurisdiction, of the initiation or threatening of any proceeding for any such
purpose, or of any request by the Commission for the amending or supplementing
of the Registration Statement or Prospectus or for additional information; and,
in the event of the issuance of any stop order or of any order preventing or
suspending the use of any Preliminary Prospectus or prospectus or suspending any
such qualification, to promptly use its best efforts to obtain the withdrawal of
such order;

(b) Promptly from time to time to take such action as you may reasonably
request to qualify the Securities for offering and sale under the securities
laws of such jurisdictions as you may request and to comply with such laws so as
to permit the continuance of sales and dealings therein in such jurisdictions
for as long as may be necessary to complete the distribution of the Securities,
provided that in connection therewith the Company shall not be required to
qualify as a foreign corporation or to file a general consent to service of
process in any jurisdiction;

(c) Prior to 11:00 a.m., New York City time, on the New York Business Day
next succeeding the date of this Agreement and from time to time, to furnish the
Underwriters with copies of the Prospectus in New York City in such quantities
as you may reasonably request, and, if the delivery of a prospectus is required
at any time prior to the expiration of nine months after the time of issue of
the Prospectus in connection with the offering or sale of the Securities and if
at such time any event shall have occurred as a result of which the Prospectus
as then amended or supplemented would include an untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made
when such Prospectus is delivered, not misleading, or, if for any other reason
it shall be necessary during such same period to amend or supplement the
Prospectus in order to comply with the Act or the Trust Indenture Act, to notify
you and upon your request to prepare and furnish without charge to each
Underwriter and to any dealer in securities as many copies as you may from time
to time reasonably request of an amended Prospectus or a supplement to the
Prospectus which will correct such statement or omission or effect such
compliance; and in case any Underwriter is required to deliver a prospectus in
connection with sales of any of the Securities at any time nine months or more
after the time of issue of the Prospectus, upon your request but at the expense
of such Underwriter, to prepare and deliver to such Underwriter as many copies
as you may request of an amended or supplemented Prospectus complying with
Section 10(a)(3) of the Act;

5
<PAGE>

(d) To make generally available to its securityholders as soon as
practicable, but in any event not later than eighteen months after the effective
date of the Registration Statement (as defined in Rule 158(c)), an earnings
statement of the Company and its subsidiaries (which need not be audited)
complying with Section 11(a) of the Act and the rules and regulations of the
Commission thereunder (including, at the option of the Company, Rule 158);

(e) During the period beginning from the date hereof and continuing to and
including the later of the Time of Delivery and such earlier time as you may
notify the Company, not to offer, sell, contract to sell or otherwise dispose
of, except as provided hereunder any securities of the Company that are
substantially similar to the Securities;

(f) To use the net proceeds received by it from the sale of the Securities
pursuant to this Agreement in the manner specified in the Prospectus under the
caption "Use of Proceeds";

(g) If the Company elects to rely upon Rule 462(b), to file a Rule 462(b)
Registration Statement with the Commission in compliance with Rule 462(b) by
10:00 P.M., Washington, D.C. time, on the date of this Agreement, and at the
time of filing either to pay to the Commission the filing fee for the Rule
462(b) Registration Statement or to give irrevocable instructions for the
payment of such fee pursuant to Rule 111(b) under the Act; and

(h) To file with the Commission such reports on Form SR as may be required
by Rule 463 under the Act.

6. The Company covenants and agrees with the several Underwriters that the
Company will pay or cause to be paid the following: (i) the fees, disbursements
and expenses of the Company's counsel and accountants in connection with the
registration of the Securities under the Act and all other expenses in
connection with the preparation, printing and filing of the Registration
Statement, any Preliminary Prospectus and the Prospectus and amendments and
supplements thereto and the mailing and delivering of copies thereof to the
Underwriters and dealers; (ii) the cost of printing or producing any Agreement
among Underwriters, this Agreement, the Indenture, the Blue Sky Memoranda,
closing documents (including any compilations thereof) and any other documents
in connection with the offering, purchase, sale and delivery of the Securities;
(iii) all expenses in connection with the qualification of the Securities for
offering and sale under state securities laws as provided in Section 5(b)
hereof, including the fees and disbursements of counsel for the Underwriters in
connection with such qualification and in connection with the Blue Sky surveys;
(iv) any fees charged by securities rating services for rating the Securities;
(v) the filing fees incident to, and the fees and disbursements of counsel for
the Underwriters in connection with, any required review by the National
Association of Securities Dealers, Inc. of the terms of the sale of the
Securities; (vi) the cost of preparing the Securities; (vii) the fees and
expenses of the Trustee and any agent of the Trustee and the fees and
disbursements of counsel for the Trustee in connection with the Indenture and
the Securities; and (viii) all other costs and expenses incident to the
performance of its obligations hereunder which are not otherwise specifically
provided for in this Section. It is understood, however, that, except as
provided in this Section, and Sections 8 and 11 hereof, the Underwriters will
pay all of their own costs and expenses, including the fees of their counsel,
transfer taxes on resale of any of the Securities by them, and any advertising
expenses connected with any offers they may make.

7. The obligations of the Underwriters hereunder shall be subject, in their
discretion, to the condition that all representations and warranties and other
statements of the Company herein are, at and as of the Time of Delivery, true
and correct, the condition that the Company shall have performed all of its
obligations hereunder theretofore to be performed, and the following additional
conditions:

6
<PAGE>

(a) The Prospectus shall have been filed with the Commission pursuant to
Rule 424(b) within the applicable time period prescribed for such filing by the
rules and regulations under the Act and in accordance with Section 5(a) hereof;
if the Company has elected to rely upon Rule 462(b), the Rule 462(b)
Registration Statement shall have become effective by 10:00 P.M. Washington,
D.C., time, on the date of this Agreement; no stop order suspending the
effectiveness of the Registration Statement or any part thereof shall have been
issued and no proceeding for that purpose shall have been initiated or
threatened by the Commission; and all requests for additional information on the
part of the Commission shall have been complied with to your reasonable
satisfaction;

(b) Sullivan & Cromwell, counsel for the Underwriters, shall have furnished
to you such opinion or opinions, dated the Time of Delivery, with respect to
incorporation of the Company, the validity of the Indenture, the validity of the
Securities being delivered at such Time of Delivery, the Registration Statement,
the Prospectus, and such other related matters as you may reasonably request,
and such counsel shall have received such papers and information as they may
reasonably request to enable them to pass upon such matters;

(c) William L. Feather, Esq., General Counsel of the Company, shall have
furnished to you his written opinion, dated the Time of Delivery, in the form
presented to you prior to the execution of this Agreement and in form and
substance satisfactory to you, to the effect that:

(i) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware, with
corporate power and authority to own its properties and conduct its business
as described in the Prospectus;

(ii) The Company has an authorized capitalization as set forth in the
Prospectus, and all of the issued shares of capital stock of the Company
have been duly and validly authorized and issued and are fully paid and non-
assessable;

(iii) To the best of such counsel's knowledge and other than as set
forth in the Prospectus, there are no legal or governmental proceedings
pending to which the Company or any of its subsidiaries is a party or of
which any property of the Company or any of its subsidiaries is the subject
which, if determined adversely to the Company or any of its subsidiaries,
would individually or in the aggregate have a material adverse effect on the
current or future consolidated financial position, stockholders' equity or
results of operations of the Company and its subsidiaries; and, to the best
of such counsel's knowledge, no such proceedings are threatened or
contemplated by governmental authorities or threatened by others;

(iv) The issue and sale of the Securities and the compliance by the
Company with all of the provisions of the Securities, the Indenture and this
Agreement and the consummation of the transactions herein and therein
contemplated will not conflict with or result in a breach or violation of
any of the terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument known to such counsel to which the Company or any of its
subsidiaries is a party or by which the Company or any of its subsidiaries
is bound or to which any of the property or assets of the Company or any of
its subsidiaries is subject, nor will such actions result in any violation
of the provisions of the Certificate of Incorporation or By-laws of the
Company or any statute or any order, rule or regulation known to such
counsel of any court or governmental agency or body having jurisdiction over
the Company or any of its subsidiaries or any of their properties;

<PAGE>

(v) No consent, approval, authorization, order, registration or
qualification of or with any such court or governmental agency or body is
required for the issue and sale of the Securities or the consummation by the
Company of the transactions contemplated by this Agreement or the Indenture,
except such as have been obtained under the Act and the Trust Indenture Act
and such consents, approvals, authorizations, registrations or
qualifications as may be required under state securities or Blue Sky laws in
connection with the purchase and distribution of the Securities by the
Underwriters;

(vi) Neither the Company nor any of its subsidiaries is in violation of
its Certificate of Incorporation or By-laws or in default in the performance
or observance of any material obligation, covenant or condition contained in
any indenture, mortgage, deed of trust, loan agreement, lease or other
agreement or instrument to which it is a party or by which it or any of its
properties may be bound; and

(vii) Although such counsel does not assume any responsibility for the
accuracy, completeness or fairness of the statements contained in the
Registration Statement or the Prospectus such counsel has no reason to
believe that, as of its effective date, the Registration Statement or any
further amendment thereto made by the Company prior to the Time of Delivery
(other than the financial statements and related schedules therein, as to
which such counsel need express no opinion) contained an untrue statement of
a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading or that,
as of its date, the Prospectus or any further amendment or supplement
thereto made by the Company prior to the Time of Delivery (other than the
financial statements and related schedules therein, as to which such counsel
need express no opinion) contained an untrue statement of a material fact or
omitted to state a material fact necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading
or that, as of the Time of Delivery, either the Registration Statement or
the Prospectus or any further amendment or supplement thereto made by the
Company prior to the Time of Delivery (other than the financial statements
and related schedules therein, as to which such counsel need express no
opinion) contains an untrue statement of a material fact or omits to state a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and such counsel
does not know of any amendment to the Registration Statement required to be
filed or of any contracts or other documents of a character required to be
filed as an exhibit to the Registration Statement or of any legal proceeding
required to be described in the Registration Statement or the Prospectus
which are not filed or described as required.

(d) McDermott, Will & Emery, counsel for the Company, shall have furnished
to you their written opinion, dated the Time of Delivery, in the form presented
to you prior to the execution of this Agreement and in form and substance
satisfactory to you, to the effect that:

(i) The Company is validly existing as a corporation in good standing
under the laws of the State of Delaware;

(ii) This Agreement has been duly authorized, executed and delivered by
the Company;

(iii) The Securities have been duly authorized, executed, authenticated,
issued and delivered and constitute valid and legally binding obligations of
the Company entitled to the benefits provided by the Indenture; and the
Securities and the Indenture conform to the descriptions thereof in the
Prospectus;

<PAGE>

(iv) The Indenture has been duly authorized, executed and delivered by
the parties thereto and constitutes a valid and legally binding instrument,
enforceable in accordance with its terms, subject, as to enforcement, to
bankruptcy, insolvency, reorganization and other laws of general
applicability relating to or affecting creditors' rights and to general
equity principles; and the Indenture has been duly qualified under the Trust
Indenture Act;

(v) The statements set forth in the Prospectus under the caption
"Description of Notes and Debentures" have been reviewed by such counsel
and, insofar as they purport to constitute a summary of the terms of the
Securities, are accurate summaries of the material terms of the Securities;

(vi) The Registration Statement and the Prospectus and any further
amendments and supplements thereto made by the Company prior to the Time of
Delivery (other than the financial statements and related schedules therein,
as to which such counsel need express no opinion) comply as to form in all
material respects with the requirements of the Act and the Trust Indenture
Act and the rules and regulations thereunder; although they do not assume
any responsibility for the accuracy, completeness or fairness of the
statements contained in the Registration Statement or the Prospectus, except
for those referred to in the opinion in subsection (viii) of this Section
7(d), they have no reason to believe that, as of its effective date, the
Registration Statement or any further amendment thereto made by the Company
prior to the Time of Delivery (other than the financial statements and
related schedules therein, as to which such counsel need express no opinion)
contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading or that, as of its date, the Prospectus or
any further amendment or supplement thereto made by the Company prior to the
Time of Delivery (other than the financial statements and related schedules
therein, as to which such counsel need express no opinion) contained an
untrue statement of a material fact or omitted to state a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading or that, as of the Time of
Delivery, either the Registration Statement or the Prospectus or any further
amendment or supplement thereto made by the Company prior to the Time of
Delivery (other than the financial statements and related schedules therein,
as to which such counsel need express no opinion) contains an untrue
statement of a material fact or omits to state a material fact necessary to
make the statements therein, in the light of the circumstances under which
they were made, not misleading;

(e) On the date of the Prospectus at a time prior to the execution of this
Agreement, at 9:30 a.m., New York City time, on the effective date of any
post-effective amendment to the Registration Statement filed subsequent to the
date of this Agreement and also at the Time of Delivery, Price Waterhouse LLP
shall have furnished to you a letter or letters, dated the respective dates of
delivery thereof, in the form presented to you prior to the execution of this
Agreement and in form and substance satisfactory to you, to the effect set forth
in Annex I hereto;

(f) (i) Neither the Company nor any of its subsidiaries shall have
sustained since the date of the latest audited financial statements included in
the Prospectus any loss or interference with its business from fire, explosion,
flood or other calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree, otherwise than as set
forth or contemplated in the Prospectus, and (ii) since the respective dates as
of which information is given in the Prospectus there shall not have been any
change in the capital stock or long-term debt of the Company or any of its
subsidiaries or any change, or any development involving a prospective change,
in or affecting the general affairs, management, financial position,
stockholders' equity or results of

<PAGE>

operations of the Company and its subsidiaries, otherwise than as set forth or
contemplated in the Prospectus, the effect of which, in any such case described
in Clause (i) or (ii), is in the judgment of the Representatives so material and
adverse as to make it impracticable or inadvisable to proceed with the public
offering or the delivery of the Securities on the terms and in the manner
contemplated in the Prospectus;

(g) On or after the date hereof (i) no downgrading shall have occurred in
the rating accorded the Company's debt securities by any "nationally recognized
statistical rating organization", as that term is defined by the Commission for
purposes of Rule 436(g)(2) under the Act, and (ii) no such organization shall
have publicly announced that it has under surveillance or review, with possible
negative implications, its rating of any of the Company's debt securities;

(h) On or after the date hereof there shall not have occurred any of the
following: (i) a suspension or material limitation in trading in securities
generally on the New York Stock Exchange; (ii) a suspension or material
limitation in trading in the Company's securities on The New York Stock
Exchange; (iii) a general moratorium on commercial banking activities declared
by either Federal or New York State authorities; or (iv) the outbreak or
escalation of hostilities involving the United States or the declaration by the
United States of a national emergency or war, if the effect of any such event
specified in this Clause (iv) in the judgment of the Representatives makes it
impracticable or inadvisable to proceed with the public offering or the delivery
of the Securities on the terms and in the manner contemplated in the Prospectus;

(i) The Company shall have complied with the provisions of Section 5(c)
hereof with respect to the furnishing of prospectuses on the New York Business
Day next succeeding the date of this Agreement; and

(j) The Company shall have furnished or caused to be furnished to you at the
Time of Delivery certificates of officers of the Company satisfactory to you as
to the accuracy of the representations and warranties of the Company herein at
and as of such Time of Delivery, as to the performance by the Company of all of
its obligations hereunder to be performed at or prior to such Time of Delivery,
as to the matters set forth in subsections (a) and (f) of this Section and as to
such other matters as you may reasonably request.

8. (a) The Company will indemnify and hold harmless each Underwriter against
any losses, claims, damages or liabilities, joint or several, to which such
Underwriter may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, the Registration
Statement or the Prospectus, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse each Underwriter for any legal or
other expenses reasonably incurred by such Underwriter in connection with
investigating or defending any such action or claim as such expenses are
incurred; PROVIDED, HOWEVER, that the Company shall not be liable in any such
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in any Preliminary Prospectus, the Registration Statement
or the Prospectus or any such amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by any Underwriter
through Goldman, Sachs & Co. expressly for use therein.

(b) Each Underwriter will indemnify and hold harmless the Company against
any losses, claims, damages or liabilities to which the Company may become
subject, under the Act or otherwise,

<PAGE>

insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon an untrue statement or alleged untrue
statement of a material fact contained in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was made in any Preliminary Prospectus, the Registration
Statement or the Prospectus or any such amendment or supplement in reliance upon
and in conformity with written information furnished to the Company by such
Underwriter through Goldman, Sachs & Co. expressly for use therein; and will
reimburse the Company for any legal or other expenses reasonably incurred by the
Company in connection with investigating or defending any such action or claim
as such expenses are incurred.

(c) Promptly after receipt by an indemnified party under subsection (a) or
(b) above of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under such subsection, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying party shall
not relieve it from any liability which it may have to any indemnified party
otherwise than under such subsection. In case any such action shall be brought
against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it shall wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party (who shall not, except with the
consent of the indemnified party, be counsel to the indemnifying party), and,
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party under such subsection for any legal expenses of
other counsel or any other expenses, in each case subsequently incurred by such
indemnified party, in connection with the defense thereof other than reasonable
costs of investigation. No indemnifying party shall, without the written consent
of the indemnified party, effect the settlement or compromise of, or consent to
the entry of any judgment with respect to, any pending or threatened action or
claim in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified party is an actual or potential party
to such action or claim) unless such settlement, compromise or judgment (i)
includes an unconditional release of the indemnified party from all liability
arising out of such action or claim and (ii) does not include a statement as to
or an admission of fault, culpability or a failure to act, by or on behalf of
any indemnified party.

(d) If the indemnification provided for in this Section 8 is unavailable to
or insufficient to hold harmless an indemnified party under subsection (a) or
(b) above in respect of any losses, claims, damages or liabilities (or actions
in respect thereof) referred to therein, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities (or actions in respect thereof)
in such proportion as is appropriate to reflect the relative benefits received
by the Company on the one hand and the Underwriters on the other from the
offering of the Securities. If, however, the allocation provided by the
immediately preceding sentence is not permitted by applicable law or if the
indemnified party failed to give the notice required under subsection (c) above,
then each indemnifying party shall contribute to such amount paid or payable by
such indemnified party in such proportion as is appropriate to reflect not only
such relative benefits but also the relative fault of the Company on the one
hand and the Underwriters on the other in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities (or
actions in respect thereof), as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand
and the Underwriters on the other shall be deemed to be in the same proportion
as the total net proceeds from

<PAGE>

the offering (before deducting expenses) received by the Company bear to the
total underwriting discounts and commissions received by the Underwriters, in
each case as set forth in the table on the cover page of the Prospectus. The
relative fault 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 to state a material fact relates to information supplied by the
Company on the one hand or the Underwriters on the other and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company and the Underwriters agree that
it would not be just and equitable if contribution pursuant to this subsection
(d) were determined by PRO RATA allocation (even if the Underwriters were
treated as one entity for such purpose) or by any other method of allocation
which does not take account of the equitable considerations referred to above in
this subsection (d). The amount paid or payable by an indemnified party as a
result of the losses, claims, damages or liabilities (or actions in respect
thereof) referred to above in this subsection (d) shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subsection (d), no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Securities underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations in this subsection
(d) to contribute are several in proportion to their respective underwriting
obligations and not joint.

(e) The obligations of the Company under this Section 8 shall be in addition
to any liability which the Company may otherwise have and shall extend, upon the
same terms and conditions, to each person, if any, who controls any Underwriter
within the meaning of the Act; and the obligations of the Underwriters under
this Section 8 shall be in addition to any liability which the respective
Underwriters may otherwise have and shall extend, upon the same terms and
conditions, to each officer and director of the Company and to each person, if
any, who controls the Company within the meaning of the Act.

9. (a) If any Underwriter shall default in its obligation to purchase the
Securities which it has agreed to purchase hereunder, you may in your discretion
arrange for you or another party or other parties to purchase such Securities on
the terms contained herein. If within thirty-six hours after such default by any
Underwriter you do not arrange for the purchase of such Securities, then the
Company shall be entitled to a further period of thirty-six hours within which
to procure another party or other parties satisfactory to you to purchase such
Securities on such terms. In the event that, within the respective prescribed
periods, you notify the Company that you have so arranged for the purchase of
such Securities, or the Company notifies you that it has so arranged for the
purchase of such Securities, you or the Company shall have the right to postpone
the Time of Delivery for a period of not more than seven days, in order to
effect whatever changes may thereby be made necessary in the Registration
Statement or the Prospectus, or in any other documents or arrangements, and the
Company agrees to file promptly any amendments to the Registration Statement or
the Prospectus which in your opinion may thereby be made necessary. The term
"Underwriter" as used in this Agreement shall include any person substituted
under this Section with like effect as if such person had originally been a
party to this Agreement with respect to such Securities.

(b) If, after giving effect to any arrangements for the purchase of the
Securities of a defaulting Underwriter or Underwriters by you and the Company as
provided in subsection (a) above, the aggregate principal amount of such
Securities which remains unpurchased does not exceed

<PAGE>

one-eleventh of the aggregate principal amount of all the Securities, then the
Company shall have the right to require each non-defaulting Underwriter to
purchase the principal amount of Securities which such Underwriter agreed to
purchase hereunder and, in addition, to require each non-defaulting Underwriter
to purchase its pro rata share (based on the principal amount of Securities
which such Underwriter agreed to purchase hereunder) of the Securities of such
defaulting Underwriter or Underwriters for which such arrangements have not been
made; but nothing herein shall relieve a defaulting Underwriter from liability
for its default.

(c) If, after giving effect to any arrangements for the purchase of the
Securities of a defaulting Underwriter or Underwriters by you and the Company as
provided in subsection (a) above, the aggregate principal amount of Securities
which remains unpurchased exceeds one-eleventh of the aggregate principal amount
of all the Securities, or if the Company shall not exercise the right described
in subsection (b) above to require non-defaulting Underwriters to purchase
Securities of a defaulting Underwriter or Underwriters, then this Agreement
shall thereupon terminate, without liability on the part of any non-defaulting
Underwriter or the Company, except for the expenses to be borne by the Company
and the Underwriters as provided in Section 6 hereof and the indemnity and
contribution agreements in Section 8 hereof; but nothing herein shall relieve a
defaulting Underwriter from liability for its default.

10. The respective indemnities, agreements, representations, warranties and
other statements of the Company and the several Underwriters, as set forth in
this Agreement or made by or on behalf of them, respectively, pursuant to this
Agreement, shall remain in full force and effect, regardless of any
investigation (or any statement as to the results thereof) made by or on behalf
of any Underwriter or any controlling person of any Underwriter, or the Company,
or any officer or director or controlling person of the Company, and shall
survive delivery of and payment for the Securities.

11. If this Agreement shall be terminated pursuant to Section 9 hereof, the
Company shall not then be under any liability to any Underwriter except as
provided in Sections 6 and 8 hereof; but, if for any other reason, the
Securities are not delivered by or on behalf of the Company as provided herein,
the Company will reimburse the Underwriters through you for all out-of-pocket
expenses approved in writing by you, including fees and disbursements of
counsel, reasonably incurred by the Underwriters in making preparations for the
purchase, sale and delivery of the Securities, but the Company shall then be
under no further liability to any Underwriter except as provided in Sections 6
and 8 hereof.

12. In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter made or
given by you.

All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to you as the representatives 85 Broad Street, New York,
New York 10004, Attention: Registration Department; and if to the Company shall
be delivered or sent by mail, telex or facsimile transmission to the address of
the Company set forth in the Registration Statement, Attention: Secretary;
PROVIDED, HOWEVER, that any notice to an Underwriter pursuant to Section 8(c)
hereof shall be delivered or sent by mail, telex or facsimile transmission to
such Underwriter at its address set forth in its Underwriters' Questionnaire, or
telex constituting such Questionnaire, which address will be supplied to the
Company by you upon request. Any such statements, requests, notices or
agreements shall take effect upon receipt thereof.

13. This Agreement shall be binding upon, and inure solely to the benefit
of, the Underwriters, the Company and, to the extent provided in Sections 8 and
10 hereof, the officers and directors of the Company and each person who
controls the Company or any Underwriter, and their respective heirs,

<PAGE>

executors, administrators, successors and assigns, and no other person shall
acquire or have any right under or by virtue of this Agreement. No purchaser of
any of the Securities from any Underwriter shall be deemed a successor or assign
by reason merely of such purchase.

14. Time shall be of the essence of this Agreement. As used herein, the term
"business day" shall mean any day when the Commission's office in Washington,
D.C. is open for business.

15. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK.

16. This Agreement may be executed by any one or more of the parties hereto
in any number of counterparts, each of which shall be deemed to be an original,
but all such respective counterparts shall together constitute one and the same
instrument.

<PAGE>

If the foregoing is in accordance with your understanding, please sign and
return to us eight counterparts hereof, and upon the acceptance hereof by you,
on behalf of each of the Underwriters, this letter and such acceptance hereof
shall constitute a binding agreement between each of the Underwriters and the
Company. It is understood that your acceptance of this letter on behalf of each
of the Underwriters is pursuant to the authority set forth in a form of
Agreement among Underwriters, the form of which shall be submitted to the
Company for examination upon request, but without warranty on your part as to
the authority of the signers thereof.

Very truly yours,
ALLEGIANCE CORPORATION
By:
--------------------------------------
Name:
Title:

Accepted as of the date hereof:
Goldman, Sachs & Co.
J.P. Morgan Securities Inc.
Smith Barney Inc.
BA Securities, Inc.
First Chicago Capital Markets, Inc.
NationsBank Capital Markets, Inc.

By:
- --------------------------------------
(Goldman, Sachs & Co.)

On behalf of each of the
Underwriters

<PAGE>

SCHEDULE I

<TABLE>
<CAPTION>
PRINCIPAL PRINCIPAL PRINCIPAL
AMOUNT OF AMOUNT OF AMOUNT OF
NOTES 200 DEBENTURES 200 DEBENTURES
TO BE TO BE TO BE
UNDERWRITER PURCHASED PURCHASED PURCHASED
- --------------------------------------------------------- ------------- ------------------- -------------------
<S> <C> <C> <C>
GOLDMAN, SACHS & CO...................................... $
J.P. MORGAN SECURITIES INC...............................
SMITH BARNEY INC.........................................
BA SECURITIES, INC.......................................
FIRST CHICAGO CAPITAL MARKETS, INC.......................
NATIONSBANK CAPITAL MARKETS, INC.........................
TOTAL............................................ $
</TABLE>

<PAGE>

ANNEX I

Pursuant to Section 7(d) of the Underwriting Agreement, the accountants shall
furnish letters to the Underwriters to the effect that:

(i) They are independent public accountants with respect to
the Company and its subsidiaries within the meaning of the Act and the
applicable published rules and regulations thereunder;

(ii) In their opinion, the financial statements examined by them and
included in the Prospectus or the Registration Statement comply as to form
in all material respects with the applicable accounting requirements of
the Act and the related published rules and regulations thereunder;

(iii) They have made a review in accordance with standards established
by the American Institute of Certified Public Accountants of the unaudited
condensed statements of income, consolidated balance sheets and
consolidated statements of cash flows included in the Prospectus and
on the basis of specified procedures including inquiries of officials of the
Company who have responsibility for financial and accounting matters
regarding whether the unaudited condensed financial statements
referred to below comply as to form in all material respects with the
applicable accounting requirements of the Act and the related published
rules and regulations, nothing came to their attention that cause them to
believe that (i) the unaudited condensed consolidated financial statements
do not comply as to form in all material respects with the applicable
accounting requirements of the Act and the related published rules and
regulations or (ii) any material modifications should be made to the
unaudited condensed consolidated statements of income, consolidated
balance sheets and consolidated statements of cash flows included in the
Prospectus for them to be in conformity with generally accepted accounting
principles;

(iv) They have compared the information in the Prospectus under
selected captions with the disclosure requirements of Regulation S-K and
on the basis of limited procedures specified in such letter nothing came
to their attention as a result of the foregoing procedures that caused
them to believe that this information does not conform in all material
respects with the disclosure requirements of Items 301 and 402,
respectively, of Regulation S-K;

(v) On the basis of limited procedures, not constituting an examination
in accordance with generally accepted auditing standards, consisting of a
reading of the unaudited financial statements and other information referred
to below, a reading of the latest available interim financial statements of
the Company and its subsidiaries, inspection of the minute books of the
Company and its subsidiaries since the date of the latest audited financial
statements included in the Prospectus, inquiries of officials of the Company
and its subsidiaries responsible for financial and accounting matters and
such other inquiries and procedures as may be specified in such letter,
nothing came to their attention that caused them to believe that:

(A) any unaudited income statement data and balance sheet items
for the years ended December 31, 1992 and 1991 included in the
Prospectus do not agree with the corresponding items in the unaudited
consolidated financial statements from which such data and items
were derived;

<PAGE>

(B) any unaudited pro forma condensed financial statements included
in the Prospectus do not comply as to form in all material respects
with the applicable accounting requirements of Rule 11-02 of Regulation
S-X or the pro forma adjustments have not been properly applied to the
historical amounts in the compilation of those statements;

(C) as of the latest month and for which the applicable unaudited
condensed combined financial data is available, there was any increase
in long-term debt of the Company or any decreases in the net current
assets or equity of the Company as compared with amounts shown in the
latest balance sheet included in the Prospectus, except in all instances
for increases and decreases that the Registration Statement discloses
have occurred or may occur and except as described in such letter for
the period from the latest balance sheet included in the Prospectus,
except in all instances for increases and decreases that the
Registration Statement discloses have occurred or may occur and except
as described in such letter;

(D) for the period from the latest balance sheet included in the
Prospectus to the last day of the latest month and for which the
applicable condensed combined financial data is available, there were
any decreases, as compared with the corresponding period in the
preceding year, in net sales or net income, except in all instances for
decreases that the Registration Statement discloses have occurred or
may occur and except as described in such letter; and

(E) as of a specified date not more than five days prior to the date
of such letter, there has been any increase in the consolidated long-
term debt of the Company and its subsidiaries, as compared with amounts
shown in the latest balance sheet included in the Prospectus, except in
each case for increases which the Prospectus discloses have
occurred or may occur or which are described in such letter; and

(vi) In addition to the examination referred to in their report(s)
included in the Prospectus and the limited procedures, inspection of minute
books, inquiries and other procedures referred to in paragraphs (iii) and
(vi) above, they have carried out certain specified procedures, not
constituting an examination in accordance with generally accepted auditing
standards, with respect to certain amounts, percentages and financial
information specified by the Representatives, which are derived from the
general accounting records of the Company and its subsidiaries, subject
to the Company's system of internal accounting control which appear
in the Prospectus, or in Part II of, or in exhibits and schedules to, the
Registration Statement specified by the Representatives, and have compared
certain of such amounts, percentages and financial information with the
accounting records of the Company and its subsidiaries and have found them
to be in agreement except as described in such letter.

<PAGE>

DRAFT 8/19/96

AGREEMENT AND PLAN OF REORGANIZATION

DATED AS OF ___________ 1996

BY AND BETWEEN

BAXTER INTERNATIONAL INC.

AND

ALLEGIANCE CORPORATION

<PAGE>

TABLE OF CONTENTS

Page

ARTICLE I. DEFINITIONS AND INTERPRETATIONS...................................2
Section 1.1 Definitions..................................................2
Section 1.2 Rules of Construction........................................9

ARTICLE II. THE SPIN-OFF....................................................10
Section 2.1 Delivery of Allegiance Shares...............................10
Section 2.2 Spin-Off of Allegiance Shares...............................10
Section 2.3 Treatment of Fractional Shares..............................10
Section 2.4 Baxter Board Action.........................................11
Section 2.5 Additional Approvals........................................11

ARTICLE III. TRANSFERS TO AHII..............................................11
Section 3.1 General.....................................................11
Section 3.2 Malaysian Glove Factory.....................................11
Section 3.3 Euromedical.................................................12
Section 3.4 France......................................................13
Section 3.5 Germany.....................................................13
Section 3.6 Malta.......................................................13
Section 3.7 Mexico......................................................14
Section 3.8 Canada......................................................14
Section 3.9 Restrictions on Intercompany Debt...........................15
Section 3.10 Transfer of Assets.........................................16
Section 3.11 Transfer of Liabilities....................................16

ARTICLE IV. TRANSFERS TO AHC................................................16
Section 4.1 Organization of AHC.........................................16
Section 4.2 Transferred Assets..........................................16
Section 4.3 Excluded BHC Assets.........................................21
Section 4.4 Assumed Liabilities.........................................22
Section 4.5 Excluded Liabilities........................................23
Section 4.6 Release of Baxter...........................................23

ARTICLE V. ORGANIZATION OF ALLEGIANCE CORPORATION...........................23
Section 5.1 Organization of Allegiance..................................23
Section 5.2 Transfer of Certain Subsidiaries............................24
Section 5.3 Transfer of Assets..........................................24
Section 5.4 Transfer of Liabilities.....................................26
Section 5.5 Excluded Liabilities........................................26
Section 5.6 Intracompany Agreements.....................................26

ARTICLE VI. DELIVERIES AT CLOSING...........................................26
Section 6.1 Instruments of Conveyance...................................26
Section 6.2 No Representations or Warranties............................27

- i -

<PAGE>

Section 6.3 Non-Assignable Contracts....................................27
Section 6.4 Further Assurances..........................................28

ARTICLE VII. CERTAIN COVENANTS..............................................29
Section 7.1 Conduct of Allegiance Business
Pending the Spin-Off Date.................................29
Section 7.2 Registration and Listing....................................29
Section 7.3 New Credit Facilities.......................................30
Section 7.4 Post-Spin-Off Tax-Related Restrictions......................30
Section 7.5 Insurance Policies and Claims
Administration............................................31
Section 7.6 Intercompany Receivables and
Cash Management...........................................34
Section 7.7 Intercompany Debt True-Up...................................35
Section 7.8 Agreements Relating to Baxter
and Allegiance............................................36
Section 7.9 Certain Releases............................................36
Section 7.10 Litigation.................................................37
Section 7.11 Liability for Previously
Delivered Products........................................37
Section 7.12 Allegiance Bank Accounts...................................39
Section 7.13 Subsidized Customer Leases.................................39
Section 7.14 Ad Now Program.............................................39
Section 7.15 Services to Dade...........................................39
Section 7.16 Products at Cost to Dade...................................40

ARTICLE VIII. INTELLECTUAL PROPERTY.........................................40
Section 8.1 License of Allegiance
Intellectual Property to Baxter...........................40
Section 8.2 License of Baxter Intellectual
Property to Allegiance....................................42
Section 8.3 Use of Baxter Trade Names and Trademarks....................44

ARTICLE IX. EMPLOYEES AND EMPLOYEE BENEFITS.................................46
Section 9.1 Domestic and International
Allegiance Employee.......................................46
Section 9.2 Employment of Domestic Allegiance
Employees.................................................46
Section 9.3 Terminations/Layoff/Severance...............................46
Section 9.4 International Allegiance Employees..........................47
Section 9.5 Employment Solicitation.....................................47
Section 9.6 WARN Act....................................................48
Section 9.7 Leave of Absence Policies...................................48
Section 9.8 Withdrawal From Participation in
Baxter Plans and Establishment
of Allegiance Plans.......................................49
Section 9.9 Transfer of Savings Plan Account Balances...................49
Section 9.10 Entitlement to Distributions
Under Pension Plan........................................50

- ii -

<PAGE>

Section 9.11 Welfare Benefits Provided
Under Allegiance Plans....................................50
Section 9.12 Stock Purchase Plan........................................51
Section 9.13 Workers' Compensation......................................51
Section 9.14 Vacation Pay Policy........................................51
Section 9.15 Non-Qualified Deferred Compensation
Plans.....................................................51
Section 9.16 Information to Be Provided to Baxter.......................52
Section 9.17 Corporate Action; Delegation
of Authority..............................................52
Section 9.18 Split-Dollar Life Insurance................................52

ARTICLE X. ACCESS TO INFORMATION............................................53
Section 10.1 Access to Information......................................53
Section 10.2 Production of Witnesses....................................53
Section 10.3 Provision of Corporate Records.............................53
Section 10.4 Confidentiality............................................53
Section 10.5 Privileged Matters.........................................54

ARTICLE XI. CONDITIONS PRECEDENT TO SPIN-OFF................................55
Section 11.1 Tax Ruling.................................................56
Section 11.2 No Actions.................................................56
Section 11.3 NYSE Listing...............................................56
Section 11.4 Opinions of Financial Advisor..............................56
Section 11.5 Consents...................................................56
Section 11.6 Registration Statement.....................................56
Section 11.7 New Credit Facility........................................56
Section 11.8 Pre-Spin-Off Transactions..................................56
Section 11.9 Ancillary Agreements.......................................57
Section 11.10 Resignations..............................................57
Section 11.11 Board Approval............................................57
Section 11.12 Election of Allegiance Board..............................57
Section 11.13 Satisfaction of Conditions................................57

ARTICLE XII. EXPENSES; TAXES................................................57
Section 12.1 Allocation of Expenses.....................................57
Section 12.2 Taxes......................................................58
Section 12.3 Directors' and Officers' Insurance.........................58

ARTICLE XIII. SURVIVAL, INDEMNIFICATION, CLAIMS AND OTHER MATTERS...........59
Section 13.1 Survival...................................................59
Section 13.2 Indemnification............................................59
Section 13.3 Procedure for Indemnification..............................62
Section 13.4 Direct Claims..............................................64
Section 13.5 Adjustment of Indemnifiable Losses.........................64
Section 13.6 Contribution...............................................66
Section 13.7 No Third Party Beneficiaries...............................66

- iii -

<PAGE>

Section 13.8 Release of Pre-Divestiture Liabilities.....................66

ARTICLE XIV. DISPUTE RESOLUTION.............................................67
Section 14.1 Escalation.................................................67
Section 14.2 Arbitration................................................67
Section 14.3 Injunctive Relief..........................................68

ARTICLE XV. MISCELLANEOUS PROVISIONS........................................68
Section 15.1 Entire Agreement...........................................68
Section 15.2 Choice of Law..............................................68
Section 15.3 Amendment; Waiver..........................................69
Section 15.4 Severability...............................................69
Section 15.5 Counterparts...............................................69
Section 15.6 Records Retention..........................................69
Section 15.7 Beneficiaries..............................................69
Section 15.8 Notices....................................................69
Section 15.9 Termination................................................70
Section 15.10 Performance................................................70

- iv -

<PAGE>

List of Exhibits
- ----------------

Exhibit A - The Transferred Business
Exhibit B - The Transferred Services
Exhibit C - Transferred Subsidiaries
Exhibit D - Operating Agreements
Exhibit E - Tax Sharing Agreement
Exhibit F - June 31, 1996 Balance Sheet
Exhibit G - Certificate of Incorporation of Allegiance
Exhibit H - By-Laws of Allegiance
Exhibit I - Allegiance Preferred Share Purchase Rights Plan
Exhibit J - Allegiance Board of Directors

- v -

<PAGE>

AGREEMENT AND PLAN OF REORGANIZATION

AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement"), dated as of
______________, 1996, by and between Baxter International Inc., a Delaware
corporation ("Baxter"), and Allegiance Corporation, a Delaware corporation
("Allegiance"), and, prior to the Spin-Off (as hereinafter defined), a wholly-
owned Subsidiary (as hereinafter defined) of Baxter.

W I T N E S S E T H

WHEREAS, Baxter through its Subsidiaries is engaged, INTER ALIA, in
the health care distribution, surgical and respiratory therapy products and
health care cost management business (as more fully described in EXHIBIT A
hereto, the "Transferred 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
(i) to transfer to Allegiance and/or one or more of its Subsidiaries the
business, operations, assets and liabilities related to the Transferred
Business, and (ii) to transfer to Allegiance or one or more of its Subsidiaries,
the employees and certain liabilities related to the provision of the
administrative services and functions set forth in EXHIBIT B hereto (the
"Transferred Services") (the Transferred Business and the Transferred Services
are hereinafter referred to together as the "Allegiance Business");

WHEREAS, Baxter has agreed to transfer and assign, or cause to be
transferred and assigned, to Allegiance or one or more of its Subsidiaries (i)
substantially all of the assets and properties of the Allegiance Business held
by Baxter, Baxter Healthcare Corporation, a Delaware corporation ("BHC"), and
certain other Subsidiaries of Baxter, and (ii) all of the issued and outstanding
shares owned by Baxter and its Subsidiaries of certain of its Subsidiaries as
set forth in EXHIBIT C hereto (the "Transferred Subsidiaries"), and Allegiance
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 Allegiance
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 all of the outstanding shares of Allegiance common stock, par
value $1.00 per share (together with the preferred share purchase rights
associated therewith, the "Allegiance Common Stock"), on a pro rata basis to the
holders of Baxter's common stock, par value $1.00 per share ("Baxter Common
Stock"); and

<PAGE>

WHEREAS, on the Spin-Off Date (as hereinafter defined), Baxter will
cause the Agent (as hereinafter defined) to distribute in the manner described
herein to all holders of record of Baxter Common Stock as of the Record Date (as
hereinafter defined), without any consideration being paid by such holders,
outstanding shares of Allegiance Common Stock.

NOW, THEREFORE, in consideration of the mutual undertakings contained
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Baxter and Allegiance agree as
follows:

ARTICLE I. DEFINITIONS AND INTERPRETATIONS

Section 1.1 DEFINITIONS. As used in this Agreement, the following
terms shall have the meanings set forth below.

"Actions" 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 Allegiance Employee" means any regular full-time or part-time
employee of Baxter or one of its Subsidiaries who commences employment with
Allegiance or one of its Subsidiaries on the Spin-Off Date.

"Affiliate" shall mean any Person controlling, controlled by, or under
direct or indirect common control with a party hereto. 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 terms "controlling" and
"controlled" have meanings correlative to the foregoing. After the Spin-Off
Date, Allegiance and Baxter shall not be deemed to be under common control for
purposes hereof due solely to the fact that Allegiance and Baxter have common
shareholders.

"Agent" means First Chicago Trust Company of New York, the
distribution agent appointed by Baxter to distribute shares of Allegiance Common
Stock pursuant to the Spin-Off.

"AHC" has the meaning set forth in SECTION 4.1.

"AHFI" has the meaning set forth in SECTION 3.3.

"AHII" has the meaning set forth in SECTION 3.1.

"AHSB" has the meaning set forth in SECTION 3.2.

- 2 -

<PAGE>

"Allegiance Business" has the meaning set forth in the recitals of
this Agreement.

"Allegiance Credit Facility" has the meaning set forth in SECTION 7.3.

"Allegiance Distributable Share" means the number of, or fractional,
Allegiance Shares which the Board of Directors of Baxter determines shall be
distributed with respect to each share of Baxter Common Stock pursuant to the
Spin-Off.

"Allegiance Employee" means any Domestic or International Allegiance
Employee.

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

"Allegiance Indemnified Party" has the meaning set forth in SECTION
13.2.

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

"Allegiance Retirement Plan" means the defined contribution plan which
shall be established by Allegiance after the Spin-Off Date for the benefit of
certain eligible employees.

"Allegiance Share" means one share of Allegiance Common Stock.

"Allegiance Welfare Plans" means the welfare benefit plans established
by Allegiance following the Spin-Off, which provide benefits that correspond to
benefits provided under the Baxter Welfare Plans.

"Assumed Actions" has the meaning set forth in SECTION 7.10(a).

"Assumed BHC Liabilities" has the meaning set forth in SECTION 4.4.

"Balance Sheet" has the meaning set forth in SECTION 4.2(i).

- 3 -

<PAGE>

"Baxter Belgium" has the meaning set forth in SECTION 3.6.

"Baxter Cafeteria Plans" means the Baxter Healthcare and Dependent Day
Care Reimbursement Accounts.

"Baxter Deutschland" has the meaning set forth in SECTION 3.5.

"Baxter France" has the meaning set forth in SECTION 3.4.

"Baxter Group" means Baxter and (a) any corporation which 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) which is a
member of an affiliated service group (within the meaning of Section 414(m) of
the Code) which 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 which is required to be aggregated with Baxter pursuant to
regulations promulgated under Section 414(o) of the Code.

"Baxter Indemnified Party" has the meaning set forth in SECTION 13.2.

"Baxter Panama" has the meaning set forth in SECTION 3.2.

"Baxter Pension Plan" means the Baxter International Inc. and
Subsidiaries Pension Plan.

"Baxter Plan" means any employee benefit plan or program maintained by
Baxter.

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

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

- 4 -

<PAGE>

"Baxter Savings Plan" means the Baxter International Inc. and
Subsidiaries Incentive Investment Plan.

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

"BHC" has the meaning set forth in the recitals of this Agreement.

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

"BWT" has the meaning set forth in SECTION 3.1.

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

"Chateaubriant Plant" has the meaning set forth in SECTION 3.4.

"Claims or Losses" means all losses, liabilities, claims, demands,
settlements, penalties, fines, damages, costs and expenses of whatever kind or
nature, known or unknown, contingent or otherwise (including reasonable
attorneys' fees and expenses, reasonable consultants' fees and expenses, court
costs, any and all expenses reasonably incurred in investigating, preparing for
or responding to or defending against any litigation or claim), commenced, made
or threatened, and any environmental clean-up or remediation claims and
expenses, including any requirements or obligations under CERCLA and any other
federal, state or local laws relating to cleanup of hazardous materials.

"COBRA" means the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended, and any applicable state law requiring continuation coverage
under a medical plan.

"Code" means the Internal Revenue Code of 1986, as amended, and except
where the context otherwise requires, the regulations promulgated thereunder.

"Contracts" has the meaning set forth in SECTION 4.2(viii).

"Disabled Employee" means each employee who would have been a Domestic
Allegiance Employee had he or she not been on a long-term disability leave of
absence on the Spin-Off Date.

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"Domestic Allegiance Employee" has the meaning set forth in SECTION
9.1.

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

"Euromedical" has the meaning set forth in SECTION 3.3.

"Eurovac" has the meaning set forth in SECTION 3.6.

"Exchange Act" has the meaning set forth in SECTION 7.2.

"Excluded Baxter Liabilities" has the meaning set forth in SECTION
5.5.

"Excluded BHC Assets" has the meaning set forth in SECTION 4.3.

"Excluded BHC Liabilities" has the meaning set forth in SECTION 4.5.

"Foreign Closing Date" means [August 31, 1996].

"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 of America, N.A.

"German Business" has the meaning set forth in SECTION 3.5.

"Inactive Allegiance Employee" means any employee of Baxter or one of
its Subsidiaries who becomes an employee of Allegiance or one of its
Subsidiaries on the Spin-Off Date and who immediately prior to the Spin-Off 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 Spin-Off Date
who is not on workers' compensation.

"Indemnified Party" means any party who is entitled to receive payment
from an Indemnifying Party pursuant to ARTICLE XIII hereof.

"Indemnifying Party" means any party who is required to pay any other
person pursuant to ARTICLE XIII hereof.

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"Indemnity Payment" means the amount an Indemnifying Party is required
to pay an Indemnified Party pursuant to ARTICLE XIII hereof.

"Information Statement" has the meaning set forth in SECTION 7.2.

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

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

"International Allegiance Employee" has the meaning set forth in
SECTION 9.1.

"IRS" means the Internal Revenue Service.

"Loan" means any intercompany indebtedness for borrowed money.

"Malaysian Glove Branch" has the meaning set forth in SECTION 3.2.

"Manufacturing Contracts" means the agreements set forth in EXHIBIT D
under the caption "Contract Manufacturing Agreements."

"New Sub" has the meaning set forth in SECTION 3.8.

"NYSE" means the New York Stock Exchange, Inc.

"Operating Agreements" means the agreements listed on EXHIBIT D hereto
regarding the ongoing business and service relationships between Baxter and
Allegiance and their respective Affiliates following the Spin-Off.

"Party" means Baxter or Allegiance.

"Person" shall mean an individual, corporation, partnership, limited
liability company, unincorporated syndicate, unincorporated organization, trust,
trustee, executor, administrator or other legal representative, governmental
authority or agency, or any group of Persons acting in concert.

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"Policies" has the meaning set forth in SECTION 7.5.

"Privilege" has the meaning set forth in SECTION 10.5.

"Privileged Information" has the meaning set forth in SECTION 10.5.

"Real Property Leases" has the meaning set forth in SECTION 4.2(v).

"Receivables" has the meaning set forth in SECTION 4.2(ii).

"Record Date" means the date determined by the Board of Directors of
Baxter as the record date for the Spin-Off.

"Registration Statement" has the meaning set forth in SECTION 7.2.

"Retained Business" means those portions of the business of Baxter and
its current Subsidiaries which are not part of the Allegiance Business.

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

"Shared Agreements" has the meaning set forth in
SECTION 7.8.

"Spin-Off" means the distribution of Allegiance Common Stock as a
dividend to holders of Baxter Common Stock on the basis provided for in ARTICLE
II hereof, which shall be effective as of the Spin-Off Date.

"Spin-Off Date" means the date determined by the Board of Directors of
Baxter as the date on which the Allegiance Shares are payable to holders of
Baxter Common Stock as of the Record Date.

"Subsidiary" means, when used with reference to any entity, any
corporation a majority of the outstanding voting securities of which are owned
directly or indirectly by such entity.

"Tax Sharing Agreement" means the Tax Sharing Agreement attached as
EXHIBIT E hereto.

"Taxes" means 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,

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or any other tax, custom, duty, governmental fee or other like assessment or
charge of any kind.

"Transferred Actions" has the meaning set forth in SECTION 7.10(b).

"Transferred Assets" means any of the assets transferred to
Allegiance, AHC or AHII as contemplated by ARTICLES III, IV and V hereof.

"Transferred BHC Assets" has the meaning set forth in SECTION 4.2.

Section 1.2 RULES OF CONSTRUCTION. (a) In this Agreement, unless a
clear contrary intention appears:

(i) the singular number includes the plural number and vice versa;

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

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

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

(v) "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 or thereof;

(vi) "including" (and with correlative meaning "include") means
including without limiting the generality of any description preceding such
term;

(vii) 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";

(viii) accounting terms used herein shall have the meanings
historically attributed to them by Baxter and its Subsidiaries prior to the
Spin-Off;

(ix) in the event of any conflict between the provisions of the body
of this Agreement and the Exhibits or

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Schedules hereto, the provisions of the body of this Agreement shall
control; and

(x) the headings contained in this Agreement have been inserted for
convenience of reference only and are not to be used in construing this
Agreement.

(b) This Agreement was negotiated by the Parties with the benefit of
legal representation, and any rule of construction or interpretation otherwise
requiring this Agreement to be construed or interpreted against either Party
shall not apply to any construction or interpretation hereof.

ARTICLE II. THE SPIN-OFF

On the Spin-Off Date, Baxter shall distribute the Allegiance Shares as
follows:

Section 2.1 DELIVERY OF ALLEGIANCE SHARES. Baxter shall deliver to
the Agent one or more stock certificates representing all of the Allegiance
Shares then issued and outstanding, together with one or more stock power(s)
duly endorsed in blank. In its capacity as Allegiance's transfer agent, the
Agent will cancel and reissue such shares in the manner described in SECTION 2.2
below.

Section 2.2 SPIN-OFF OF ALLEGIANCE SHARES. Allegiance shall provide
to the Agent sufficient certificates in such denominations as the Agent may
request in order to effect the Spin-Off. Baxter shall instruct the Agent (i) to
distribute the Allegiance Shares, pro rata, to all holders of record of Baxter
Common Stock as of the Record Date on the basis of one Allegiance Share for each
_______ shares of Baxter Common Stock outstanding as of the Record Date, and
(ii) to deliver to Allegiance, as a contribution to Allegiance, all of the
remaining Allegiance Shares, if any, then held by the Agent. Any such returned
Allegiance Shares shall be canceled immediately by Allegiance, and the Board of
Directors of Allegiance shall take appropriate action so that such returned
shares shall not constitute treasury shares. All of the distributed Allegiance
Shares shall be validly issued, fully paid and nonassessable and shall be free
of any preemptive rights.

Section 2.3 TREATMENT OF FRACTIONAL SHARES. No certificates or scrip
representing fractional Allegiance Shares shall be issued in the Spin-Off. In
lieu of receiving fractional shares, each holder of Baxter Common Stock who
would otherwise be entitled to receive a fractional Allegiance Share pursuant to
the Spin-Off will receive cash for such fractional share. Baxter and Allegiance
shall instruct the Agent to determine the number of whole Allegiance Shares and
fractional Allegiance Shares

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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 sell the whole
shares obtained thereby in the open market at the then prevailing prices on
behalf of holders who would otherwise be entitled to receive fractional share
interests, and the 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.

Section 2.4 BAXTER BOARD ACTION. The Board of Directors of Baxter
shall, in its discretion, determine the Record Date and the Spin-Off Date and
all appropriate procedures in connection with the Spin-Off. The Board of
Directors of Baxter shall also have the right to adjust at any time prior to the
Spin-Off Date the Allegiance Distributable Share. The consummation of the
transactions provided for in this ARTICLE II shall only be effected after the
Spin-Off has been declared by the Board of Directors of Baxter and after all of
the conditions set forth in ARTICLE XI hereof shall have been satisfied.

Section 2.5 ADDITIONAL APPROVALS. Baxter shall cooperate with
Allegiance in effecting, and if so requested by Allegiance, Baxter shall, as the
sole stockholder of Allegiance prior to the Spin-Off, ratify any actions which
are reasonably necessary or desirable to be taken by Allegiance to effectuate,
the transactions referenced in or contemplated by this Agreement in a manner
consistent with the terms of this Agreement.

ARTICLE III. TRANSFERS TO AHII

Section 3.1 GENERAL. Prior to or promptly following the execution of
this Agreement, Baxter shall cause to be incorporated, under the General
Corporation Law of Delaware, Allegiance Healthcare International Inc. ("AHII")
as a wholly owned Subsidiary of Baxter World Trade Corporation, a Delaware
corporation ("BWT") and a wholly-owned Subsidiary of Baxter. AHII shall be
qualified as a foreign corporation under the Business Corporation Act of
Illinois. Subject to the terms and conditions of this Agreement, Baxter and
Allegiance 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 prior to the Spin-Off Date and at the approximate times
and in the order described in SCHEDULE 3.1.

Section 3.2 MALAYSIAN GLOVE FACTORY. Baxter and Allegiance hereby
agree to take any and all actions necessary to effect the transfer to AHII of
all of the right, title and

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interest of Panama Healthcare S.A. (Panama), a Panamanian corporation and a
wholly-owned Subsidiary of BWT ("Baxter Panama"), in the Baxter Panama branch in
Malaysia that produces gloves and all of the assets and liabilities related
thereto (the "Malaysian Glove Branch"), as follows:

(i) Allegiance Healthcare Sdn. Bhd. ("AHSB") shall be incorporated as
a Subsidiary of Baxter Panama;

(ii) Baxter Panama shall declare a U.S.$100 million dividend payable
to BWT on or before January 31, 1997;

(iii) AHSB shall borrow 10 million ringgits from Euromedical;

(iv) Baxter Panama shall transfer to AHSB all of its right, title and
interest in and to the Malaysian Glove Branch plus-million ringgits in cash
in return for AHSB stock and the assumption, by AHSB of __ million ringgits
of intercompany debt due on the Spin-Off Date and owed to Baxter Panama;

(v) AHII shall borrow U.S.$1,000 from BHC;

(vi) Baxter Panama shall transfer to BWT all of its right, title and
interest in and to the capital stock of AHSB;

(vii) BWT shall transfer to AHII all of its right, title and interest
in and to the capital stock of AHSB in exchange for _____ shares of AHII
common stock and U.S.$1,000 in cash; and

(viii) Contemporaneously with or immediately following the Spin-Off
(1) AHII shall repay U.S.$1,000 to BHC, and (2) AHSB shall borrow from
Allegiance __ million ringgits and use the proceeds of such indebtedness
towards the repayment of all debt owed to Baxter Panama.

Section 3.3 EUROMEDICAL. Baxter and Allegiance hereby agree to take
any and all actions necessary to effect the transfer to AHII of all the right,
title and interest in Euromedical Industries Senderihan Berhad, a Malaysian
corporation ("Euromedical"), held by AHFI/Netherlands B.V., a Dutch corporation
and a wholly-owned Subsidiary of BWT ("AHFI"), as follows:

(i) AHFI shall be merged with and into BWT; and

(ii) BWT shall transfer to AHII all of BWT's right, title and
interest in or to 75% of the outstanding common stock of Euromedical.

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<PAGE>

Section 3.4 FRANCE. Baxter and Allegiance hereby agree to take any
and all actions necessary to effect the transfer to AHII of all of the right,
title and interest of Baxter S.A. (France) ("Baxter France") in the
Chateaubriant manufacturing facility and all of the assets and liabilities
related thereto (the "Chateaubriant Plant") as follows:

(i) AHII shall form [Allegiance France S.A.] ("Allegiance France") as
a French corporation and a wholly-owned Subsidiary of AHII;

(ii) BWT shall contribute ____________FF to AHII, which shall be due
________;

(iii) AHII shall contribute ___________ to Allegiance France as
equity; and

(iv) Allegiance France shall purchase from Baxter France the
Chateaubriant Plant for a purchase price equal to the book value of the
Chateaubriant Plant, as determined in accordance with U.S. generally
accepted accounting principles, to be paid in cash and in United States
currency.

Section 3.5 GERMANY. Baxter and Allegiance hereby agree to take any
and all actions necessary to effect the transfer to AHII of all of the right,
title and interest of Baxter Deutschland GmbH ("Baxter Deutschland") in certain
German assets and liabilities related to the Allegiance Business (the "German
Business") as follows:

(i) AHII shall incorporate Allegiance Health Deutschland GmbH
("Allegiance Germany") will 58,000 DM as equity; and

(ii) Allegiance Germany shall acquire from Baxter Deutschland the
German Business and 100,000 DM.

Section 3.6 MALTA. Baxter and Allegiance hereby agree to take any
and all actions necessary to effect the transfer to AHII of all of the right,
title and interest in Eurovac Ltd., a Malta corporation ("Eurovac") held by
Baxter S.A., a Belgium corporation ("Baxter Belgium"), as follows:

(i) Baxter shall loan _____ Maltese lira to Allegiance, which shall
be due on the Spin-Off Date;

(ii) Allegiance shall loan _______ Maltese lira to Eurovac;

(iii) Eurovac shall pay _______ Maltese lira to [Baxter Malta] to pay
off a loan; and

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<PAGE>

(iv) Baxter Belgium shall distribute as a dividend all of the capital
stock of Eurovac to its two stockholders (BWT and Baxter Pharmacy Services,
a Delaware corporation and a wholly owned Subsidiary of BWT ("BPS"));

(v) BPS shall distribute as a dividend to BWT all of the capital
stock of Eurovac held by it;

(vi) BWT shall transfer to AHII all of its right, title and interest
in and to the capital stock of Eurovac; and

(vii) Allegiance shall repay _____ Maltese lira to Baxter.

Section 3.7 MEXICO. Baxter and Allegiance hereby agree to take any
and all actions necessary to effect the transfer to AHII of all of the right,
title and interest in certain Mexican corporations held by BHC and BWT as
follows:

(i) BWT shall transfer all of its right, title and interest in the
capital stock in Productos Urologos de Mexico S.A. de C.V., a Mexico
corporation and a wholly-owned Subsidiary of BWT ("Mexicali"), to AHII in
exchange for ______ shares of AHII voting common stock , _____ shares of
AHII non-voting common stock and U.S.$1,000 in cash;

(ii) BHC shall distribute all of its rights, title and interest in
the capital stock in Cirpro de Delicias S.A. de C.V., a Mexico corporation
and a wholly owned Subsidiary of BHC ("Cirpro"), Quiroproductos de
Cuauhtemoc, S.A. de C.V., a Mexico corporation and a wholly owned
Subsidiary of BHC ("Quiroproductos"), Convertors de Mexico S.A. de C.V., a
Mexico corporation and a wholly owned Subsidiary of BHC ("Convertors"), and
Cirmex de Chihuahua S.A. de C.V., a Mexico corporation and a wholly owned
Subsidiary of BHC (together with Cirpro, Quiroproductos and Convertors, the
"Mexican BHC Subsidiaries"), to Baxter;

(iii) Baxter shall transfer all of its right, title and interest in
the capital stock of the Mexican BHC Subsidiaries to BWT in exchange for
U.S. $4,000 in cash; and

(iv) BWT shall transfer all of its right, title and interest in the
capital stock of the Mexican BHC Subsidiaries to AHII in exchange for
______ shares of AHII voting common stock, _______ shares of AHII non-
voting common stock and U.S.$4,000 in cash.

Section 3.8 CANADA. Baxter and Allegiance hereby agree to take any
and all actions necessary to effect the transfer to AHII of all of the right,
title and interest in the

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Allegiance Business held by Baxter Corporation, a Canada corporation and a
wholly owned Subsidiary of BWT ("Baxter Canada"), as follows:

(i) Baxter Canada shall form NewSub ("New Sub") under the laws of
Canada and shall contribute to it all of the right, title and interest of
Baxter Canada in the Allegiance Business plus the Can $______ of
intercompany indebtedness owed by Baxter Canada to BWTSA;

(ii) Baxter Canada shall adopt a new [charter] pursuant to which
Baxter Canada will exchange all of its outstanding capital stock held by
BWT for new shares of Class A Common Stock and Class B Common Stock, [with
the Class B Common Stock equaling the value of the capital stock of New
Sub];

(iii) BWT shall transfer to AHII all of BWT's holdings of Class B
Common Stock in exchange for _____ shares of AHII voting common stock and
_______ shares of AHII non-voting common stock;

(iv) AHII shall form Allegiance Canada under the laws of Canada
("Allegiance Canada") and shall transfer to Allegiance Canada all of the
Class B Common Stock in exchange for ______ shares of Allegiance Canada
common stock;

(v) Baxter Canada shall transfer to Allegiance Canada all of the
outstanding capital stock of New Sub in exchange for ____ shares of
Allegiance Canada's non-voting Series A Preferred Stock;

(vi) Allegiance Canada shall redeem all of its outstanding non-voting
Series A Preferred in exchange for its promissory note in the principal
amount of U.S.$_____ (the "Canadian Note"), and Baxter Canada shall redeem
all of its outstanding Class B Common Stock from Allegiance Canada in
exchange for the cancellation of the Canadian Note;

(vii) New Sub shall amalgamate with Allegiance Canada; and

(viii) Contemporaneously with or immediately following the Spin-Off,
Allegiance Canada shall borrow Can $_______ from Allegiance and use the
proceeds of such indebtedness to repay the intercompany indebtedness of New
Sub to BWTSA assumed by Allegiance Canada pursuant to the amalgamation.

Section 3.9 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 Allegiance

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Foreign Entity from the Foreign Closing Date through the Spin-Off Date, except
as specifically contemplated by this Agreement.

Section 3.10 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 AHII on or prior to the Spin-Off Date, all of BWT's right, title
and interest in and to all assets, tangible or intangible, including all
goodwill, which are exclusive to the operations of the Allegiance Business.

Section 3.11 TRANSFER OF LIABILITIES. Subject to the terms and
conditions of this Agreement, Allegiance shall cause AHII to assume, effective
as of the Spin-Off Date, and pay, comply with and discharge all contractual and
other obligations of BWT arising out of or relating to the Allegiance Business
and/or its past or present facilities, whether accrued, absolute, contingent or
otherwise, and whether due or to become due, 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 obligations shall have been disclosed herein, and whether or
not reflected on the books and records or Balance Sheet of Allegiance.

ARTICLE IV. TRANSFERS TO AHC

Section 4.1 ORGANIZATION OF AHC. Prior to or promptly following the
execution of this Agreement, Baxter shall cause to be incorporated, under the
General Corporation Law of Delaware, Allegiance Healthcare Corporation ("AHC")
as a wholly owned Subsidiary of BHC. AHC shall be qualified as a foreign
corporation under the corporation laws of each state where the ownership of its
assets or conduct of its business makes such qualification necessary.

Section 4.2 TRANSFERRED ASSETS. Subject to the terms and conditions
of this Agreement, Baxter shall cause to be conveyed, assigned, transferred,
contributed and set over to AHC on or prior to the Spin-Off Date, and Allegiance
shall cause AHC to accept and receive on or prior to the Spin-Off Date all
right, title and interest of BHC in and to the tangible and intangible assets,
properties, rights and interests of the Allegiance Business (all of such assets
being hereinafter referred to as the "Transferred BHC Assets"), including the
following:

(i) BALANCE SHEET ASSETS. All assets reflected or disclosed on the
unaudited balance sheet of the Allegiance Business as of June 30, 1996
attached as EXHIBIT F hereto, (the "Balance Sheet"), including all
machinery, equipment,

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furniture and other tangible personal property (other than equipment and
furniture located in properties to be retained by Baxter or its
Subsidiaries hereunder), whether owned or leased, used primarily in the
operation of the Allegiance Business, subject to acquisitions, dispositions
and adjustments in the ordinary course of the Allegiance Business,
consistent with past practice, after such date;

(ii) RECEIVABLES.

(A) All accounts receivable, notes receivable, lease receivables,
prepayments (other than prepaid insurance), advances and other
receivables arising out or produced by the Allegiance Business and
owing by any persons (the "Receivables");

(B) all cash payments received after the Spin-Off Date on account
of the Receivables;

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

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

(iii) INVENTORIES.

(A) All work-in-process, finished goods and spare parts inventory
of Allegiance Products, other than (x) Allegiance Products transferred
to BWT or one of its Subsidiaries for distribution outside the United
States and (y) Allegiance Products being manufactured by Baxter
pursuant to the Manufacturing Contracts;

(B) all raw materials inventory related to Allegiance Products;

(D) all finished goods and spare parts inventory of Baxter
Products transferred to the Allegiance Business for distribution
within the United States as shown on the accounting records of Baxter
on the Spin-Off Date; and

(E) Baxter manufactured products in Allegiance's inventory
system which will be purchased at Baxter's distributor list price
until such time when Baxter will convert to a consignment supplier;

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(iv) OWNED REAL PROPERTY. Those certain parcels of land set forth on
SCHEDULE 4.2(iv) hereto, together with any and all buildings, plants and
other structures and improvements thereon, any and all rights and
privileges pertaining thereto or to any of such buildings, plants or other
structures or improvements, including, without limitation, ownership
interests, easements, permits, licenses, rights of way, leases, 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 and all other rights and
interests of any nature in and to any other real estate of the Allegiance
Business;

(v) REAL PROPERTY LEASES. Those certain real estate leases set forth
on SCHEDULE 4.2(v) hereto (the "Real Estate Leases") and any and all
improvements, fixtures, machinery, equipment and other property located on
the premises demised under such Real Estate Leases;

(vi) VEHICLES. All vehicles used primarily in connection with the
Allegiance Business, including those set forth on SCHEDULE 4.2(vi) hereto,
whether owned or leased;

(vii) INTELLECTUAL PROPERTY. All nonpatented inventions,
discoveries, processes, formulations, trade secrets, know-how and technical
data to the extent such intellectual property is used primarily in
connection with the Allegiance Business including those set forth on
SCHEDULE 4.2(vii) hereto, and all rights which are associated with such
intellectual property, including, without limitation: (1) the right to
sue, recover and retain such recoveries for infringement of the foregoing
prior to the Spin-Off Date; (2) 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, provided, however, that to the
extent that such recoveries relate to infringements of both Baxter Products
and Allegiance Products, such recoveries shall be apportioned between
Baxter and Allegiance on a pro-rata basis based on the relative damages
suffered by each, after reimbursement of each Parties' costs and expenses
incurred in obtaining such recoveries; (3) the assignment of inventions and
other intellectual properties made or conceived by employees, consultants
or contractors of Baxter and its Subsidiaries as to which BHC and its
Subsidiaries have rights under any agreement or otherwise relating to the
foregoing; (4) the assignment of inventions and other intellectual
properties made or conceived by third parties as to which BHC and its
Subsidiaries have rights pursuant to executory agreements with said third
parties relating to the foregoing; and (5) all permits, grants, contracts,
agree-

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ments and licenses running to or from BHC and its Subsidiaries relating to
the foregoing. As of the Spin-Off Date, and except as permitted pursuant
to the terms and conditions of SECTION 8.1 herein, Baxter and its
Subsidiaries shall cease all use of the foregoing, and Baxter agrees to
terminate any license granted to its Subsidiaries with respect to the
foregoing.

(viii) CONTRACTS. All of the following 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 "AHC Contracts"):

(A) all Contracts related to acquisitions or divestitures of
assets or stock exclusive to the Allegiance Business, including
Contracts related to the transactions set forth on SCHEDULE
4.2(viii)(A) hereto, except to the extent any such Contracts
relate to the Retained Business and except to the extent
indicated on SCHEDULE 4.2(viii)(A);

(B) all Contracts with customers exclusive to the Allegiance
Business and all Contracts with customers in the categories set
forth on SCHEDULE 4.2(viii)(B) hereto;

(C) all customer leases exclusive to the Allegiance
Business, including those set forth on SCHEDULES 4.2(viii)(C) and
7.13 hereto;

(D) all government Contracts exclusive to the Allegiance
Business, including those set forth on SCHEDULE 4.2(viii)(D)
hereto;

(E) all supplier Contracts exclusive to the Allegiance
Business relating either to raw materials or distributed
products, including those in the categories set forth on SCHEDULE
4.2(viii)(E) hereto;

(F) all joint development and confidentiality Contracts
exclusive to the Allegiance Business, including those set forth
on SCHEDULE 4.2(viii)(F) hereto;

(G) all consulting Contracts exclusive to the Allegiance
Business, including those set forth on SCHEDULE 4.2(viii)(G)
hereto;

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(H) all dealer management Contracts and alternate
distribution Contracts set forth on SCHEDULE 4.2(viii)(H);

(I) all manufacturing Contracts exclusive to the Allegiance
Business; and

(J) all other Contracts exclusive to the Allegiance
Business.

(ix) PERMITS AND LICENSES. All permits, approvals, licenses,
franchises, authorizations or other rights granted by any federal, state,
local or foreign governmental authority held or applied for by Baxter and
its Subsidiaries and which are exclusively used in the Allegiance Business
or which relate exclusively to the Transferred BHC 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 BHC
Assets or the operation of the Allegiance Business and that are legally
transferable to AHC;

(x) 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 BHC arising out of the Allegiance
Business, including those set forth on SCHEDULE 4.2(x) hereto;

(xi) SUBSIDIARIES, JOINT VENTURES AND MINORITY INTERESTS. All shares
of capital stock or equity or debt or other interests owned by Baxter and
its Subsidiaries in the Subsidiaries, joint ventures and minority
investments set forth on SCHEDULE 4.2(xi) hereto;

(xii) BOOKS AND RECORDS. All books and records (including all
records pertaining to customers, suppliers and personnel) wherever located,
which relate primarily to the operation of the Allegiance Business;

(xiii) 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 which relate
primarily to the operation of the Allegiance Business;

(xiv) SOFTWARE. All (A) software installed on the mainframe computer
located in Building __ at McGaw Park, Illinois, except for the software set
forth on SCHEDULE 4.2(xiv) hereto, (B) software based on AS400 and other
mid-range hardware included in the Transferred BHC Assets, (C) PC-based
software located on hardware included in the

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Transferred BHC Assets, and (D) any Contracts related to the aforementioned
software; and

(xv) OTHER ASSETS. All other assets, tangible or intangible,
including all goodwill, which are exclusive to the operations of the
Allegiance Business.

Section 4.3 EXCLUDED BHC ASSETS. Notwithstanding anything to the
contrary herein, the following assets (the "Excluded BHC Assets") are not, and
shall not be deemed to be, Transferred BHC Assets;

(i) Cash and cash equivalents, any cash on hand or in bank accounts,
certificates of deposit, commercial paper and similar securities except for
(A) cash and cash equivalents of the Transferred Subsidiaries [as of the
Spin-Off Date], (B) deposits securing bonds, letters of credit, leases and
all other obligations related to the Allegiance Business, and (C) petty
cash and impressed funds related to the Allegiance Business;

(ii) Except as otherwise provided in the Tax Sharing Agreement, any
right, title or interest of Baxter and its Subsidiaries in any U.S.
federal, state or local tax refund, credit or benefit (including any income
with respect thereto) relating to the U.S. operations of the Allegiance
Business prior to the Spin-Off Date;

(iii) Any amounts accrued on the books and records of Baxter and its
Subsidiaries or the Allegiance Business with respect to any Excluded
Liabilities;

(iv) Assets relating to the provision of pensions and benefits to
present or former employees of the Allegiance Business, but excluding
assets transferred from the Baxter Savings Plan to the Allegiance
Retirement Plan as described in ARTICLE IX;

(v) Any corporate allocations of non-Allegiance Business-related
assets heretofore made by Baxter or its Subsidiaries to the Allegiance
Business for internal management responsibility reporting purposes;

(vi) Any intellectual property rights in and to the name "Baxter" and
the related emblem design, and any variants thereof, and the trademarks and
trade names used by Baxter or its Subsidiaries in relation to the Retained
Business except as provided in ARTICLE VIII; and

(vii) The preferred stock of Dade International Inc. which is
restricted by agreement from transfer, exchange,

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assignment, pledge or other disposal prior to December 20, 1996.

Section 4.4 ASSUMED LIABILITIES. Except as expressly limited in this
ARTICLE IV, Allegiance shall cause AHC to assume, effective as of the Spin-Off
Date, and pay, comply with and discharge all contractual and other obligations
and liabilities of BHC arising out of or relating to the Allegiance Business
and/or any of the past or present facilities of Baxter or any of its
Subsidiaries used primarily in connection with the Allegiance Business, whether
accrued, unrecorded, absolute, contingent or otherwise, and whether due or to
become due, including:

(i) All of the liabilities of BHC (excluding, except as provided in
SECTION 4.4(ii), Loans owed to Baxter or any of its Subsidiaries) which are
reflected, disclosed or reserved for on the Balance Sheet, as such
liabilities may be increased or reduced in the operation of the Allegiance
Business from the date of the Balance Sheet through the Spin-Off Date in
the ordinary course of business consistent with past practice;

(ii) The Loans of BHC held by BWT and the Loans of BHC held by Baxter
set forth on SCHEDULE 4.4(ii) hereto;

(iii) All liabilities and obligations of BHC in connection with the
industrial revenue bond financings set forth on SCHEDULE 4.4(iii);

(iv) All liabilities and obligations of BHC under or related to the
Real Estate Leases and the AHC Contracts, such assumption to occur as (i)
assignee if such Real Estate Leases and AHC Contracts are assignable and
are assigned or otherwise transferred to AHC, or (ii) subcontractor,
sublessee or sublicensee as provided in SECTION 6.3 below if assignment of
such Real Estate Leases and AHC Contracts and/or the proceeds thereof is
prohibited by law, by the terms thereof or not permitted by the other
contracting party;

(v) All warranty, performance and similar obligations entered into or
made by BHC prior to the Spin-Off Date with respect to the products or
services of the Allegiance Business;

(vi) All liabilities and obligations of BHC 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 Allegiance Business, whether before or
after the Spin-Off Date and the liabilities relating to any Assumed
Actions;

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(vii) All liabilities and obligations of BHC arising under (A) CERCLA
and any other federal, state or local laws regarding the management,
control and cleanup of hazardous materials (including off-site waste
disposal liabilities) or (B) 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 Allegiance Business, whether before or after
the Spin-Off Date, including those set forth on SCHEDULE 4.4(vii) hereto;

(viii) All liabilities and obligations of BHC under any mortgage
interest subsidy program on behalf of any Allegiance Employee;

(ix) All liabilities associated with the transfer of assets from the
Baxter Savings Plan to the Allegiance Savings Plan; and

(x) All other liabilities and obligations of BHC relating to the
Allegiance 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 obligations shall have been disclosed herein, and whether or
not reflected on the books and records or Balance Sheet.

The liabilities and obligations described in this SECTION 4.4 are
referred to in this Agreement collectively as the "Assumed BHC Liabilities."

Section 4.5 EXCLUDED LIABILITIES. Notwithstanding anything to the
contrary in this Agreement, neither Allegiance nor any of its Subsidiaries shall
assume any of the liabilities set forth on SCHEDULE 4.5 hereto (the "Excluded
BHC Liabilities").

Section 4.6 RELEASE OF BAXTER. It is expressly understood and agreed
by the parties hereto that upon the assumption by AHC of the Assumed BHC
Liabilities, [Baxter,] its Subsidiaries, and its officers, directors and
employees shall be released by Allegiance and its Subsidiaries from any and all
liability, whether joint, several or joint and several, for the discharge,
performance or observance of any of the Assumed BHC Liabilities.

ARTICLE V. ORGANIZATION OF ALLEGIANCE CORPORATION

Section 5.1 ORGANIZATION OF ALLEGIANCE. Baxter and Allegiance shall
take any and all action necessary so that, at the Spin-Off Date, the Certificate
of Incorporation and By-laws

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of Allegiance shall be in the forms attached hereto as EXHIBITS G and H,
respectively. Prior to the Spin-Off Date, the Board of Directors of Allegiance
shall adopt a preferred share purchase rights plan in substantially the form
attached hereto as EXHIBIT I. At the Spin-Off Date, the Allegiance Board of
Directors shall consist of, and Baxter and Allegiance shall take all actions
which may be required to elect or otherwise appoint as directors of Allegiance
on or prior to the Spin-Off Date, the persons named on EXHIBIT J. Following the
transfers of Subsidiaries contemplated by SECTION 5.2, Allegiance shall take
appropriate action to be qualified as a foreign corporation under the Business
Corporation Act of Illinois.

Section 5.2 TRANSFER OF CERTAIN SUBSIDIARIES. Following the
consummation of the transactions contemplated by ARTICLES III and IV, Baxter and
Allegiance hereby agree to take, or cause to be taken, any and all actions
necessary to effect the following transactions prior to the Spin-Off Date:

(i) BWT shall distribute as a dividend to Baxter all of BWT's right,
title and interest in and to the common stock of AHII;

(ii) Baxter shall transfer to Allegiance all of Baxter's right, title
and interest in and to the common stock of AHII; and

(iii) BHC shall distribute as a dividend to Baxter all of BHC's right,
title and interest in and to the common stock of AHC; and

(iv) Baxter shall contribute to Allegiance all of Baxter's right,
title and interest in and to the common stock of AHC.

Section 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 Allegiance on or prior to the Spin-Off Date, all of Baxter's right,
title and interest in and to the following assets:

(i) INTELLECTUAL PROPERTY. (A) The foreign and domestic intellectual
property rights relating exclusively to the Allegiance Business including
the intellectual property rights set forth below:

(1) the patents and patent applications set forth on
SCHEDULE 5.3(i)(A)(1) hereto, including any continuations,
continuations-in-part, divisions, renewals, reissues and
extensions thereof;

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(2) the copyrights and copyright applications and
registrations set forth on SCHEDULE 5.3(i)(A)(2) hereto; and

(3) the trade names, trademarks, service marks and service
names, whether or not registered, including those set forth on
SCHEDULE 5.3(i)(A)(3) hereto and the goodwill associated with
each of the foregoing (all of the rights described in this
SECTION 5.3(i)(A) are referred to collectively as the "Allegiance
Assigned Intellectual Property").

(B) The Allegiance Assigned Intellectual Property shall include,
without limitation: (1) the right to sue, recover and retain such
recoveries for infringement of the Allegiance Assigned Intellectual
Property prior to the Spin-Off Date; (2) the right to continue in the
name of Baxter any pending actions relating to the Allegiance Assigned
Intellectual Property, and to recover and retain any damages
therefrom; (3) the assignment of inventions and other intellectual
properties made or conceived by employees, consultants or contractors
of Baxter as to which Baxter has rights under any agreement or
otherwise relating to the Allegiance Assigned Intellectual Property;
(4) the assignment of inventions and other intellectual properties
made or conceived by third parties as to which Baxter has rights
pursuant to executory agreements with said third parties relating to
the Allegiance Assigned Intellectual Property; and (5) all permits,
grants, contracts, agreements and licenses running to or from Baxter
relating to the Allegiance Assigned Intellectual Property. As of the
Spin-Off Date, and except as permitted pursuant to the terms and
conditions of SECTION 8.1 herein, Baxter and its Subsidiaries shall
cease all use of the Allegiance Assigned Intellectual Property, and
Baxter agrees to terminate any licenses granted to its Subsidiaries
with respect to the Allegiance Assigned Intellectual Property.

(C) The parties recognize that as of the Spin-Off Date all of
the Allegiance Assigned Intellectual Property may not have been
identified on the appropriate schedules referred to hereinabove. The
parties agree that they shall take such other steps as may be
necessary or appropriate in order to complete, ensure and perfect the
conveyance, assignment, transfer, recordation, registration and/or
delivery of all right, title and interest in and to any of the
Allegiance Assigned Intellectual Property.

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(ii) BALANCE SHEET ASSETS. All assets reflected or disclosed on the
Balance Sheet, subject to acquisitions, dispositions and adjustments in the
ordinary course of the Allegiance Business, consistent with past practice,
after June 30, 1996; and

(iii) OTHER ASSETS. All other assets, tangible or intangible,
including all goodwill, which are exclusive to the operations of the
Allegiance Business.

Section 5.4 TRANSFER OF LIABILITIES. Subject to the terms and
conditions of this Agreement, Allegiance shall assume, effective as of the Spin-
Off Date, and pay, comply with and discharge all contractual and other
obligations and liabilities of Baxter arising out of or relating to the
Allegiance Business, and/or any of the past or present facilities of Baxter or
any of its Subsidiaries relating to the Allegiance Business, whether accrued,
absolute, contingent or otherwise, and whether due or to become due, including:

(i) all liabilities and obligations under each of the guarantees and
letters of credit set forth on SCHEDULE 5.4(i) hereto; and

(ii) all other liabilities and obligations of the Allegiance
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 obligations shall have been disclosed herein, and whether or
not reflected on the books and records of the Balance Sheet of Allegiance.

Section 5.5 EXCLUDED LIABILITIES. Notwithstanding anything to the
contrary in this Agreement, Allegiance shall not assume any of the Baxter
liabilities set forth in SCHEDULE 5.5 hereto (the "Excluded Baxter
Liabilities").

Section 5.6 INTRACOMPANY AGREEMENTS. Effective as of the Spin-Off
Date, Allegiance shall enter into the agreements with its Subsidiaries described
on SCHEDULE 5.6 hereto, providing for cost sharing, management services and
licensing of intellectual property between Allegiance and its Subsidiaries.

ARTICLE VI. DELIVERIES AT CLOSING

Section 6.1 INSTRUMENTS OF CONVEYANCE. In order to effectuate the
transactions contemplated by ARTICLES III, IV and V, the Parties shall cause to
be executed and delivered prior to or as of the Spin-Off Date such deeds, bills
of sale, instruments of assumption, trademark and patent assignments, stock
powers,

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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.

Section 6.2 NO REPRESENTATIONS OR WARRANTIES. Subject to the
Operating Agreements, neither Baxter nor any of its Subsidiaries is, in this
Agreement or in any other agreement or document contemplated by this Agreement,
representing or warranting (a) as to the value or freedom from encumbrance of,
or any other matter concerning, any Transferred BHC Assets or Transferred
Subsidiaries or (b) as to the legal sufficiency to convey title to any
Transferred BHC Assets or Transferred Subsidiaries on the execution, delivery
and filing of the Conveyancing Instruments. SUBJECT TO THE OPERATING
AGREEMENTS, ALL SUCH ASSETS AND SUBSIDIARIES ARE BEING TRANSFERRED "AS IS, WHERE
IS" WITHOUT ANY REPRESENTATION OR WARRANTY OF MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE, MARKETABILITY, TITLE, VALUE, FREEDOM FROM ENCUMBRANCE OR ANY
OTHER REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, and Allegiance and its
Subsidiaries shall bear the economic and legal risk that any conveyances of such
assets and Subsidiaries shall prove to be insufficient or that Allegiance's and
its Subsidiaries' title to any such assets and Subsidiaries shall be other than
good and marketable and free of encumbrances. Neither Baxter nor any of its
Subsidiaries is, in this Agreement or in any other agreement or document
contemplated by this Agreement, representing or warranting 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 6.3,
Allegiance 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. Notwithstanding the foregoing, the Parties
shall use reasonable efforts to obtain all consents and approvals, to enter into
all amendatory agreements and to make all filings and applications which may be
required for the consummation of the transactions contemplated by this
Agreement, including, without limitation, all applicable regulatory filings or
consents under federal or state environmental laws.

Section 6.3 NON-ASSIGNABLE CONTRACTS. In the event and to the extent
that Baxter or its Subsidiaries are unable to obtain any consent, approval or
amendment to any Contract, lease, license, or other rights relating to the
Allegiance Business, (i) Baxter and its Subsidiaries shall continue to be bound
thereby, and (ii) unless not permitted by the terms thereof or by law,
Allegiance or its Subsidiaries shall pay, perform and discharge fully all the
obligations of Baxter or its Subsidiaries thereunder from and after the Spin-Off
Date and indemnify Baxter

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and its Subsidiaries for all Indemnifiable Losses arising out of such
performance by Allegiance or its Subsidiaries. Baxter and its Subsidiaries
shall, without further consideration therefor, pay and remit to Allegiance 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 6.3 only as reasonably
directed by Allegiance and at Allegiance's expense. If and when any such
consent shall be obtained or such Contract, lease, license or other right shall
otherwise become assignable or able to be novated, Baxter or its Subsidiaries
shall promptly assign and novate (to the extent permissible) all its rights and
obligations thereunder to Allegiance or its Subsidiaries without payment of
further consideration, and Allegiance 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 (or their
proceeds) pursuant to this SECTION 6.3 is prohibited by law, the assignment
provisions of this SECTION 6.3 shall operate to create a subcontract with
Allegiance or its Subsidiaries to perform each relevant unassignable Baxter
Contract at a subcontract price equal to the monies, rights and other
considerations received by Baxter or its Subsidiaries with respect to the
performance by Allegiance or its Subsidiaries under such subcontract.

Section 6.4 FURTHER ASSURANCES. (a) In addition to the actions
specifically provided for elsewhere in this Agreement, each of the Parties shall
use 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 the
transactions contemplated by this Agreement. Without limiting the foregoing,
each Party shall cooperate with the other Party, and execute and deliver, or use
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 or regulatory 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
Allegiance's title to all of the Allegiance Business, to put Allegiance or its
Subsidiaries in actual possession and operating control thereof and to permit
Allegiance or its Subsidiaries to exercise all rights with respect thereto and
to effectuate the provisions and purposes of this Agreement, the Tax Sharing
Agreement, the Operating Agreements and the other transactions contemplated
hereby or thereby.

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(b) If as a result of mistake or otherwise, any asset reasonably
necessary to the conduct of the Allegiance Business has been omitted from the
Transferred BHC Assets or is not held by a Transferred Subsidiary, or any asset
reasonably necessary to the conduct of the Retained Business has been included
in the Transferred BHC Assets or is held by a Transferred Subsidiary, Baxter
and Allegiance shall negotiate in good faith after the Spin-Off Date to
determine whether such asset should be transferred to Allegiance 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
Allegiance or one of its Subsidiaries or to Baxter or one of its Subsidiaries,
as the case may be.

ARTICLE VII. CERTAIN COVENANTS

Section 7.1 CONDUCT OF ALLEGIANCE BUSINESS PENDING THE SPIN-OFF DATE.
Each of the Parties agrees that, from the date hereof until the Spin-Off Date,
except as otherwise expressly contemplated by this Agreement, it will use its
reasonable efforts to carry on the Allegiance 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 Allegiance
Business (including using its reasonable efforts to cause its respective
Subsidiaries to take such actions).

Section 7.2 REGISTRATION AND LISTING. Prior to the Spin-Off Date:

(i) Baxter and Allegiance shall prepare a registration statement on
Form 10 (the "Registration Statement") to effect the registration of the
Allegiance Common Stock under the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder (the
"Exchange Act"), which Registration Statement shall include an information
statement to be sent by Baxter to its stockholders in connection with the
Spin-Off (the "Information Statement"). Allegiance shall file the
Registration Statement with the SEC and shall use reasonable efforts to
cause the Registration Statement to become 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.

(ii) The Parties shall use their 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.

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

(iv) The Parties hereto shall cooperate in preparing, filing with the
SEC and causing to become effective any registration statements or
amendments thereto which 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.

Section 7.3 NEW CREDIT FACILITIES. On or prior to the Spin-Off Date,
Allegiance shall enter into a new credit facility or facilities with commercial
lenders (the "Allegiance Credit Facility") and use the proceeds of the
indebtedness incurred under the Allegiance Credit Facility to purchase ten year
debentures in the aggregate principal amount of $1,027,000,000 from AHC. On the
Spin-Off Date, (i) Allegiance shall cause AHC to use the proceeds from the sale
of its ten year debentures to Allegiance to pay its [$400 million] intercompany
debt to BWT and its [$627 million] [less assumed industrial revenue bonds
pursuant to SECTION 4.4(iii)] intercompany debt to Baxter, and (ii) Baxter shall
cause BWT to pay its [$125 million] intercompany debt to Baxter and to
distribute as a dividend to Baxter the remaining [$275 million].

Section 7.4 POST-SPIN-OFF TAX-RELATED RESTRICTIONS. (a) In order
to avoid potentially adverse tax consequences relating to the Spin-Off, for a
period of two years after the Spin-Off Date Allegiance shall not: (i) cease to
engage in an active trade or business within the meaning of the Code, (ii) issue
or redeem any share of stock of Allegiance, except for issuances and redemptions
for the benefit of Allegiance's employees or to effect acquisitions by
Allegiance in the ordinary course of business or in connection with the issuance
of any convertible debt by Allegiance or in accordance with the requirements for
permitted purchases of Allegiance stock as set forth in Section 4.05(l)(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 (a)
an opinion is obtained from counsel to Baxter, or (b) 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 Spin-Off to Baxter, its
stockholders who receive Allegiance Shares or Allegiance.

(b) If, as a result of any transaction occurring after the Spin-Off
Date involving either the stock or assets of either Allegiance or any of its
Subsidiaries, or any combination thereof, the Spin-Off fails to qualify as tax
free under the

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provisions of Section 355 of the Code, Allegiance shall indemnify Baxter for
all taxes, liabilities and associated expenses, including penalties and
interest, incurred as a result of such failure of the Spin-Off to qualify
under Section 355 of the Code. If the Spin-Off 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 Spin-Off Date involving either the stock or
assets of Allegiance or any of its Subsidiaries, or any combination thereof,
then Allegiance shall not be liable for such taxes, liabilities or expenses.

Section 7.5 INSURANCE POLICIES AND CLAIMS ADMINISTRATION. (a)
OWNERSHIP OF INSURANCE POLICIES AND PROGRAMS. Baxter shall continue to own all
property and casualty insurance programs, including, without limitation, primary
and excess general liability, automobile, workers' compensation, property and
crime insurance policies in effect on or before the Spin-Off Date (collectively,
the "Baxter Policies" and individually, a "Baxter Policy"). Baxter shall use
reasonable efforts to maintain the Baxter Policies in full force and effect up
to and including the Spin-Off Date, and, subject to the provisions of this
SECTION 7.5, Baxter and its Subsidiaries shall retain all of their respective
rights, benefits and privileges, if any, under the Baxter Policies. Allegiance
shall assume any liabilities or reserves recorded which relate to Allegiance or
any of its Subsidiaries as of the Spin-Off Date, including but not limited to
workers' compensation. Nothing contained herein shall be construed to change
the ownership of the Baxter Policies.

(b) PROCUREMENT OF INSURANCE BY ALLEGIANCE. To the extent not
already provided for by the terms of a Baxter Policy, Baxter shall use
reasonable efforts to cause Allegiance and the appropriate Allegiance
Subsidiaries to be named as additional insureds under Baxter Policies whose
effective policy periods include the Spin-Off Date, in respect of claims arising
or relating to periods prior to the Spin-Off 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 Allegiance and its Subsidiaries
as such additional insureds.

(c) POST SPIN-OFF ALLEGIANCE POLICIES AND PROGRAMS. Commencing on
and as of the Spin-Off Date, Allegiance shall be responsible for establishing
and maintaining its own separate property and casualty insurance (including,
without limitation, primary and excess general liability, automobile, workers'
compensation, property, fire, crime, surety and other similar insurance
policies) for activities and claims involving Allegiance or any of its
Subsidiaries or Affiliates. Allegiance

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will exercise reasonable efforts in securing casualty insurance to avoid
potential gaps in coverage for claiming arising prior to the Spin-Off Date which
would not exist had the Transferred Businesses continued to be covered with the
same retroactive and inception dates existing in the Baxter Policies in effect
on the Spin-Off Date. Allegiance and each of its Subsidiaries, as appropriate,
shall be responsible for all administrative and financial matters relating to
insurance policies established and maintained by Allegiance and its Subsidiaries
or Affiliates for claims relating to any period on or after the Spin-Off Date
involving Allegiance or any of its Subsidiaries or Affiliates, to the extent
such claims administration does not effect or relate to the Baxter Policies.
Notwithstanding any other agreement or understanding to the contrary, except as
set forth in this SECTION 7.5 with respect to claims administration and
financial administration of the Baxter Policies, neither Baxter nor any of its
Subsidiaries shall have any responsibility for or obligation to Allegiance or
any of its Subsidiaries and Affiliates relating to liability and casualty
insurance matters for any period, whether prior to, on or after the Spin-Off
Date.

(d) POST SPIN-OFF CLAIMS ADMINISTRATION. Baxter shall have sole
responsibility for claims and financial administration for claims which relate
to or affect the Baxter Policies. Upon notification by Allegiance of a claim
relating to Allegiance or a Subsidiary or Affiliate thereof under one or more of
the Baxter Policies, Baxter shall cooperate with Allegiance in asserting and
pursuing coverage and payment for such claim by the appropriate insurance
carrier. 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 Allegiance and its
Subsidiaries and Affiliates, which power and authority Baxter shall use to
maximize the overall economic benefit of the Baxter Policies. Allegiance, 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, as appropriate (collectively, "Insurance Charges"), whenever arising,
which shall become due and payable under the terms and conditions of any
applicable Baxter Policy in respect of any liabilities, losses, claims, actions
or occurrences, whenever arising or becoming known, involving or relating to any
of the assets, businesses, operations or liabilities of Allegiance or any of its
Subsidiaries or Affiliates, whether the same relate to the period prior to, on
or after the Spin-Off Date. To the extent that the terms of any applicable
Baxter Policy provide that Baxter, as appropriate, shall have an obligation to
pay or guarantee the payment of any Insurance Charges, Baxter shall be entitled
to demand that Allegiance make such payment directly to the Person or entity
entitled thereto. In connection with any such demand,

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Baxter shall submit to Allegiance a copy of any invoice received by Baxter
pertaining to such Insurance Charges together with appropriate supporting
documentation, if available. In the event that Allegiance fails to pay any
Insurance Charges when due and payable, whether at the request of the party
entitled to payment or upon demand by Baxter, Baxter may (but shall not be
required to) pay such insurance charges for and on behalf of Allegiance and,
thereafter, Allegiance shall forthwith reimburse Baxter for such payment. The
retention by Baxter of the Baxter Policies and the responsibility for claims
administration and financial administration of the Policies are in no way
intended to limit, inhibit or preclude any right to insurance coverage for any
Insured Claims of an insured under the Baxter Policies.

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

(f) NON-WAIVER OF RIGHTS TO COVERAGE. An insurance carrier which
would otherwise 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 SECTION 7.5, 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 Spin-Off occurred, or in the absence of the provisions of this
SECTION 7.5) by virtue of the provisions hereof.

(g) SCOPE OF EFFECTED POLICIES OF INSURANCE. The provisions of this
SECTION 7.5 relate solely to matters involving property and casualty insurance
programs including, without limitation, primary and excess general liability,
automobile, workers' compensation, property and crime insurance policies, and
shall not be construed to affect any obligation of or impose any obligation on
the parties hereto 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 hereto or their Affiliates.

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Section 7.6 INTERCOMPANY RECEIVABLES AND CASH MANAGEMENT.

(a) (i) All Intercompany Receivables between Baxter or any of its
Subsidiaries as they will exist after the Spin-Off, on the one hand, and
any of Euromedical, Eurovac or [Malaysia Silicath], on the other hand,
shall be settled as of 3:00 p.m., Chicago time, on August 26, 1996 in cash,
with such cash settlement occurring on August 29, 1996. Commencing from
the opening of business on August 27, 1996, Intercompany Receivables
between Baxter or any of its Subsidiaries, on the one hand, and any of
Euromedical, Eurovac or [Malaysia Silicath] shall be recorded for
accounting purposes as third party trade account receivables and payables.

(ii) All Intercompany Receivables between Baxter or any of its
Subsidiaries, on the one hand, and the Malaysian Glove Branch, on the other
hand, shall be settled as of 3:00 p.m., Chicago time, on September 23, 1996
in cash, with such cash settlement occurring on September 26, 1996.
Commencing from the opening of business on September 24, 1996, Intercompany
Receivables between Baxter and its Subsidiaries, on the one hand, and the
Malaysian Glove Branch, on the other hand, shall be recorded for accounting
purposes as third party trade account receivables and payables.

(iii) All Intercompany Receivables between any domestic Subsidiary of
Baxter or Allegiance and any entity outside of Baxter's United States
consolidated tax return group shall be settled as of 3:00 p.m., Chicago
time, on September 23, 1996 in cash with such cash settlement occurring on
September 26, 1996. Commencing from the opening of business on September
24, 1996, Intercompany Receivables between any domestic Subsidiary of
Baxter or Allegiance and any entity outside of Baxter's United States
consolidated tax return group shall be recorded for accounting purposes as
third party trade account receivables and payables.

(b) As provided in SECTION 4.3(i), Baxter shall be entitled to all
cash bank balances (other than cash and cash equivalents of the Transferred
Subsidiaries) existing immediately prior to the Spin-Off Date relating to the
Allegiance Business, or otherwise utilized or maintained in connection with the
Allegiance Business, including, without limitation, 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 Allegiance or any of its
Subsidiaries on or prior to the Spin-Off Date. Any such cash balances as of the

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Spin-Off Date which have not been transferred to Baxter shall be paid to Baxter.

(c) Allegiance or an appropriate Subsidiary thereof shall be
responsible for payment of all checks or drafts issued up to the Spin-Off Date
against disbursement accounts transferred to Allegiance or such Subsidiary,
which checks or drafts have not been charged against such disbursement accounts
on or prior to the Spin-Off Date.

[(d) Baxter shall assist Allegiance and each of its Subsidiaries in
establishing a separate cash management system effective as of and immediately
after the Spin-Off Date. Commencing immediately after the Spin-Off Date, any
advances or other payments by Baxter or any of its Subsidiaries to or on behalf
of Allegiance or any of its Subsidiaries, or otherwise in connection with the
Allegiance Business or the Allegiance Employees, shall be recorded in the
accounts of Allegiance or its Subsidiaries, as appropriate, as a payable to
Baxter or of its Subsidiaries, as the case may be, and shall be paid to Baxter
on or prior to the Spin-Off Date.]

(e) Each Party shall, and shall cause its respective Subsidiaries to,
promptly remit to the other any cash or other payment received by such Party or
its Subsidiaries in respect of accounts or notes receivables of the other Party.

Section 7.7 INTERCOMPANY DEBT TRUE-UP.

(a) CALCULATION OF OPERATIONAL CASH FLOW. As soon as practicable,
but in any event within __ days after the Spin-Off Date, Baxter shall prepare a
statement of operational cash flow for its U.S. healthcare business excluding
the IV Systems Division (but including the respiratory therapy business unit
within the IV Systems Division), for the period January 1, 1996 through the
Spin-Off Date. The operational cash flow statement shall be prepared from the
books and records of Baxter relating to its U.S. healthcare business in a manner
consistent with the definition of operational cash flow. The statement shall
also be consistent with Baxter's historical cash flow allocation among its
various business units, except for the elimination of the one-month lag period
in recording the payment of certain liabilities such as payroll, payroll taxes,
sales and use taxes, on the Division's books. The effect of the elimination of
this lag on operational cash flow (the "lag adjustment") shall be included as a
separate schedule accompanying the statement of operational cash flow. Subject
to SECTION 7.7(c) the statement of operational cash flow delivered by Baxter to
Allegiance shall be final, binding and conclusive on the Parties for all
purposes of this Agreement and shall provide the basis for determining the
adjustments (if any) specified in SECTION 7.7(d).

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(b) DEFINITION OF OPERATIONAL CASH FLOW. Operational cash flow for
each Baxter operating unit represents net income plus depreciation and
amortization, increased or decreased, as appropriate, by cash restructuring
utilization and the net change in "managed capital" (as defined in Baxter
Finance Policy #1402) during the period, but excluding the effects of any non-
cash restructuring utilization and acquisitions and divestitures on managed
capital. The operational cash flow shall be computed in the same manner as
reflected in the Consco Management Report, "Cash Flow Trends", except for the
elimination of the one month lag for certain items, as described in SECTION
7.7(a).

(c) DISPUTES. Any disputes regarding the computation of operational
cash flow shall be resolved in accordance with ARTICLE XIV of this Agreement.

(d) TRUE-UP. In the event that the final determination of the Cash
Flow Statement indicates that the operational cash flow is less than
$___________ plus the lag adjustment, the amount of the difference shall be paid
by Allegiance to Baxter, as an adjustment to intercompany debt assumed by
Allegiance or its Subsidiaries pursuant to SECTION 4.4(ii), within 10 days of
the final determination of such adjustment. In the event that the final
determination of the Cash Flow Statement indicates that the operational cash
flow is greater than $ _____________ plus the lag adjustment, the amount of the
difference shall be paid by Baxter to Allegiance, as an adjustment to
intercompany debt assumed by Allegiance pursuant to SECTION 4.4(ii), within 10
days of the final determination of such adjustment.

Section 7.8 AGREEMENTS RELATING TO BAXTER AND ALLEGIANCE. (a) Each
of Baxter and Allegiance shall use its 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 its or its Subsidiaries' pro rata portion of
all Contracts with customers, suppliers, vendors or other third parties relating
to both the Allegiance Business and the Retained Business (the "Shared
Agreements"), including those Shared Agreements set forth on SCHEDULE 7.8
hereto. Each of Baxter and its Subsidiaries and Allegiance and its Subsidiaries
shall be entitled to the rights and privileges of its pro rata portion of the
Shared Agreements.

(b) Each of Baxter and Allegiance agree to perform, or cause to be
performed, their respective pro rata portions of all purchase, distribution, and
other obligations under the Shared Agreements.

Section 7.9 CERTAIN RELEASES. Baxter or one or more of its
Subsidiaries is a guarantor of certain obligations of the

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Allegiance Business, including those obligations set forth on SCHEDULE 5.4(i).
Allegiance shall use its reasonable efforts to release Baxter and its
Subsidiaries from such guarantees prior to the Spin-Off Date and shall indemnity
Baxter and its Subsidiaries and save it harmless from any liabilities relating
to such guarantees.

Section 7.10 LITIGATION. (a) On or as of the Spin-Off Date,
Allegiance and its Subsidiaries shall assume and pay all liabilities which may
result from the Assumed Actions and all fees and costs relating to the defense
of the Assumed Actions, including attorneys' fees and costs incurred after the
Spin-Off Date. "Assumed Actions" shall mean those cases, claims and
investigations (on which Baxter or its Subsidiaries, other than Allegiance and
its Subsidiaries, is a defendant or the party against which the claim or
investigation is directed) related to the Allegiance Business and listed on
SCHEDULE 7.10(a).

(b) Baxter and its Subsidiaries shall transfer the Transferred
Actions to Allegiance and its Subsidiaries, and Allegiance and its Subsidiaries
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 are plaintiffs or claimants) relating to the
Allegiance Business and listed on SCHEDULE 4.2(x).

Section 7.11 LIABILITY FOR PREVIOUSLY DELIVERED PRODUCTS. The
following provisions shall apply to all Baxter Products sold or transferred to
the Allegiance Business prior to the Spin-Off Date for distribution and to all
Allegiance Products sold or transferred to the Retained Business prior to the
Spin-Off Date for distribution (in each case, the "Products"):

(i) Each Party warrants to the other Party that, at the time of
delivery to the other Party or its Subsidiaries, the Products were not at
the time of delivery (A) adulterated or misbranded within the meaning of
the Federal Food, Drug and Cosmetic Act, as amended, and the regulations
issued thereunder, or (B) products that may not under the provisions of
Sections 404, 505, 514 or 515 of said Act be introduced into interstate
commerce, or (C) banned devices under Section 516 of said Act. [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 WHICH ARE THE SUBJECT OF SUCH LIABILITY PLUS ALL COSTS FOR
TRANSPORTATION AND OTHER DIRECT EXPENSES INCURRED BY ALLEGIANCE AND ITS
SUBSIDIARIES WITH

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RESPECT TO SUCH PRODUCTS]. A Party's and its Subsidiaries' exclusive
remedy against the other 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 which proves not to be in conformity with applicable labeling
or specifications. The other 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 other Party or its Subsidiaries for
repair or replacement under this Section, or, at the other Party's option,
reimburse a 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 other 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.]

(ii) Each Party and its Subsidiaries warrants to the other Party and
its Subsidiaries that, at the time of delivery to the other Party or its
Subsidiaries, the 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 other Party or its Subsidiaries).

(iii) Each Party and its Subsidiaries shall indemnify and hold the
Allegiance Indemnified Parties or the Baxter Indemnified Parties, as the
case may be, harmless from and against, and in respect of, any and all
Claims and Losses by any of the Allegiance Indemnified Parties or the
Baxter Indemnified Parties, as the case may be, which result from a third
party claim and which arise out of or relate to: (A) 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; (B) defects in Products; (C) any actual or alleged breach of
warranty or obligation, if any, accompanying the Product or Products,
subject to the limitations in SECTION 7.11(i) to the extent provided
therein; and (D) any claim for personal injury, wrongful death or property
damage arising out of the use of a Product; PROVIDED that this SECTION
7.11(iii) shall not apply to any Claim or Loss (x) to the extent that the
Parties agree; (y) 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 other Party or its
Subsidiaries or business units (but excluding Subsidiaries of business
units

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that become Subsidiaries or business units of the initial party as a result
of the Spin-Off), or their employees or other agents, including, but not
limited to, any Claims 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 (z) 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 a 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 initial party as a result of the
Spin-Off), 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].

Section 7.12 ALLEGIANCE BANK ACCOUNTS. On or prior to the Spin-Off
Date, Baxter and its Subsidiaries shall transfer the bank accounts set forth on
SCHEDULE 7.12 hereto to Allegiance or one of its Subsidiaries, as directed by
Allegiance. Allegiance shall cause any amounts received, by mistake or
otherwise, in such accounts after the Spin-Off Date on account of the Retained
Business to be promptly transferred to Baxter and its Subsidiaries, as
appropriate.

Section 7.13 SUBSIDIZED CUSTOMER LEASES. Allegiance hereby agrees
that, with respect to the lease agreements set forth on SCHEDULE 7.13 hereto
(the "Subsidized Customer Leases"), it shall cause AHC, from time to time as
such Subsidized Customer Leases are in effect, to make payments to BHC in
amounts sufficient to offset the reduction in rental payments given to the
customer resulting from purchases of Allegiance Products. Such payments shall
be in amounts calculated in a manner consistent with past practice with respect
to such Subsidized Customer Leases.

Section 7.14 AD NOW PROGRAM. Baxter hereby agrees to cause BHC to
offer and administer the "Advantage Now" program for Baxter Products to the full
extent necessary to comply with Section 5(e)(12) of the Amended and Restated
Exclusive Distribution Agreement, dated as of September 15, 1995, by and between
Dade International Inc., a Delaware corporation ("Dade"), and BHC (the "Dade
Distribution Agreement").

Section 7.15 SERVICES TO DADE. If the Dade Transition Services
Agreement is assigned to Allegiance, Baxter will need to agree to provide those
services to Dade for which Allegiance does not have the capability. If the
agreement remains with Baxter, Allegiance will need to agree to do the same.

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Section 7.16 PRODUCTS AT COST TO DADE. (a) Baxter hereby agrees to,
and to cause its appropriate Subsidiaries to, provide laboratory supply products
manufactured by Baxter and its Subsidiaries at actual cost to Dade for Dade's
internal use only and not for resale in accordance with Section 5(r) of the Dade
Distribution Agreement.

(b) Allegiance hereby agrees to, and to cause its appropriate
Subsidiaries to, provide laboratory supply products manufactured by Allegiance
and its Subsidiaries at actual cost to Dade for Dade's internal use only and not
for resale in accordance with the Amended and Restated Exclusive Distribution
Agreement, dated as of September 15, 1995, by and between Dade and Baxter Sales
and Distribution Corp., a Delaware corporation.

ARTICLE VIII. INTELLECTUAL PROPERTY

Section 8.1 LICENSE OF ALLEGIANCE INTELLECTUAL PROPERTY TO BAXTER.

(a) GRANT OF LICENSE. Allegiance and its Subsidiaries hereby grant,
and Baxter and its Subsidiaries hereby accept and retain, a perpetual,
nonexclusive, fully paid-up, worldwide right and license to use, manufacture,
make, have made, sell and otherwise practice the patents, patent applications,
copyrights, trade secrets, technology, know-how, and other intellectual property
rights set forth on SCHEDULE 8.1(a), attached hereto and incorporated herein
(hereinafter, the "Licensed Allegiance Intellectual Property"), in connection
with the Baxter Products as of the Spin-Off Date, including new products which
are substitutes for, or line extensions of, such products.

(b) OWNERSHIP OF THE ALLEGIANCE INTELLECTUAL PROPERTY. Baxter and
its Subsidiaries acknowledge that, subject to the foregoing license, Allegiance
and its Subsidiaries, as the case may be, are the sole and exclusive owner of
all of right, title and interest in and to the Licensed Allegiance Intellectual
Property. Baxter and its Subsidiaries agree that they will do nothing
inconsistent with Allegiance's ownership of, or rights in, the Licensed
Allegiance Intellectual Property. Allegiance and its Subsidiaries, at their
expense, agree to take all steps reasonably necessary to protect, enforce or
otherwise maintain in full force and effect the Licensed Allegiance Intellectual
Property, including, without limitation, the filing of any required renewals and
the payment of any required fees, taxes or other payments that may become due.
Baxter and its Subsidiaries shall cooperate with Allegiance and its Subsidiaries
in connection with such steps at Allegiance's reasonable request and at
Allegiance's expense, including, without limitation, by obtaining execution by
Baxter's and Baxter's Subsidiaries' employees, consultants and agents of any
papers Allegiance or its

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Subsidiaries consider necessary to enable Allegiance and its Subsidiaries to
protect the Licensed Allegiance Intellectual Property. Baxter and its
Subsidiaries shall make their employees, consultants and agents, who have direct
knowledge of facts pertaining to an invention that is the subject of a patent
application or another intellectual property right that is the subject of
intellectual property protection, available at Allegiance's expense to
Allegiance and its Subsidiaries for the purpose of disclosing sufficient facts
for the preparation of necessary documentation required for patent applications
and other protection. At Allegiance's reasonable request and expense, Baxter
and its Subsidiaries will assist Allegiance and its Subsidiaries in the
preparation and review of patent documents related to the Licensed Allegiance
Intellectual Property to the extent that such assistance is necessary for such
preparation. Baxter and its Subsidiaries do not represent that they are
qualified to provide any legal or other professional services, the providers of
which must be licensed or are otherwise subject to requirements of law
establishing educational, professional or similar qualifications for providers
of such service, and nothing contained in this Section shall be construed as
requiring Baxter and its Subsidiaries to provide any such services. Allegiance
and its Subsidiaries will procure all such professional service from its own
employees or third parties. All expenses, including, without limitation,
charges for staff costs, including travel and other expenses incurred in
connection with any assistance requested by Allegiance in the preparation or
prosecution of a patent will be reimbursed by Allegiance and will not constitute
a part of the payments for research and development work. Allegiance and its
Subsidiaries shall not allow the protection for any Licensed Allegiance
Intellectual Property to lapse without not less than [three] months' prior
written notice to Baxter. If Allegiance so notifies Baxter, (a) Baxter and its
Subsidiaries shall have the right, but not the obligation, to take such steps to
prevent such a lapse, at Baxter's expense and in Allegiance's and its
Subsidiaries' names, if necessary, and (b) Allegiance and its Subsidiaries shall
cooperate with Baxter and its Subsidiaries at Baxter's reasonable request and at
Baxter's expense.

(c) MARKING AND NOTICES. Baxter and its Subsidiaries agree that any
products which are manufactured, made, offered, sold or otherwise distributed by
them pursuant to the license(s) granted hereunder shall bear a legal or
proprietary rights notice in such form as may be reasonably requested by and to
the extent directed by Allegiance from time to time.

(d) TERMINATION OF LICENSES. The licenses granted in SECTION 8.1 may
be terminated by Baxter only under the following conditions:

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(i) BREACH. If Baxter or its Subsidiaries are in breach or default
of a material term of this SECTION 8.1 which breach or default continues
for sixty (60) days after written notice thereof by Allegiance, Allegiance
may terminate the license granted pursuant to this SECTION 8.1, PROVIDED
that such termination shall be limited to those Licensed Allegiance
Intellectual Property rights that relate to the uncured breach.

(ii) DIVESTITURE. If Baxter or its Subsidiaries sell, assign,
transfer or otherwise divest themselves of ownership of any business units
or product lines that use or are manufactured under the Licensed Allegiance
Intellectual Property, Allegiance may terminate the license granted
pursuant to this SECTION 8.1 by written notice to Baxter as to the Licensed
Allegiance Intellectual Property rights with exception of any Licensed
Allegiance Intellectual Property consisting of patents, patent
applications, or inventions covering manufacturing processes which are
being transferred in connection with such divestiture.

(iii) CHANGE OF CONTROL. If more than 30% of the voting stock of
Baxter or any Affiliate thereof is acquired, directly or indirectly, by a
competitor of Allegiance in the field in which Allegiance or its
Subsidiaries are then using the Licensed Allegiance Intellectual Property
or Persons other than Baxter or an Affiliate of Baxter, then by written
notice to Baxter Allegiance may terminate the license granted pursuant to
this SECTION 8.1 in its entirety, in the case of the acquisition of the
voting stock of Baxter, or as to such Affiliate in the case of the
acquisition of the voting stock of an Affiliate.

Section 8.2 LICENSE OF BAXTER INTELLECTUAL PROPERTY TO ALLEGIANCE.

(a) GRANT OF LICENSE. Baxter and its Subsidiaries hereby grant, and
Allegiance and its Subsidiaries hereby accept and retain, a perpetual,
nonexclusive, fully paid-up, worldwide right and license to use, manufacture,
make, have made, sell and otherwise practice the patents, patent applications,
copyrights, trade secrets, technology, know-how, and other intellectual property
rights set forth on SCHEDULE 8.2(a), attached hereto and incorporated herein
(hereinafter, the "Licensed Baxter Intellectual Property") in connection with
the Allegiance Products as of the Spin-Off Date, including new products which
are substitutes for, or line extensions of, such products.

(b) OWNERSHIP OF THE BAXTER INTELLECTUAL PROPERTY. Allegiance and
its Subsidiaries acknowledge that, subject to the foregoing license, Baxter and
its Subsidiaries are the sole and exclusive owner of all of right, title and
interest in and to the

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Licensed Baxter Intellectual Property. Allegiance and its Subsidiaries agree
that they will do nothing inconsistent with Baxter's and its Subsidiaries'
ownership of, or rights in, the Licensed Baxter Intellectual Property. Baxter
and its Subsidiaries, at their expense, agree to take all steps reasonably
necessary to protect, enforce or otherwise maintain in full force and effect the
Licensed Baxter Intellectual Property, including, without limitation, the filing
of any required renewals and the payment of any required fees, taxes or other
payments that may become due. Allegiance and its Subsidiaries shall cooperate
with Baxter and its Subsidiaries in connection with such steps at Baxter's
reasonable request and at Baxter's expense, including, without limitation, by
obtaining execution by Allegiance's and its Subsidiaries' employees, consultants
and agents of any papers Baxter or its Subsidiaries consider necessary to enable
Baxter and its Subsidiaries to protect the Licensed Baxter Intellectual
Property. Allegiance and its Subsidiaries shall make their employees,
consultants and agents, who have direct knowledge of facts pertaining to an
invention that is the subject of a patent application or another intellectual
property right that is the subject of intellectual property protection,
available to Baxter and its Subsidiaries at Baxter's expense for the purpose of
disclosing sufficient facts for the preparation of necessary documentation
required for patent applications and other protection. At Baxter's reasonable
request and expense, Allegiance and its Subsidiaries will assist Baxter and its
Subsidiaries in the preparation and review of patent documents related to the
Licensed Baxter Intellectual Property to the extent that such assistance is
necessary for such preparation. Allegiance and its Subsidiaries do not
represent that they are qualified to provide any legal or other professional
services, the providers of which must be licensed or are otherwise subject to
requirements of law establishing educational, professional or similar
qualifications for providers of such service. Nothing contained in this Section
shall be construed as requiring Allegiance and its Subsidiaries to provide any
such services. Baxter and its Subsidiaries will procure all such professional
service from its own employees or third parties. All expenses, including,
without limitation, charges for staff costs, including travel and other expenses
incurred in connection with any assistance requested by Baxter and its
Subsidiaries in the preparation or prosecution of a patent will be reimbursed by
Baxter and will not constitute a part of the payments for research and
development work. Baxter and its Subsidiaries shall not allow the protection
for any Licensed Baxter Intellectual Property to lapse without prior written
notice to Allegiance. If Baxter so notifies Allegiance, (a) Allegiance have the
right, but not the obligation, to take such steps to prevent such a lapse, at
Allegiance's expense and in Baxter's and its Subsidiaries' name, if necessary,
and (b) Baxter shall cooperate with Allegiance at Allegiance's and its
Subsidiaries' reasonable request and at Allegiance's expense.

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(c) MARKING AND NOTICES. Allegiance and its Subsidiaries agree that
any products which are manufactured, made, offered, sold or otherwise
distributed by them pursuant to the license(s) granted hereunder 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 in SECTION 8.2 may
be terminated by Allegiance only under the following conditions:

(i) BREACH. If Allegiance or its Subsidiaries are in breach or
default of a material term of this SECTION 8.2 which breach or default
continues for sixty (60) days after written notice thereof by Baxter,
Baxter may terminate this Agreement, PROVIDED that such termination shall
be limited to those Licensed Baxter Intellectual Property rights that
relate to the uncured breach.

(ii) DIVESTITURE. If Allegiance or its Subsidiaries sell, assign,
transfer or otherwise divest themselves of ownership of any business units
or product lines that use the Licensed Baxter Intellectual Property, Baxter
may terminate the license granted pursuant to this SECTION 8.2 on written
notice to Allegiance as to the Licensed Baxter Intellectual Property rights
with the exception of any Licensed Baxter Intellectual Property consisting
of patents, patent applications or inventions covering manufacturing
processes which are being transferred in connection with such divestiture.

(iii) CHANGE OF CONTROL. If more than 30% of the voting stock of
Allegiance or any Affiliate thereof is acquired, directly or indirectly, by
a competitor of Baxter in the field in which Baxter or its Subsidiaries are
then using the Licensed Baxter Intellectual Property, then by written
notice to Allegiance Baxter may (A) in the case of the acquisition of the
voting stock of Allegiance, terminate the license granted pursuant to this
SECTION 8.2 in its entirety, or (B) in the case of the acquisition of the
voting stock of an Affiliate, terminate the license granted pursuant to
this SECTION 8.2 only with respect to such Affiliate.

Section 8.3 USE OF BAXTER TRADE NAMES AND TRADEMARKS.
(a) Allegiance 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:

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(i) Allegiance and its Subsidiaries will cease use of the Baxter
Marks on or in connection with materials other than labels of Allegiance
Products, including, by way of example and not limitation, signs,
stationery, trucks, and customer brochures, on or before December 31, 1997.

(ii) Allegiance and its Subsidiaries will cease use of the Baxter
Marks on or in connection with Allegiance Products containing latex as soon
as practical, but in no event later than March 31, 1997 with respect to
gloves manufactured after that date and June 30, 1997 with respect to other
products containing, as a significant component, natural rubber latex
manufactured after that date.

(iii) Allegiance and its Subsidiaries will cease use of the Baxter
Marks on or in connection with products of the type subject to regulation
under Section 351 of the Public Health Service Act/by the Center for
Biologic Evaluation Review (CBER) ("Biologics"), if any, as soon as
practical, but in no event later than [June 30, 1997/March 31, 1997] with
respect such products manufactured after that date.

(iv) Allegiance and its Subsidiaries will [cease use of the Baxter
Marks on or in connection with/complete specifications to remove the Baxter
Marks from] high volume products, namely, those products which constitute
80% of Allegiance's product volume and a minimum of 80% of the total number
of product code product labels, as of December 31, 1997.

(v) Allegiance and its Subsidiaries will cease use of the Baxter
marks on or in connection with all other products as of June 30, 1998, in
that neither Allegiance nor its Subsidiaries shall quality control release
any products bearing any of the Baxter Marks after such date.

(b) Any use of the Baxter Marks by Allegiance or its Subsidiaries
pursuant to the above terms and conditions shall be in the same form as existed
prior to the Spin-Off Date and any products or processes offered by Allegiance
or its Subsidiaries for sale under the Baxter Marks shall meet the same product
specifications and quality assurance standards as existed prior to the Spin-Off
Date. Any new label copy created after the Spin-Off Date or the development of
which is in progress as of the Spin-Off Date, shall not bear any of the Baxter
Marks.

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ARTICLE IX. EMPLOYEES AND EMPLOYEE BENEFITS

Section 9.1 DOMESTIC AND INTERNATIONAL ALLEGIANCE EMPLOYEES.
SCHEDULE 9.1 describes or otherwise identifies all Domestic and International
Allegiance Employees including all such employees who are then Inactive
Employees. An "International Allegiance Employee" means any Active or Inactive
Allegiance Employee who, immediately prior to the Spin-Off Date is employed by a
Transferred Subsidiary in a foreign jurisdiction. A "Domestic Allegiance
Employee" shall mean any Active or Inactive Allegiance Employee who is not an
International Allegiance Employee.

Section 9.2 EMPLOYMENT OF DOMESTIC ALLEGIANCE EMPLOYEES. On the
Spin-Off Date, Allegiance shall, or shall cause its Subsidiaries to, employ or
continue to employ each Domestic Allegiance Employee. Allegiance and Baxter
(and their Subsidiaries) shall use their reasonable efforts to accomplish any
transfers of employment required by this SECTION 9.2 in a timely manner. Active
Domestic Allegiance Employees shall be paid by Allegiance or one of its
Subsidiaries at the salary and wage rate levels paid by Baxter or its
Subsidiaries as of the Spin-Off Date; PROVIDED, HOWEVER, that Allegiance (or the
applicable Allegiance Subsidiary) retains the right to determine the
compensation of Domestic Allegiance Employees after the Spin-Off Date.

Section 9.3 TERMINATIONS/LAYOFF/SEVERANCE. (a) Domestic Allegiance
Employees shall not be eligible for any severance benefits from Baxter or its
Subsidiaries or Affiliates as a result of either their employment by Allegiance
or its Subsidiaries or Affiliates or their subsequent termination of employment
with Allegiance or its Subsidiaries or Affiliates. Notwithstanding the
foregoing, Baxter and Allegiance have agreed on the payment of certain severance
costs as provided in SECTION 9.12.

(b) Any Allegiance Employee who receives a written notice prior to
the Spin-Off Date regarding such employee's termination of employment on a fixed
date between the Spin-Off Date and January 31, 1997 from Allegiance or any of
its Subsidiaries shall be eligible to receive from Allegiance (or the applicable
Allegiance Subsidiary) severance pay which is calculated with the formula used
under the Baxter Severance Pay Plan. No Allegiance Business unit shall notify
any Allegiance Employee prior to the Spin-Off Date that such person shall
terminate employment with Allegiance or any of its Subsidiaries on a fixed date
which is after January 31, 1997. Allegiance (or the applicable Allegiance
Subsidiary) shall have the obligation to pay the severance benefits as provided
under the Baxter Severance Pay formula to any employee terminated by Baxter
prior to the Spin-Off Date while employed in any Allegiance Business

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unit who is receiving severance benefits under the Baxter Severance Pay Plan and
to pay the severance benefits to any employee terminated by Allegiance after the
Spin-Off Date who is receiving severance benefits under the Allegiance Severance
Pay Plan. The manner in which this SECTION 9.3(b) is implemented shall be
governed by the terms of the Allegiance Severance Pay Plan.

(c) Allegiance shall be responsible, and shall reimburse Baxter and
its Subsidiaries, for the payment of the severance and related costs and
expenses of any employee of Baxter and its Subsidiaries employed by a Subsidiary
or other entity which is included in the Allegiance Business and who receives
severance payments from Baxter or one of its Subsidiaries. Baxter and
Allegiance shall each be responsible for the payment of one-half of the
severance of Allegiance Employees who currently provide IV customer service
functions in field locations who are terminated without cause within three
months following the Spin-Off Date.

Section 9.4 INTERNATIONAL ALLEGIANCE EMPLOYEES. On the Spin-Off
Date, or as soon thereafter as administratively practicable, Allegiance shall,
or shall cause its Subsidiaries to, employ or continue to employ each
International Allegiance Employee. Allegiance and Baxter (and their
Subsidiaries) shall use their reasonable efforts to accomplish any transfers of
employment required by this SECTION 9.4 in a timely manner. Allegiance and its
Subsidiaries shall ensure that International Allegiance Employees transferring
from Baxter or its international Subsidiaries to Allegiance or its international
Subsidiaries shall transfer their relationship to the relevant Allegiance
Subsidiary in accordance with applicable country law, including, without
limitation, laws regarding transfer of business assets and employee benefits.
On the Spin-Off Date, Allegiance shall assume all employment-related liabilities
arising from or incurred in connection with the International Allegiance
Employees, including but not limited to all liabilities relating to any employee
benefit plan as defined in Section 3(3) of ERISA but which is not covered by
ERISA pursuant to ERISA Section 4(b)(4), and Allegiance shall cause its
Subsidiaries to assume all such liabilities with respect to International
Allegiance Employees transferring from Baxter or its Subsidiaries to Allegiance
or its Subsidiaries on the Spin-Off Date.

Section 9.5 EMPLOYMENT SOLICITATION. During the period beginning on
the Spin-Off Date and ending one year after the Spin-Off Date, neither Baxter
nor Allegiance shall, or shall permit any of their respective Subsidiaries or
agents to, directly or indirectly, without the prior written consent of the
other, actively solicit or recruit for employment any then current employee of
the other or of any of the other's

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Subsidiaries. If an employee of Baxter or Allegiance intends to seek employment
from the other company, the employee must receive prior written consent from the
employee's current employer prior to seeking the employment and prior to the
other company hiring the employee. An employee who voluntarily resigns his/her
employment, or whose employment is terminated would also be eligible for
employment consideration in the other company. After the one-year period
beginning on the Spin-Off Date, the foregoing restriction shall not apply.

Section 9.6 WARN ACT. Allegiance and its Subsidiaries agree that
they shall not, at any time during the 90-day period following the Spin-Off
Date, effectuate (i) 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 Allegiance
Business or (ii) take any action to precipitate a "mass layoff" as defined in
the WARN Act affecting any site of employment of the Allegiance Business,
except, in either case, after complying fully with the notice and other
requirements of the WARN Act. Allegiance agrees to indemnify Baxter and its
Subsidiaries and to defend and hold Baxter and its Subsidiaries harmless from
and against any and all claims, losses, damages, expenses, obligations and
liabilities (including attorney's fees and other costs of defense) which Baxter
and its Subsidiaries may incur in connection with any suit or claim of violation
brought against Baxter under the WARN Act, which relate in whole or in part to
actions taken by Allegiance or its Subsidiaries with regard to any site of
employment of Allegiance or operating units within any site of employment of the
Allegiance Business.

Section 9.7 LEAVE OF ABSENCE POLICIES. (a) Through the Spin-Off
Date, Baxter and its Subsidiaries shall be responsible for administering
compliance with the Baxter leave of absence policies with respect to Domestic
and International Allegiance Employees.

(b) Effective immediately after the Spin-Off Date: (i) Allegiance
shall adopt, and shall cause each Allegiance Subsidiary to adopt, its own leave
of absence policies; (ii) Allegiance shall honor, and shall cause each
Allegiance Subsidiary to honor, all terms and conditions of leaves of absence
which have been granted to any Allegiance Employee under a Baxter leave of
absence policy before the Spin-Off Date by Baxter or any of its Subsidiaries,
including such leaves that are to commence after the Spin-Off 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 Spin-Off Date; (iii) Allegiance and its Subsidiaries shall be
solely responsible for administering leaves of absence policies and compliance
with all applicable laws with respect to their employees; and (iv)

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Allegiance and its Subsidiaries shall recognize all periods of service of
Allegiance 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 Spin-Off Date and
upon request to Baxter's Senior Vice President of Human Resources, Baxter shall
provide to Allegiance copies of all records pertaining to the Baxter leave of
absence policies with respect to all Allegiance Employees to the extent such
records have not been provided previously to Allegiance or one of its
Subsidiaries.

Section 9.8 WITHDRAWAL FROM PARTICIPATION IN BAXTER PLANS AND
ESTABLISHMENT OF ALLEGIANCE PLANS. (a) Effective as of the Spin-Off Date,
Allegiance and its Subsidiaries shall cease to be participating employers in the
Baxter Plans and shall take any and all action necessary to effectuate their
withdrawal as participating employers under the terms of such plans. Each
Allegiance Employee shall cease accruing benefits under the Baxter Plans as of
the Spin-Off Date (other than imputed compensation taken into account under the
Baxter Pension Plan from the Spin-Off Date through December 31, 1996).

(b) Effective as of the Spin-Off Date, Allegiance or any Allegiance
Subsidiary shall establish its own employee benefit plans for the benefit of
eligible employees of Allegiance and its Subsidiaries, including but not limited
to the Allegiance Retirement Plan, the Allegiance Welfare Plans and the
Allegiance 1996 Incentive Compensation Program, as described in the Registration
Statement.

Section 9.9 TRANSFER OF SAVINGS PLAN ACCOUNT BALANCES. Subject to
applicable law and the provisions of the Baxter Savings Plan, effective as of
the first day of the first calendar month following the Spin-Off, 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 Allegiance Retirement
Plan, the account balances (including outstanding loans) of all Baxter Savings
Plan participants who are Allegiance Employees shall be spun off from the Baxter
Savings Plan and merged into the Allegiance Retirement Plan (the "Transferred
Accounts"). The plan administrator for the Allegiance Retirement Plan shall
distribute any amounts from such Transferred Accounts which may be necessary in
order for the Baxter Savings Plan to satisfy any requirements of applicable law
(including, but not limited to, nondiscrimination rules) as instructed by the
plan administrator for the Baxter Savings Plan. The plan administrator for the
Allegiance Retirement Plan shall take any

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other action reasonably requested by the plan administrator for the Baxter
Savings Plan which 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.

Section 9.10 ENTITLEMENT TO DISTRIBUTIONS UNDER PENSION PLAN. Each
Allegiance Employee shall be treated as having terminated employment with an
"Employer" as defined in the Baxter Pension Plan effective as of the Spin-Off
Date and shall be fully vested in his or her accrued benefit under the Baxter
Pension Plan as of such date; PROVIDED, HOWEVER, that no such employee shall be
treated as terminated for purposes of eligibility to receive plan distributions
until such employee is no longer eligible to have compensation with Allegiance
(or the applicable Allegiance Subsidiary) count for purposes of determining
benefits under the Baxter Pension Plan.

Section 9.11 WELFARE BENEFITS PROVIDED UNDER ALLEGIANCE PLANS. (a)
Each employee of Allegiance or any of its Subsidiaries who is eligible to
participate in the Allegiance Welfare Plans shall be credited with (1)
deductibles and co-payments paid by such employee during 1996 under the Baxter
Medical Plan (including dental benefits) and (2) 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 Allegiance or any of its Subsidiaries who as of the Spin-Off Date is
totally and permanently disabled. Allegiance (or the applicable Allegiance
Subsidiary) shall pay all costs associated with the provision of disability
benefits to any employee or former employee of Allegiance or any of its
Subsidiaries other than the persons described in the first sentence of this
SECTION 9.11(b); Allegiance (or the applicable Allegiance Subsidiary) shall
provide benefits to any such persons who on the Spin-Off Date are entitled to
receive disability benefits 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. As of the Spin-Off Date, Allegiance (or
the applicable Allegiance Subsidiary) shall assume all liabilities determined
under FAS 112 relating to all Allegiance Employees.

(c) Baxter (or the applicable Baxter Subsidiary) shall pay all claims
under the Baxter Medical Plan (including dental benefits) which as of the Spin-
Off Date have been incurred but not reported relating to employees of Allegiance
and its Subsidiaries, but only if claims for such costs are submitted in written
form to the authorized agents of Baxter (or the

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applicable Baxter Subsidiary) during the six-month period beginning on the
Spin-Off 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 Spin-Off Date have satisfied the age
and service eligibility requirements for receiving benefits under such plan.
Allegiance (or the applicable Allegiance Subsidiary) shall assume and pay all
costs associated with the provision of retiree welfare benefits for all
employees of Allegiance and its Subsidiaries who after the Spin-Off Date satisfy
the age and service eligibility requirements under the corresponding Allegiance
plan, if any, for receiving such benefits.

(e) Effective as of the Spin-Off Date, the account balances
(including assets and liabilities) of all participants in the Baxter Cafeteria
Plans who are Allegiance Employees shall be spun off from the Baxter Cafeteria
Plans and merged into the corresponding cafeteria plans which are established by
Allegiance or the applicable Allegiance Subsidiary.

Section 9.12 STOCK PURCHASE PLAN. Except as otherwise provided in
the plan, on the Spin-Off Date, employees of Allegiance and its Subsidiaries
shall not be eligible to purchase Baxter Common Stock under the terms of the
Baxter Stock Purchase Plan.

Section 9.13 WORKERS' COMPENSATION. As soon as administratively
practicable following the Spin-Off Date, a Senior Vice President of each of the
Parties shall agree upon the allocation between the Parties of responsibility
for workers' compensation claims relating to employees and former employees of
the Parties and their respective Subsidiaries.

Section 9.14 VACATION PAY POLICY. After the Spin-Off Date, it is
expected that Allegiance shall maintain for its employees and employees of its
Subsidiaries a vacation pay policy and Allegiance (or the applicable Allegiance
Subsidiary) shall be responsible for costs incurred to provide vacation pay to
employees of Allegiance and its Subsidiaries following such date. Allegiance
(or the applicable Allegiance Subsidiary) shall assume any and all Baxter
liabilities to provide to Allegiance Employees vacation which such persons
accrued under the Baxter vacation pay policy as of the Spin-Off Date.

Section 9.15 NON-QUALIFIED DEFERRED COMPENSATION PLANS. Baxter (or
the applicable Baxter Subsidiary) shall assume the liability to provide benefits
accrued as of the Spin-Off Date under the Baxter and Subsidiaries Supplemental
Pension Plan with respect to all Allegiance Employees. Allegiance (or the
applicable Subsidiary) shall assume the liability to provide

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benefits accrued under the Baxter and Subsidiaries Incentive Investment Excess
Plan and the Baxter and Subsidiaries Deferred Compensation Plan with respect to
Allegiance Employees. No assets shall be transferred between the Parties with
respect to the plans listed in this SECTION 9.16; PROVIDED, HOWEVER, that Baxter
shall receive a balance sheet credit for the amounts assumed in the first
sentence of this Section.

Section 9.16 INFORMATION TO BE PROVIDED TO BAXTER. Allegiance (or
the applicable Allegiance Subsidiary) shall provide any information which Baxter
(or any Baxter Subsidiary) may reasonably request, including but not limited to
information relating to dates of termination of employment, in order to provide
benefits to any eligible employee of Allegiance or any of its Subsidiaries 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 Allegiance (or the applicable Allegiance Subsidiary) to Baxter as
soon as available to Allegiance or any of its Subsidiaries, but in any event no
later than 30 days after such information is made available to Allegiance or any
such Subsidiaries. Allegiance (or the applicable Allegiance Subsidiary) shall,
as necessary, update the system used to keep such information in such timely
manner as is required to administer the Baxter Plans.

Section 9.17 CORPORATE ACTION; DELEGATION OF AUTHORITY. Any action
taken by the Senior Vice President of Human Resources shall be considered to be
action taken by either Baxter or Allegiance or their respective Subsidiaries for
purposes of this ARTICLE IX. Without limiting the foregoing, the Chief
Executive Officer of Baxter or Allegiance or their respective Subsidiaries may
delegate in writing to any other person the authority to act on behalf of Baxter
or Allegiance, respectively, or their respective Subsidiaries, with respect to
actions required under the terms of this ARTICLE IX.

Section 9.18 SPLIT-DOLLAR LIFE INSURANCE. Effective as of the Spin-
Off Date, Baxter (or the applicable Baxter Subsidiary) shall transfer to
Allegiance (or the applicable Allegiance Subsidiary) all split-dollar life
insurance policies relating to, and Allegiance (or the applicable Allegiance
Subsidiary) shall assume all liabilities associate with the provision of such
split-dollar life insurance to, any Allegiance Employee who as of such date had
attained 65 points as determined under the split-dollar life insurance policy
maintained by Baxter (or the applicable Baxter Subsidiary) with respect to such
person on such date.

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ARTICLE X. ACCESS TO INFORMATION

Section 10.1 ACCESS TO INFORMATION. At all times from and after the
Spin-Off Date for a period of ten years, (1) Baxter, upon reasonable notice,
shall afford Allegiance and its authorized accountants, counsel and other
designated representatives reasonable access during normal business hours to,
or, at Allegiance's expense, provide copies of, all records, books, contracts,
instruments, data, documents and other information relating to the Allegiance
Business or the Allegiance Employees (collectively, "Information") within
Baxter's possession or control, insofar as such access or copies are required by
Allegiance, and (2) Allegiance, upon reasonable notice, shall afford to Baxter
and its authorized accountants, counsel and other designated representatives
reasonable access during normal business hours to, or, at Baxter's expense,
provide copies of, Information within Allegiance's possession or control insofar
as such access or copies are required by Baxter. Information may be requested
under this SECTION 10.1 for audit, accounting, claims defense, litigation and
tax purposes, for purposes of fulfilling disclosure and reporting obligations,
for compensation, benefit or welfare plan administration and for other proper
business purposes but not for competitive purposes. Baxter and Allegiance shall
maintain the Information in the same way that Baxter maintains similar material
relating to the ongoing business of Baxter.

Section 10.2 PRODUCTION OF WITNESSES. At all times from and after
the Spin-Off Date, each Party shall use its reasonable efforts to make available
to the other Party (without cost to, and upon prior written request of, the
other Party) its officers, directors, 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 proceedings in which the requesting
Party may from time to time be involved with respect to the Allegiance Business,
the Retained Business, the Spin-Off or any related transactions.

Section 10.3 PROVISION OF CORPORATE RECORDS. Prior to or as promptly
as practicable after the Spin-Off Date, Baxter shall deliver to Allegiance or
one or more of its Subsidiaries all corporate books and records of Allegiance
and its Subsidiaries and copies of all corporate books and records of Baxter
relating to the Allegiance Business, including in each case all active
agreements, litigation files and government filings. From and after the Spin-
Off Date, all books, records and copies so delivered shall be the property of
Allegiance or such Subsidiaries.

Section 10.4 CONFIDENTIALITY. (a) From and after the Spin-Off Date,
each of Baxter and Allegiance shall hold, and shall cause its officers,
employees, agents, consultants,

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advisors and other representatives to hold, in strict confidence all non-public
information concerning the other Party or any of its Subsidiaries or Affiliates
obtained by it prior to the Spin-Off Date or furnished to it by such other Party
pursuant to this Agreement including, without limitation, any trade secrets,
technology, know-how-and other non-public, proprietary intellectual property
rights licensed pursuant to SECTIONS 8.1 and 8.2 herein, 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 10.4; PROVIDED, HOWEVER,
that Baxter and Allegiance may disclose such information if, and only to the
extent that, (a) 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 (b) such Party can show that
such information (i) is published or is or otherwise becomes available to the
general public as part of the public domain without breach of this Agreement;
(ii) has been furnished or made known to the recipient without any obligation to
keep it confidential by a third Party under circumstances which are not known to
the recipient to involve a breach of the third party's obligations to a Party
hereto; (iii) was developed independently of information furnished to the
recipient under this Agreement; or (iv) in the case of information furnished
after the Spin-Off Date, was known to the recipient at the time of receipt
thereof from the other Party.

(b) Each Party (the "first Party") acknowledges that the other Party
would not have an adequate remedy at law for the breach by the first Party of
any one or more of the covenants contained in this SECTION 10.4 and agrees that,
in the event of such breach, the other Party may, in addition to the other
remedies which may be available to it, apply to a court for an injunction to
prevent breaches of this SECTION 10.4 and to enforce specifically the terms and
provisions of this Section. Notwithstanding SECTION 13.1 hereof, the provisions
of this SECTION 10.4 shall survive the Spin-Off Date indefinitely.

Section 10.5 PRIVILEGED MATTERS. (a) Each of Baxter and Allegiance
agree to maintain, preserve and assert all privileges, including, without
limitation, 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 Allegiance
Business and the Transferred Services for any period prior to the Spin-Off 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
10.5 shall apply to all information relating to the

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Allegiance Business as to which, but for the Spin-Off, either Party would have
been entitled to assert or did assert the protection of a Privilege ("Privileged
Information"), including without limitation, any and all information generated
prior to the Spin-Off Date but which, after the Spin-Off, is in the possession
of either Party; and (2) all information generated, received or arising after
the Spin-Off Date that refers to or relates to Privileged Information generated,
received or arising prior to the Spin-Off 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 Allegiance 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 10.5 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 10.5 unless (1) the other Party has provided its
written consent to such production or disclosure (which consent will not be
unreasonably withheld), or (2) 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
Allegiance, and Baxter's agreement to permit Allegiance to possess Privileged
Information occurring or generated prior to the Spin-Off Date, are made in
reliance on Allegiance's agreement, as set forth in this SECTION 10.5, to
maintain the confidentiality of Privileged Information and to assert and
maintain all applicable Privileges. The access to information being granted
pursuant to SECTION 10.1, the agreement to provide witnesses and individuals
pursuant to SECTION 10.2 and the transfer of Privileged Information to
Allegiance pursuant to this Agreement shall not be deemed a waiver of any
Privilege that has been or may be asserted under this SECTION 10.5 or otherwise.
Nothing in this Agreement shall operate to reduce, minimize or condition the
rights granted to Baxter in, or the obligations imposed upon Allegiance by, this
SECTION 10.5.

ARTICLE XI. CONDITIONS PRECEDENT TO SPIN-OFF

The obligation of Baxter to effect the Spin-Off is subject to the
satisfaction or the waiver by Baxter (if

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permissible) at or prior to the Spin-Off Date of each of the following
conditions:

Section 11.1 TAX RULING. Baxter shall have received a ruling from
the United States Internal Revenue Service or, at Baxter's discretion, an
opinion of tax counsel, substantially to the effect that no income, gain or loss
will be recognized by Baxter or its stockholders (other than with respect to
cash received in lieu of fractional shares) upon the distribution to Baxter's
stockholders of shares of Allegiance Common Stock.

Section 11.2 NO ACTIONS. No action shall have been instituted or
threatened by or before any court or administrative body to restrain, enjoin or
otherwise prevent the Spin-Off or the other transactions contemplated hereby
(including but not limited to a stop order with respect to the effectiveness of
the Registration Statement), and no order, injunction or decree issued by any
court of competent jurisdiction shall be in effect restraining the Spin-Off or
such other transactions.

Section 11.3 NYSE LISTING. The Allegiance Shares shall have been
approved for listing on the NYSE, subject to official notice of issuance.

Section 11.4 OPINIONS OF FINANCIAL ADVISOR. The Board of Directors
of Baxter shall have received written opinions of CS First Boston Corporation to
the effect that (i) the Spin-Off will not have a material adverse effect on the
financial viability of Baxter after the Spin-Off or of Allegiance through the
period ending December 31, 1998 and (ii) the Spin-Off is fair to the
stockholders of Baxter from a financial point of view, which opinions shall not
have been withdrawn or modified.

Section 11.5 CONSENTS. All material authorizations, consents,
approvals and clearances of all federal, state, local and foreign governmental
agencies required to permit the valid consummation of the transactions
contemplated herein shall have been obtained without any conditions being
imposed that would have a material adverse effect on Allegiance.

Section 11.6 REGISTRATION STATEMENT. The Registration Statement
shall have become effective and no stop order shall have been issued or
threatened.

Section 11.7 NEW CREDIT FACILITY. The definitive agreements
governing the Allegiance Credit Facility shall have been executed.

Section 11.8 PRE-SPIN-OFF TRANSACTIONS. The pre-Spin-Off
transactions contemplated by ARTICLES III, IV and V of this Agreement shall have
been consummated in all material respects.

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Section 11.9 ANCILLARY AGREEMENTS. Each of the Tax Sharing Agreement
and the Operating Agreements shall have been executed and each of such
agreements shall be in full force and effect.

Section 11.10 RESIGNATIONS. 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 Allegiance and its Affiliates and any Transferred
Subsidiary on which they serve.

Section 11.11 BOARD APPROVAL. The Board of Directors of Baxter shall
have given final approval of the Spin-Off.

Section 11.12 ELECTION OF ALLEGIANCE BOARD. The Board of Directors
of Allegiance as set forth on EXHIBIT J shall have been duly elected.

Section 11.13 SATISFACTION OF CONDITIONS. The satisfaction of such
conditions shall not create any obligations on the part of Baxter or any other
party hereto to effect the Spin-Off or in any way limit Baxter's power of
termination set forth in SECTION 15.9.

ARTICLE XII. EXPENSES; TAXES

Section 12.1 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 costs associated with the
dedication of internal resources and personnel to such transactions at all times
prior to the Spin-Off Date, (ii) Baxter will pay all fees and expenses which are
directly related to the implementation of the Spin-Off transactions on or prior
to the Spin-Off Date, and certain agreed software contractor fees and expenses
after the Spin-Off, and (iii) Allegiance will pay all fees and expenses with
respect to services for which Allegiance procures and receives the primary
benefit prior to and after the Spin-Off Date.

(b) Notwithstanding SECTION 12.1(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 McDermott, Will &
Emery in connection with its

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representation of Allegiance relating to the creation of benefits plans; (iv)
the reasonable fees and expenses of Goldman Sachs & Co., First Chicago Bank and
Bank of America, N.A. relating to their financial advisory services rendered to
Baxter; (v) the reasonable fees and expenses of CS First Boston Corporation and
Lehman Brothers Inc. relating to their financial advisory services rendered to
Baxter; (vi) the reasonable fees and expenses of Price Waterhouse LLP in
connection with its audit and tax services rendered to Baxter; (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 and Allegiance; (viii) all SEC registration and "blue sky" filing fees
associated with the Registration Statement; (ix) the printing, mailing and
distributing the Information Statement to Baxter's stockholders; (x) the
reasonable fees and expenses of Allegiance's transfer agent and registrar
relating to the initial issuance of Allegiance Shares as a dividend to Baxter's
stockholders, (xi) the NYSE listing fees for the Allegiance Shares; (xii) the
design and initial printing of certificates of the Allegiance Shares; (xiii) the
initial distribution of the certificates of Allegiance Common Stock as a
dividend to Baxter stockholders; (xiv) the development, search and registration
of the name "Allegiance"; (xv) third party vendors for software licenses;
(xvi) retention bonuses to Allegiance employees in the amount of $5,271,174;
(xvii) office moving expenses in an amount not to exceed $3,500,000; and
(xviii) various international professional services directly related to the
Spin-Off transactions.

(c) Notwithstanding SECTION 12(a)(i) above, Allegiance shall be
solely responsible for all fees, expenses and other costs incurred in connection
with the transactions contemplated hereby related to: (i) any and all retention
bonuses in excess of $5,271,174; and (ii) any and all moving expenses in excess
of $3,500,000.

Section 12.2 TAXES. Baxter and Allegiance agree to cooperate to
determine the amount of sales, transfer or other 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 by this Agreement (the "Transaction Taxes"). Baxter and/or
Allegiance as the case may be, agree to file promptly and timely the returns for
such Transaction Taxes with the appropriate taxing authorities and remit payment
of the Transaction Taxes. Subject to the Tax Sharing Agreement, Baxter shall be
responsible for the payment of the Transaction Taxes.

Section 12.3 DIRECTORS' AND OFFICERS' INSURANCE. Baxter shall use
reasonable efforts to cause the persons currently serving as officers and/or
directors of Baxter who will become, effective as of the Spin-Off Date, officers
and/or

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directors of Allegiance to be covered for a period of six years from the Spin-
Off Date by the directors' and officers' liability insurance policy maintained
by Baxter (PROVIDED that Baxter may substitute therefor policies of at least the
same coverage and amounts containing terms and conditions which are not less
advantageous than such policy) with respect to matters covered under the
existing policy occurring prior to the Spin-Off Date which 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 12.3, Baxter shall use 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 12.3. The provisions of this SECTION 12.3 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.

ARTICLE XIII. SURVIVAL, INDEMNIFICATION, CLAIMS
AND OTHER MATTERS

Section 13.1 SURVIVAL. All covenants and agreements of Baxter and
Allegiance contained in this Agreement shall survive the Spin-Off Date
indefinitely, unless a specific survival or other applicable period is expressly
set forth therein.

Section 13.2 INDEMNIFICATION. (a) Baxter shall indemnify, defend
and hold harmless Allegiance and each of its Affiliates, directors, officers,
employees and agents (collectively, "Allegiance Indemnified Parties") from and
against any and all Claims and Losses incurred or suffered by Allegiance (and/or
one or more of the Allegiance Indemnified Parties) in connection with or arising
out of or due to, directly or indirectly:

(i) any claim that the information included in the Registration
Statement or the Information Statement which 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

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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 Spin-Off;

(ii) the business (other than the Allegiance Business) conducted by
Baxter or its Subsidiaries, Affiliates or predecessors on or at any time
prior to the Spin-Off Date (including, but not limited to, any
environmental liabilities associated with such business);

(iii) the Excluded BHC Assets;

(iv) the Excluded BHC Liabilities and the Excluded Baxter
Liabilities;

(v) the breach by Baxter of any covenant or agreement set forth in
this Agreement or any Conveyancing Instruments, regardless of when or where
the loss, claim, accident, occurrence, event or happening giving rise to
the Claim or Loss took place, or whether any such loss, claim, accident, or
occurrence, event or happening is known or unknown, or reported or
unreported;

(vi) Baxter's reduction, elimination or failure to provide any
benefit previously provided to its employees (or employees of its
Subsidiaries) and any act or omission by Baxter in connection with the
transfer of assets and liabilities from the Baxter Savings Plan to the
Allegiance Retirement Plan;

(vii) the indemnifiable matters set forth in SECTION 7.11(iii).

(b) Allegiance shall indemnify, defend and hold harmless Baxter and
each of its Affiliates, directors, officers, employees and agents (collectively,
"Baxter Indemnified Parties") from and against any and all Claims and Losses
incurred or suffered by Baxter (and/or one or more of the Baxter Indemnified
Parties) in connection with or arising out of or due to, directly or indirectly:

(i) any claim that the information included in the Registration
Statement or Information Statement which relates to the Allegiance 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 or whether the occurrence, action or
other event

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giving rise to the applicable matter took place prior to or subsequent to
the Spin-Off Date;

(ii) the Allegiance Business as conducted by Baxter or its
Subsidiaries, Affiliates or predecessors on or at any time prior to the
Spin-Off Date;

(iii) the Transferred Assets;

(iv) the Assumed BHC Liabilities;

(v) the Transferred Subsidiaries;

(vi) the breach by Allegiance of any covenant or agreement set forth
in this Agreement or any Conveyancing Instrument, regardless of when or
where the loss, claim, accident, occurrence, event or happening giving rise
to the Claim or Loss took place, or whether any such loss, claim, accident,
occurrence, event or happening is known or unknown, or reported or
unreported;

(vii) 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 Allegiance (or its Subsidiaries), their beneficiaries,
alternate payees or any other person claiming benefits through them (except
to the extent such Claims or Losses are specifically allocated to Baxter
pursuant to SECTION 13.2(a)(vi)), including without limitation Claims or
Losses arising in connection with (1) Allegiance's reduction, elimination
or failure to provide any benefit previously provided to its employees or
employees of any of its Subsidiaries and (2) the transfer of account
balances from the Baxter Savings Plan to the Allegiance Retirement Plan
where such Claims or Losses are incurred as a result of (1) any act or
omission by Allegiance (or Allegiance's representative) or (2) a
determination by the Internal Revenue Service that the Allegiance
Retirement Plan is not a tax-qualified plan;

(viii) the indemnifiable matters set forth in SECTIONS 6.3, 7.4 and
7.11(iii); or

(ix) the Contracts set forth on SCHEDULE 4.2(viii)(A) and noted as
being subject to indemnity by Allegiance.

(c) EXCEPT AS EXPRESSLY PROVIDED HEREIN, THE INDEMNITY OBLIGATION
UNDER THIS SECTION 13.2 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

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HEREUNDER IS BASED ON STRICT LIABILITY, ABSOLUTE LIABILITY OR ARISES AS AN
OBLIGATION FOR CONTRIBUTION.

(d) NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, IN NO
EVENT SHALL BAXTER BE LIABLE TO ALLEGIANCE (OR ANY ALLEGIANCE INDEMNIFIED
PARTY), OR ALLEGIANCE BE LIABLE TO BAXTER (OR ANY BAXTER INDEMNIFIED PARTY),
UNDER THIS AGREEMENT FOR ANY SPECIAL, INDIRECT, INCIDENTAL, CONSEQUENTIAL OR
PUNITIVE DAMAGES, INCLUDING, WITHOUT LIMITATION, 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.

Section 13.3 PROCEDURE FOR INDEMNIFICATION. (a) If any third party
shall make any claim or commence any arbitration proceeding or suit against any
one or more of the Indemnified Parties with respect to which an Indemnified
Party intends to make any claim for indemnification against Allegiance under
SECTION 13.2(b) or against Baxter under SECTION 13.2(a), such Indemnified
Parties shall promptly give written notice to the Indemnifying Party of such
third party claim, arbitration proceeding or suit and the following provisions
shall apply.

(b) The Indemnifying Party shall have 20 business days after receipt
of the notice referred to in SECTION 13.3(a) to notify the Indemnified Party
that it elects to conduct and control the defense of such claim, proceeding or
suit. If the Indemnifying Party does not give the foregoing notice, the
Indemnified Party shall have the right to defend, contest, settle or compromise
such claim, proceeding or suit in the exercise of its exclusive discretion
subject to the provisions of SECTION 13.3(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 13.3(b)
the amount of any Claim 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 claim, proceeding or suit, 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 claim, proceeding or suit as either of

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them may reasonably request (which request may be general or specific), but the
fees and expenses of such counsel shall be borne by the Indemnified Party unless
(1) the Indemnifying Party and the Indemnified Party shall have mutually agreed
to the retention of such counsel or (2) the named parties to any such claim,
proceeding or suit 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 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 XIII the Indemnified Party for the full amount of any Claim or Loss
resulting from such claim, proceeding or suit 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 comprise 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 claim, suit or proceeding 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 action or suit 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 claim,
suit or proceeding in good faith, the Indemnified Party shall not pay or settle
any such claim, proceeding or suit. Notwithstanding the foregoing, the
Indemnified Party shall have the right to pay or settle any such claim,
proceeding or suit, 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 a Claim or Loss under this SECTION
13.3(C).

If the Indemnifying Party shall have undertaken the conduct and
control of the defense of any claim, suit or proceeding 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
claim and

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such settlement shall be binding upon the Parties hereto for the purposes
hereof, unless within said 30-day period the Indemnifying Party shall have
requested the Indemnified Party to contest such 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 of the
conditions of SECTION 13.3(b). Anything in this SECTION 13.3(c) to the contrary
notwithstanding, 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
make settlement of 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 13.3(c) for indemnification by the Indemnifying
Party.

Section 13.4 DIRECT CLAIMS. Any claim for indemnity on account of an
Indemnifiable Loss made directly by the Indemnified Party against the
Indemnifying Party and which does not result from a third party claim shall be
asserted by written notice from the Indemnified Party to the Indemnifying Party.
Such Indemnifying Party shall have a period of 20 business days within which to
respond thereto. If such Indemnifying Party does not respond within such 20
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 20
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 XIV.

Section 13.5 ADJUSTMENT OF INDEMNIFIABLE LOSSES. (a) The amount
which an Indemnifying Party is required to pay to an Indemnified Party shall be
reduced (including, without limitation, retroactively) by any insurance proceeds
and other amounts actually recovered by such Indemnified Party in reduction of
the related Claim or Loss. If an Indemnified Party shall have received an
Indemnity Payment in respect of a Claim or Loss and shall subsequently actually
receive insurance proceeds or the other amounts in respect of such Claim or
Loss, then such Indemnified Party shall pay to such Indemnifying Party a sum
equal to the lesser of (1) the amount of such insurance proceeds or other
amounts actually received and (2) the net amount of Indemnity Payments actually
received previously. The Indemnified Party agrees that the Indemnifying Party
shall be subrogated to such Indemnified Party under any insurance policy. An
insurer who would otherwise 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

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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 they would not be entitled to receive in the absence
of the indemnification provisions) by virtue of the indemnification provisions
hereof.

(b) 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,
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 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 shall be deemed to equal the product obtained by multiplying (i) the amount
of any deduction or inclusion in income for such period resulting from such
Claim or Loss or the payment thereof, as the case may be, 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 13.5(b) 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.

(c) 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 a Claim or 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 a Claim or 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
Claim or Loss with the Indemnifying Party; and

(iii) with respect to a Claim or Loss not covered by clause (i) or
(ii) above, the Foreign Exchange Rate for such

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currency shall be determined as of the date that notice of the claim with
respect to such Claim or Loss shall be given to the Indemnified Party.

Section 13.6 CONTRIBUTION. If the indemnification provided for in
SECTION 13.2 is unavailable to an Indemnified Party in respect of any Claim 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 Claim or Loss in such
proportion as is appropriate to reflect the relative fault of Allegiance or the
Allegiance Indemnified Parties (an "Allegiance Party"), on the one hand, or
Baxter or the Baxter Indemnified Parties (a "Baxter Party"), on the other hand,
in connection with the statements or omissions which resulted in such Claim or
Loss. The relative fault of any Allegiance Party, on the one hand, and of any
Baxter 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 or the omission or
alleged omission of a material fact relates to information about or supplied by
the Allegiance Business or an Allegiance Party, on the one hand, or about or by
the Retained Business or a Baxter Party, on the other hand.

Section 13.7 NO THIRD PARTY BENEFICIARIES. Except to the extent
expressly provided otherwise in this ARTICLE XIII, the indemnification provided
for in this Agreement, the Tax Sharing 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 would otherwise be obligated to pay
any claim or 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.

Section 13.8 RELEASE OF PRE-DIVESTITURE LIABILITIES. Each of Baxter
and Allegiance does hereby for itself, its Affiliates, successors and assigns,
remise, release and forever discharge each other Party, its Affiliates,
successors and assigns [and all Persons who at any time prior to the Spin-Off
Date have been shareholders, directors, officers, agents or employees of any
such other Party or Affiliate, their heirs, executors, administrators and
assigns], any and all claims, debts, demands, actions, causes of action, suits,
sum or sums of money, accounts, reckonings, bonds, specialties, indemnities,
exonerations, covenants, contracts, controversies, agreements, obligations,
promises, doings, omissions, variances, damages, executions and liabilities
whatsoever, both at law and in equity, arising from any events in the ordinary
course of business on or

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prior to the Spin-Off Date and relating to the operations of the Retained
Business or the Allegiance Business, including the transactions and all other
activities to implement the Spin-Off (each of the foregoing being hereinafter
referred to as a "liability"), PROVIDED, HOWEVER, that nothing in this SECTION
13.8 shall release (a) any Party from (i) any liability, contingent or
otherwise, transferred, assigned or allocated and assumed in accordance with
this Agreement, the Tax Sharing Agreement or any Operating Agreement, or
(ii) any liability provided in or resulting from this Agreement, the Tax Sharing
Agreement, any Operating Agreement or any agreement between any of Baxter and
its Subsidiaries, on the one hand, and Allegiance and its Subsidiaries, on the
other hand, not terminated pursuant to the Spin-Off or any other agreement
between any of the Parties entered into in contemplation that such agreement
would remain in effect after the Spin-Off, or (b) any Party for any liability
for unpaid amounts for the sale, lease, construction or receipt of goods,
property or services purchased, obtained or used by it in the ordinary course of
business prior to the Spin-Off Date, or (c) 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 at one Party's request or done on such Party's
behalf, or (d) any liability the release of which would result in the release of
any party other than a Person released pursuant to this SECTION 13.8.

ARTICLE XIV. DISPUTE RESOLUTION

Section 14.1 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 business executives
with authority to resolve the controversy. Subject to the provisions set forth
in SECTION 7.7, prior to taking action as provided in SECTION 14.2, the Parties
first shall submit such claim or controversy to the appropriate [divisional or
business unit chief executives] of each Party for resolution, and if such
[divisional or business unit chief executives] 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 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
describing the particular claim or controversy.

Section 14.2 ARBITRATION. Subject to the provisions set forth in
SECTION 7.7, any dispute that is not resolved by negotiations pursuant to
SECTION 14.1 will, upon the written

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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 County,
Illinois. The arbitration will be governed by the United States Arbitration
Act, 9 U.S.C. Sections 1-16 and the Patent Arbitration Act, 35 U.S.C. Section
294. 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 14.2 except as expressly provided
otherwise.

Section 14.3 INJUNCTIVE RELIEF. Nothing contained in this ARTICLE
XIV 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 XV. MISCELLANEOUS PROVISIONS

Section 15.1 ENTIRE AGREEMENT. This Agreement, the Tax Sharing
Agreement and the Operating Agreements constitute the only agreements between
the Parties with respect to the subject matters hereof, there being no prior
written or oral promises or representations not incorporated herein or therein.

Section 15.2 CHOICE OF LAW. This Agreement shall be governed by and
construed and enforced in accordance with the laws 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. Any lawsuit arising
from or related to this Agreement shall only be brought in the United States
District Court for the Northern District of Illinois or the Circuit Court of
Lake County, Illinois. 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 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.

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<PAGE>

Section 15.3 AMENDMENT; WAIVER. No amendment or modification of the
terms of this Agreement shall be binding on either Party unless reduced to
writing and signed by an authorized representative of the Party to be bound.
The waiver by either Party of any particular default by the other Party shall
not affect or impair the rights of the Party so waiving with respect to any
subsequent default of the same or a different kind; nor shall any delay or
omission by either Party to exercise any right arising from any default by the
other affect or impair any rights which the nondefaulting Party may have with
respect to the same or any future default.

Section 15.4 SEVERABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall be ineffective in such
jurisdiction to the extent of such prohibition or unenforceability without
affecting, impairing or invalidating the remaining provisions or the
enforceability of this Agreement.

Section 15.5 COUNTERPARTS. For convenience of the Parties, this
Agreement may be executed in one or more counterparts, each of which shall be
deemed an original for all purposes.

Section 15.6 RECORDS RETENTION. Each Party will retain all
information obtained or created in the course of performance hereunder in
accordance with the records retention policy of the other Party existing from
time to time; PROVIDED, HOWEVER, that such information shall be retained for a
period of at least ten years following the date hereof. Each Party has advised
the other of its respective policy as in effect on the Spin-Off Date and will
advise the other Party of any subsequent changes therein. Each Party shall
provide 30 days' prior notice to the other Party before destroying any such
information.

Section 15.7 BENEFICIARIES. Except for the provisions of SECTIONS
12.3 and 13.2 hereof, this Agreement is solely for the benefit of the Parties
and their respective Affiliates, successors and permitted assigns and shall not
confer upon any other Person any remedy, claim, liability, reimbursement or
other right in excess of those existing without reference to this Agreement.
Nothing in this Agreement shall obligate Baxter, Allegiance or any of their
respective direct or indirect Subsidiaries to assist any Allegiance Employee to
enforce any rights such employee may have with respect to any of the employee
benefits described in this Agreement.

Section 15.8 NOTICES. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given (and shall
be deemed to have been duly given upon receipt) by delivery in person, by cable,
telegram, telex, facsimile or other standard form of telecommunications, or by

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<PAGE>

registered or certified mail, postage prepaid, return receipt requested,
addressed as follows:

If to Baxter:

Baxter International Inc.
One Deerfield Parkway
Deerfield, IL 60015
Attention: General Counsel
Facsimile: (847) 948-4000

with copies to:

______________________________
______________________________
______________________________
______________________________

If to Allegiance:

Allegiance Corporation
1450 Waukegan Road
McGaw Park, IL 60085
Attention: General Counsel
Facsimile: (847) 689-6812

with copies to:

______________________________
______________________________
______________________________
______________________________

Section 15.9 TERMINATION. Notwithstanding any provision hereof, this
Agreement may be terminated and the Spin-Off abandoned at any time prior to the
Spin-Off 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, 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 Allegiance or its Subsidiaries prior to or arising out of such
termination.

Section 15.10 PERFORMANCE. Each Party shall cause to be performed,
and hereby guarantee the performance of, all actions, agreements and obligations
set forth herein to be performed by any Subsidiary or Affiliate of such Party.

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<PAGE>

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

BAXTER INTERNATIONAL INC.

By: ______________________________
Name:
Title:

ALLEGIANCE CORPORATION

By: ______________________________
Name:
Title:

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<PAGE>

AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
ALLEGIANCE CORPORATION

* * * * *

Allegiance Corporation, a Delaware corporation, initially incorporated on June
26, 1996, has duly adopted by action of its Board of Directors and stockholders
the following amended and restated certificate of incorporation in accordance
with the provisions of Sections 242 and 245 of the General Corporation Law of
Delaware.

FIRST: The name of the Corporation is Allegiance Corporation.

SECOND: The registered office of the Corporation in the State of Delaware is
located at 1209 Orange Street in the City of Wilmington, County of New Castle.
The name of the registered agent of the Corporation is The Corporation Trust
Company.

THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.

FOURTH: The total number of shares of stock which the Corporation shall have
authority to issue is Two Hundred Twenty Million (220,000,000) shares, of which
Twenty Million (20,000,000) shares, par value $.01 per share, shall be preferred
stock (the "Preferred Stock") and of which Two Hundred Million (200,000,000)
shares, par value $ 1.00 per share, shall be common stock (the "Common Stock").

Authority is hereby expressly granted to and vested in the Board of Directors of
the Corporation to issue Preferred Stock in one or more series and in connection
therewith to fix by resolutions providing for the issue of such series the
number of shares to be included in such series and the designations and such
voting powers, full or limited, or no voting powers, and such of the preferences
and relative, participating, optional or other special rights and the
qualifications, limitations or restrictions thereof, of such series of the
Preferred Stock which are not fixed by the certificate of incorporation, to the
full extent now or hereafter permitted by the laws of the State of Delaware.
Without limiting the generality of the grant of authority contained in the
preceding sentence, the Board of Directors is authorized to determine any or all
of the following, and the shares of each series may vary from the shares of any
other series in any or all of the following respects:

1. The number of shares of such series (which may subsequently be
increased, except as otherwise provided by the resolutions of the
Board of Directors providing for the issue of such series, or
decreased to a number not less than the number of shares then
outstanding) and the distinctive designation thereof;

2. The dividend rights, if any, of such series, the dividend preferences,
if any, as between such series and any other class or series of stock,
whether and the extent to which shares of such series shall be
entitled to participate in dividends with

<PAGE>

shares of any other series or class of stock, whether and the extent
to which dividends on such series shall be cumulative, and any
limitations, restrictions or conditions on the payment of such
dividends;

3. The time or times during which, the price or prices at which, and any
other terms or conditions on which the shares of such series may be
redeemed, if redeemable;

4. The rights of such series, and the preferences, if any, as between
such series and any other class or series of stock, in the event of
any voluntary or involuntary liquidation, dissolution or winding up of
the Corporation and whether and the extent to which shares of any such
series shall be entitled to participate in such event with any other
class or series of stock;

5. The voting powers, if any, in addition to the voting powers prescribed
by law of shares of such series and, to the extent not prohibited by
applicable law, voting powers which may exceed one vote per share, and
the terms of exercise of such voting powers;

6. Whether shares of such series shall be convertible into or
exchangeable for shares of any other series or class of stock, or any
other securities, and the terms and conditions, if any, applicable to
such rights; and

7. The terms and conditions, if any, of any purchase, retirement or
sinking fund which may be provided for the shares of such series.

FIFTH: Subject to any rights of the holders of the Preferred Stock or any
terms thereof to elect additional directors under specified circumstances, the
number of directors which shall constitute the whole Board of Directors of the
Corporation shall be the number from time to time fixed by the Board of
Directors. A decrease in the number of directors shall not affect the term of
office of any director then in office.

Subject to any rights of the holders of the Preferred Stock or any series
thereof to fill any newly created directorships or vacancies, any vacancy on the
Board of Directors that results from an increase in the number of directors or
for any other reason, may be filled by a majority of the directors then in
office, although less than a quorum, or by a sole remaining director.

Subject to the rights of the holders of any series of Preferred Stock, any
director may be removed from office at any time, but only for cause and only by
the affirmative vote of at least a majority of the then outstanding shares
entitled to vote for the election of such director.

Unless the Corporation's bylaws specify otherwise, the election of directors of
the Corporation need not be by written ballot.

SIXTH: The directors, other than those who may be elected by the holders of
any series of Preferred Stock under specified circumstances, shall be divided,
with respect to the time for which they severally hold office, into three
classes, with the term of office of the first class to expire at the 1997 annual
meeting of stockholders, the term of office of the second class to expire at the

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1998 annual meeting of stockholders and the terms of office of the third class
to expire at the 1999 annual meeting of stockholders, with each director to hold
office until his or her successor shall have been duly elected and qualified.
The directors chosen to succeed those whose terms are expiring shall be
identified as being of the same class as the directors whom they succeed and
shall be elected for a term expiring at the third succeeding annual meeting of
stockholders or thereafter in each case until their respective successors are
elected and qualified, subject to death, resignation, retirement or removal from
office.

Any new positions created as a result of the increase in the number of directors
shall be allocated to make the classes of directors as nearly equal as possible.
Any director elected to fill a term resulting from an increase in the number of
directors shall have the same term as the other members of his class. A
director elected to fill any other vacancy shall have the same remaining term as
that of his predecessor.

Notwithstanding the foregoing, whenever the holders of any one or more classes
or series of Preferred Stock issued by the Corporation shall have the right,
voting separately by class or series, to elect directors at an annual or special
meeting of stockholders, the election, term of office, filling of vacancies and
other features of such directorships shall be governed by the terms of the
certificate of incorporation applicable thereto, and such directors so elected
shall not be divided into classes pursuant to this Article SIXTH unless
expressly provided by such terms.

SEVENTH: The Board of Directors shall have such powers as are permitted by the
General Corporation Law of Delaware, including, without limitation, without the
assent or vote of the stockholders, to make, alter, amend, change, add to, or
repeal the bylaws of the Corporation, to fix and vary the amount to be reserved
as working capital; to authorize and cause to be executed mortgages and liens
upon all the property of the Corporation, or any part thereof, to determine the
use and disposition of any surplus or net profits over and above the capital
stock paid in, and to fix the times for the declaration and payment of
dividends.

EIGHTH: The Board of Directors is hereby authorized to create and issue,
whether or not in connection with the issuance and sale of any of its capital
stock or other securities or property, rights entitling the holders thereof to
purchase from the Corporation shares of stock or other securities of the
Corporation or any other corporation. The times at which and the terms upon
which such rights are to be issued will be determined by the Board of Directors
and set forth in the contracts or instruments that evidence such rights. The
authority of the Board of Directors or any duly authorized committee thereof
with respect to such rights shall include, but not be limited to, determination
of the following:

(A) the initial purchase price per share or other unit of the capital
stock or other securities or property to be purchased upon exercise of
such rights;

(B) provisions relating to the times at which and the circumstances under
which such rights may be exercised or sold or otherwise transferred,
either together with or separately from, any other capital stock or
other securities of the Corporation;

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<PAGE>

(C) provisions which adjust the number or exercise price of such rights or
amount or nature of the capital stock or other securities or property
receivable upon exercise of such rights in the event of a combination,
split or recapitalization of any capital stock of the Corporation, a
change in ownership of the Corporation's capital stock or other
securities or a reorganization, merger, consolidation, sale of assets
or other occurrence relating to the Corporation or any capital stock
of the Corporation, and provisions restricting the ability of the
Corporation to enter into any such transaction absent an assumption by
the other party or parties thereto of the obligations of the
Corporation under such rights;

(D) provisions which deny the holder of a specified percentage of the
outstanding capital stock or other securities of the Corporation the
right to exercise such rights and/or cause the rights held by such
holder to become void;

(E) provisions which permit the Corporation to redeem or exchange such
rights; and

(F) the appointment of a rights agent with respect to such rights.

NINTH: Notwithstanding anything contained in this Certificate of
Incorporation to the contrary, the affirmative vote of at least two-thirds of
the voting power of the then outstanding Voting Stock (as defined below), voting
together as a single class, shall be required to amend or repeal, or adopt any
provisions inconsistent with, the bylaws of the Corporation or Articles FIFTH,
SIXTH and EIGHTH of this Certificate of Incorporation. For the purposes of this
Certificate of Incorporation, "Voting Stock" shall mean the outstanding shares
of capital stock of the Corporation entitled to vote generally in the election
of Directors.

TENTH: No person who is, or was at any time but is no longer serving as, a
director of the Corporation shall be personally liable to the Corporation or its
stockholders for monetary damages for any breach of fiduciary duty by such
person as a director, provided that the provisions of this Article TENTH shall
not eliminate or limit the liability of a director (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the General Corporation Law
of the State of Delaware or (iv) for any transaction from which the director
derived an improper personal benefit. If the General Corporation Law of the
State of Delaware is amended to authorize corporate action further eliminating
or limiting the personal liability of directors, then the liability of a
director of the Corporation shall be eliminated or limited to the fullest extent
permitted by the General Corporation Law of the State of Delaware, as so
amended. No amendment to or repeal of this Article TENTH shall have the effect
of increasing the liability or alleged liability of any director of the
Corporation for or with respect to any act or omission of such director
occurring prior to such amendment or repeal.

ELEVENTH: The Corporation shall indemnify and advance expenses to each
person who serves as an officer or director of the Corporation or a subsidiary
of the Corporation and each person who serves or may have served at the request
of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise from any
liability incurred as a result of such service to the fullest extent permitted
by the General Corporation Law of Delaware as it may from time to time be
amended, except with respect to an

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<PAGE>

action commenced by such director or officer against the Corporation or by such
director or officer as a derivative action by or in the right of the
Corporation. Each person who is or was an employee or agent of the Corporation
and each officer or director who commences any action against the Corporation or
a derivative action by or in the right of the Corporation may be similarly
indemnified and receive an advance of expenses at the discretion of the Board of
Directors.

The indemnification and advancement of expenses provided by, or granted pursuant
to, the certificate of incorporation shall not be deemed exclusive of any other
rights to which those seeking indemnification or advancement of expenses may be
entitled under any agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in their official capacity and as to action in
another capacity while holding such office.

The Corporation may purchase and maintain insurance on behalf of any person who
is or was a director, officer, employee or agent of the Corporation, or is or
was serving at the request of this Corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against him and incurred by him in any
such capacity, or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against such liability under
this certificate of incorporation or Delaware law.

The indemnification and advancement of expenses provided by, or granted pursuant
to, this certificate of incorporation shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.

TWELFTH: The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this certificate of incorporation, in the manner now
or hereafter prescribed by statute, and all rights conferred upon the
stockholders herein are granted subject to this reservation. No amendment to
this certificate of incorporation or repeal of any article of this certificate
of incorporation shall increase the liability or alleged liability or reduce or
limit the right to indemnification of any directors, officers, employees or
agents of the Corporation for acts or omissions of such person occurring prior
to such amendment or repeal.

THIRTEENTH: Effective from and after the date upon which the Corporation shall
first have more than one stockholder, no action which requires the vote or
consent of stockholders of the Corporation may be taken without a meeting and
vote of stockholders and the power of stockholders to consent thereafter in
writing without a meeting to the taking of any action is specifically denied.

IN WITNESS WHEREOF, Allegiance Corporation has caused this Amended and Restated
Certificate of Incorporation to be signed by Lester B. Knight, its chairman of
the board and chief executive officer this 29th day of August, 1996.

ALLEGIANCE CORPORATION

By /s/ Lester B. Knight
--------------------
(Name)

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<PAGE>

ALLEGIANCE CORPORATION
AMENDED AND RESTATED BYLAWS
EFFECTIVE AUGUST 30, 1996

ARTICLE I
STOCKHOLDERS

SECTION 1. PLACE OF HOLDING MEETINGS. All meetings of the stockholders
shall be held at the principal executive offices of the Corporation, or such
other place as shall be determined by the Board of Directors.

SECTION 2. ELECTION OF DIRECTORS.

(a) The annual meeting of stockholders for the election of directors and
the transaction of other business shall be held at such time and date as shall
be determined by the Board of Directors.

(b) Only persons who are nominated in accordance with the following
procedures shall be eligible for election as directors of the Corporation,
except as may be otherwise provided in the Certificate of Incorporation of the
Corporation with respect to the right of holders of preferred stock of the
Corporation to nominate and elect a specified number of directors in certain
circumstances. Nominations of persons for election to the Board of Directors
may be made at any annual meeting of stockholders, or at any special meeting of
stockholders called for the purpose of electing directors, (i) by or at the
direction of the Board of Directors (or any duly authorized committee thereof)
or (ii) by any stockholder of the Corporation (A) who is a stockholder of record
or beneficial owner on the date of the giving of the notice provided for in this
Section 2 and on the record date for the determination of stockholders entitled
to vote at such meeting and (B) who complies with the notice procedures set
forth in this Section 2.

(c) In addition to any other applicable requirements, for a nomination to
be made by a stockholder, such stockholder must have given timely notice thereof
in proper written form to the secretary of the Corporation.

(d) To be timely, a stockholder's notice to the secretary must be
delivered to or mailed and received at the principal executive offices of the
Corporation (i) in the case of an annual meeting not less than sixty (60) days
nor more than ninety (90) days prior to the anniversary date of the immediately
preceding

<PAGE>

annual meeting of stockholders; PROVIDED, HOWEVER, that in the event that the
annual meeting is called for a date that is not within thirty (30) days before
or after such anniversary date, notice by the stockholder in order to be timely
must be so received not later than the close of business on the tenth (10th) day
following the day on which such notice of the date of the annual meeting was
mailed or such public disclosure of the date of the annual meeting was made,
whichever occurs first, and (ii) in the case of a special meeting of
stockholders called for the purpose of electing directors, not later than the
close of business on the tenth (10th) day following the day an which notice of
the date of the special meeting was mailed or public disclosure of the date of
the special meeting was made, whichever occurs first.

(e) To be in proper written form, a stockholder's notice to the secretary
must set forth (i) as to each person whom the stockholder proposes to nominate
for election as a director (A) the name, age, business address and residence
address of the person, (B) the principal occupation or employment of the person,
(C) the class or series and number of shares of capital stock of the Corporation
which are owned beneficially or of record by the person and (D) any other
information relating to the person that would be required to be disclosed in a
proxy statement or other filings required to be made in connection with
solicitations of proxies for election of directors pursuant to Section 14 of the
Securities and Exchange Act of 1934, as amended (the "Exchange Act"), and the
rules and regulations promulgated thereunder, and () as to the stockholder
giving the notice (A) the name and record address of such stockholder, (B) the
class or series and number of shares of capital stock of the Corporation which
are owned beneficially or of record by such stockholder, (C) a description of
all arrangements or understandings between such stockholder and each proposed
nominee and any other person or persons (including their names) pursuant to
which the nomination(s) are to be made by such stockholder, (D) a representation
that such stockholder intends to appear in person or by proxy at the meeting to
nominate the persons named in its notice and (E) any other information relating
to such stockholder that would be required to be disclosed in a proxy statement
or other filings required to be made in connection with solicitations of proxies
for election of directors pursuant to Section 14 of the Exchange Act and the
rules and regulations promulgated thereunder. Such notice must be accompanied
by a written consent of each proposed nominee to being named as a nominee and to
serve as a director if elected.

(f) No person shall be eligible for election as a director of the
Corporation, at any annual meeting of stockholders or at any special meeting of
stockholders called for the purpose of electing

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directors, unless nominated in accordance with the procedures set forth in this
Section 2. If the chairman of the meeting determines that a nomination was not
made in accordance with the foregoing procedures, the chairman shall declare to
the meeting that the nomination was defective and such defective nomination
shall be disregarded.

(g) The determination of whether shares of capital stock of the
Corporation are owned beneficially under this Section 2 shall be made in the
same manner applicable to proposals submitted pursuant to Rule 14a-8 of the
Exchange Act.

SECTION 3. VOTING. Each stockholder entitled to vote in accordance with the
terms of the Certificate of Incorporation, these Bylaws or Delaware law shall,
unless the Certificate of Incorporation or Delaware law otherwise provides, be
entitled to one vote, in person or by proxy, for each share of stock entitled to
vote held by such stockholder, but no proxy shall be voted after three years
from its date unless such proxy provides for a longer period. The vote for
directors, and upon the demand of any stockholder, the vote upon any question
before the meeting. shall be by ballot. Except for the election of directors,
which shall be decided by a plurality of the shares present in person or
represented by proxy at the meeting and entitled to vote thereat, all matters
shall be decided by the affirmative vote of a majority of shares present in
person or represented by proxy at any meeting duly called and entitled to vote
thereat, except as otherwise provided by the Certificate of Incorporation and/or
Delaware law.

A stockholder may authorize another person or persons to act for such
stockholder as proxy (i) by executing a writing authorizing such person or
persons to act as such, which execution may be accomplished by such stockholder
or such stockholder's authorized officer, director, employee or agent signing
such writing or causing his or her signature to be affixed to such writing by
any reasonable means, including, but not limited to, facsimile signature, or
(ii) by transmitting or authorizing the transmission of a telegram, cablegram or
other means of electronic transmission (a "Transmission") to the person who will
be the holder of the proxy or to a proxy solicitation firm, proxy support
service organization or like agent duly authorized by the person who will be the
holder of the proxy to receive such Transmission, which Transmission must either
set forth or be submitted with information from which it can be determined that
such Transmission was authorized by such stockholder. The Secretary or such
other person or persons as shall be appointed from time to time by the Board of
Directors shall examine Transmissions to determine if they are valid. If it is
determined that a Transmission is valid, the

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<PAGE>

person or persons making that determination shall specify the information upon
which such person or persons relied. Any copy, facsimile telecommunication or
other reliable reproduction of such a writing or such a Transmission that is a
complete reproduction of the entire original writing or Transmission may be
substituted or used in lieu of the original writing or Transmission for any and
all purposes for which the original writing or Transmission could be used.

The secretary shall prepare and make, at least ten days before each meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of meeting,
or, if nor so specified, at the place where the meeting is to be held. The list
shall also be produced and kept at the time and place of the meeting during the
whole time thereof and may be inspected by any stockholder who is present.

SECTION 4. QUORUM. Except as provided in the next section hereof, any
number of stockholders together holding a majority of the stock issued and
outstanding and entitled to vote thereat, who shall be present in person at
represented by proxy at any meeting duly called, shall constitute a quorum for
the transaction of business.

SECTION 5. ADJOURNMENT OF MEETINGS. If less than a quorum shall be in
attendance at any time for which the meeting shall have been called, the meeting
may, after the lapse of at least half an hour, be adjourned from time to time by
a majority of the stockholders present or represented and entitled to vote
thereat. If notice of such adjourned meeting is sent to the stockholders
entitled by statute to receive the same, and such notice contains a statement of
the purpose of the meeting, that the previous meeting failed for lack of a
quorum, and that under the provisions of this Section it is proposed to hold the
adjourned meeting with a quorum of those present, then any number of
stockholders, in person or by proxy, shall constitute a quorum at such meeting
unless otherwise provided by statute.

SECTION 6. SPECIAL MEETINGS: HOW CALLED. Special meetings of the
stockholders for any purpose or purposes may be called only (a) by the chairman
of the board and chief executive officer or

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<PAGE>

secretary, and shall be called by the chairman of the board and chief executive
officer or secretary upon a request in writing therefor, stating the purpose or
purposes thereof, delivered to the chairman of the board and chief executive
officer or secretary, signed by a majority of the directors or (b) by resolution
of the directors.

SECTION 7. NOTICE OF STOCKHOLDERS' MEETINGS. Written or printed notice
stating the time and place of regular or special meetings of the stockholders
and the general nature of the business to be considered shall be mailed by the
secretary, or such other officer as the Board of Directors may designate, to
each stockholder entitled to vote thereat at his address as it appears on the
records of the Corporation, at least ten (10) days but not more than sixty (60)
days before the date of such meeting.

SECTION 8. CONDUCT OF THE MEETINGS.

(a) The chairman of the meeting shall have absolute authority over matters
of procedure and there shall be no appeal from the ruling of the chairman. If
the chairman, in his absolute discretion, deems it advisable to dispense with
the rules of parliamentary procedure as to any one meeting of stockholders or
pan thereof, the chairman shall so state and shall clearly state the rules under
which the meeting or appropriate part thereof shall be conducted.

(b) If disorder should arise which prevents continuation of the legitimate
business of the meeting, the chairman may quit the chair and announce the
adjournment of the meeting; and upon his doing so, the meeting is immediately
adjourned.

(d) A resolution or motion shall be considered for vote only if (i)
proposed by a stockholder or duly authorized proxy, and seconded by an
individual, who is a stockholder or a duly authorized proxy, other than the
individual who proposed the resolution and (ii) all other requirements under
law, the Corporation's Certificate of Incorporation, these Bylaws or otherwise,
for consideration of such a resolution or motion have been duly satisfied as
determined by the chairman in his absolute discretion, from which there shall be
no appeal.

SECTION 9. ANNUAL MEETINGS.

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(a) No business may be transacted at an annual meeting of stockholders,
other than business that is either (i) specified in the notice of meeting (or
any supplement thereto) given by or at the direction of the Board of Directors
(or any duly authorized committee thereof), (ii) otherwise property brought
before the annual meeting by or at the direction of the Board of Directors (or
any duly authorized committee thereof) or (iii) otherwise properly brought
before the annual meeting by any stockholder of the Corporation (A) who is a
stockholder of record or beneficial owner on the date of the giving of the
notice provided for in this Section 9 and on the record date for the
determination of stockholders entitled to vote at such annual meeting and (B)
who complies with the notice procedures set forth in this Section 9.

(b) In addition to any other applicable requirements, for business to be
properly brought before an annual meeting by a stockholder, such stockholder
must have given timely notice thereof m proper written form to the secretary of
the Corporation, which notice is not withdrawn by such stockholder at or prior
to such annual meeting.

(c) To be timely, a stockholder's notice to the secretary must be
delivered to or mailed and received at the principal executive offices of the
Corporation not less than sixty (60) days nor more than ninety (90) days prior
to the anniversary date of the immediately preceding annual meeting of
stockholders; PROVIDED, HOWEVER, that in the event that the annual meeting is
called for a date that is not within thirty (30) days before or after such
anniversary date, notice by the stockholder in order to be timely must be so
received not later than the close of business on the tenth (10th) day following
the day on which such notice of the date of the annual meeting was mailed or
such public disclosure of the date of the annual meeting was made, whichever
occurs first.

(d) To be in proper written form, a stockholder's notice to the secretary
must set forth as to each matter such stockholder proposes to bring before the
annual meeting (i) a brief description of the business desired to be brought
before the annual meeting and the reasons for conducting such business at the
annual meeting, (ii) the name and record address of such stockholder, (iii) the
class or series and number of shares of capital stock of the Corporation which
are owned beneficially or of record by such stockholder, (iv) a description of
all arrangements or understandings between such stockholder and any other person
or persons (including their names) in connection with the proposal of such
business by such stockholder and any material interest of such stockholder in
such business and (v) a representation that such

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stockholder intends to appear in person or by proxy at the annual meeting to
bring such business before the meeting.

(e) No business shall be conducted at the annual meeting of stockholders
except business brought before the annual meeting in accordance with the
procedures set forth in this Section 9. If the chairman of the annual meeting
determines that business was not property brought before the annual meeting in
accordance with the foregoing procedures, the chairman shall declare to the
meeting that the business was not properly brought before the meeting and such
business shall not be transacted.

(f) The determination of whether shares of capital stock of the
Corporation are owned beneficially under this Section 9 shall be made in the
same manner applicable to proposals submitted pursuant to Rule 14a-8 of the
Exchange Act.

ARTICLE II
DIRECTORS

SECTION 1. QUALIFICATION AND QUORUM. One-third of the total number of
directors (rounded upwards, if necessary, to the next whole number) shall
constitute a quorum for the transaction of business at any meeting of the board.
If at any meeting of the board there shall be less than a quorum present, a
majority of those present may adjourn the meeting from time to time until a
quorum is obtained, and no further notice thereof need be given other than by
announcement at said meeting which shall be so adjourned. The board may also
transact business without a meeting if all members of the board consent thereto
in writing.

The act of the majority of the directors present at any meeting at which a
quorum is present shall be the act of the Board of Directors, unless otherwise
provided by the laws of the State of Delaware, the Certificate of Incorporation
or these Bylaws.

SECTION 2. FIRST MEETING. The newly elected directors may hold their first
meeting for the purpose of organization and the transaction of business, if a
quorum is present, immediately after the annual meeting of the stockholders or
the time and place of such meeting may be fixed by the written consent of all
the directors.

SECTION 3. REGULAR MEETINGS. A regular annual meeting of the Board of
Directors shall be held, without call or notice, in connection with the annual
meeting of stockholders, for the purpose of organizing the Board of Directors,
electing officers and

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transacting any other business that may properly come before such meeting.
Additional regular meetings of the Board of Directors may be held without call
or notice at such times as shall be determined by the Board of Directors.

SECTION 4. ELECTION OF OFFICERS. At the first meeting or at any subsequent
meeting called for the purpose, the directors shall elect a chairman of the
board and chief executive officer as well as a secretary, and may elect a
president, one or more executive vice presidents, one or more senior vice
presidents, one or more group vice presidents, one or more corporate vice
presidents, one or more vice presidents, a treasurer, and one or more assistant
secretaries, who need not be directors. Each such officer shall hold office
until the next annual election of offices, and until his successor is elected
and qualified.

SECTION 5. SPECIAL MEETINGS: HOW CALLED; NOTICE. Special meetings of the
board may be called by the chairman of the board and chief executive officer;
and shall be called by the president or the secretary on the written request of
any two directors, in each case on twenty-four (24) hours notice to each
director. Such notice, which need not specify the purpose of the meeting or the
matters to be considered thereat, may be given as provided in Article VIII,
personally (including by telephone) or by telegram or other written
communication delivered to the residence or office of the director. Such
personal notice of written communication shall be effusive when delivered.

SECTION 6. PLACE OF MEETING. The directors may hold their meetings and have
one or more offices, and keep the books of the Corporation, outside the State of
Delaware, at any office or offices of the Corporation, or at any place as they
may from time to time by resolution determine.

SECTION 7. GENERAL POWERS OF DIRECTORS. The Board of Directors shall have
the management of the business of the Corporation, and subject to the
restrictions imposed by law, by the Certificate of Incorporation or by these
Bylaws, may exercise all the powers of the Corporation, including any powers
incidental thereto.

SECTION 8. COMPENSATION OF DIRECTORS. Directors shall not receive any
stated salary for their services as directors, but by resolution of the board
compensation may be paid together with expenses of attendance at meetings.
Nothing herein contained shall be construed to preclude any director from
serving the Corporation in any other capacity as an officer, agent or otherwise,
and receiving compensation therefor.

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ARTICLE III
COMMITTEES

SECTION 1. The Board of Directors shall create an audit and public policy
committee, and a compensation and nominating committee, and may create such
other committees as the board, from time to time, deems desirable. Each
committee shall consist of three or more of the directors of the Corporation
and, to the extent provided in the resolutions creating the committees or in
these Bylaws, shall have the powers of the Board of Directors in the management
of the business and affairs of the Corporation.

SECTION 2. The audit and public policy committee shall Consist solely of
directors who are independent of management and free from any relationships
that, in the opinion of the Board of Directors, would interfere with their
exercise of independent judgment as a committee member. The Policy Statement on
Audit Committees issued by the New York Stock Exchange, as in effect from time
to time, shall be applicable in determining which directors are "independent"
for this purpose.

The audit and public policy committee shall assist the Board of Directors in
fulfilling its responsibilities for the Corporation's accounting and financial
reporting practices and provide a channel of communication between the Board of
Directors and the Corporation's independent auditors. The committee also shall
review the policies and practices of the Corporation to assure that they are
consistent with its social responsibility to employees, to customers and to
society.

To accomplish the above purposes, the audit and public policy committee shall:

(a) Review with the independent auditors the scope of their annual and
interim examinations, placing particular attention where either the committee or
the auditors believe such attention should be directed, and to direct the
auditors to expand (but not to limit) the scope of their audit whenever such
action is, in the opinion of the committee, necessary or desirable. The
independent auditors shall have sole authority to determine the scope of the
audit which they deem necessary for the formation of an opinion on financial
statements;

(b) Consult with the auditors during any annual or interim audit on any
situation which the auditors deem advisable for resolution prior to the
completion of their examination;

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<PAGE>

(c) Meet with the auditors to appraise the effectiveness of the audit
effort. Such appraisal shall include a discussion of the overall approach to
and the scope of the examination, with particular attention on those areas on
which either the committee or the auditors believe emphasis is necessary or
desirable;

(d) Determine through discussions with the auditors and otherwise, that no
restrictions were placed by management on the scope of the examination or its
implementation;

(e) Inquire into the effectiveness of the Corporation's accounting and
internal control functions through discussions with the auditors and appropriate
officers of the Corporation and exercise supervision of the Corporation's
policies which prohibit improper or illegal payments;

(f) Review with the auditors and management any registration statement
which shall be filed by the Corporation in connection with the public offering
of securities and such other public financial reports as the committee or the
Board of Directors shall deem desirable;

(g) Report to the Board of Directors on the results of the committee's
activities and recommend to the Board of Directors any changes in the
appointment of independent auditors which the committee may deem to be in the
best interests of the Corporation and its stockholders;

(h) Monitor the Corporation's policies and practices relating to the
health and safety of employees and customers as well as the ethical standards of
the Corporation; and

(i) Have such other powers and perform such other duties as the board
shall, from time to time, grant and assign to it.

SECTION 3. The compensation and nominating committee shall consist solely of
directors who are independent of management, as defined in Section 2.

(a) The committee shall (1) determine the compensation of officers, other
than the chairman of the board and chief executive officer and advise the board
of such determination, (2) exercise the authority of the board concerning
employee benefit plans, including those plans which are limited in their
application to officers and senior management, (3) serve as the administration
committee of the Corporation's stock option plans, (4) make recommendations to
the board concerning the compensation of the chairman of the board and chief
executive officer, and (5) advise

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the board and the chairman of the board and chief executive officer on other
compensation and employee benefit matters.

(b) In addition, the committee shall assist and advise the Board of
Directors in connection with board membership, board committee structure and
membership. To accomplish these purposes, the committee shall:

(i) Develop general criteria for use in setting potential new board
members and assist the board in identifying and attracting qualified
candidates for election to the board;

(ii) Recommend to the board annually a slate of nominees to be
proposed by the board to the stockholders as nominees for election as
directors and, from time to time, recommend persons to fill any vacancy on
the board;

(iii) Recommend to the board any changes in number, authority and
duties of board committees and the chairmen and members who should serve
thereon;

(iv) In the event of the death, incapacity, resignation or other
absence (temporary or permanent) of the chairman of the board and chief
executive officer, the committee shall confer and recommend for election by
the full board an acting or successor chairman of the board and chief
executive officer; and

(v) Make recommendations to the board concerning compensation payable
for board membership, as well as other benefits available to board members.

The compensation and nominating committee shall have such other powers and
perform such other duties as the board shall, from time to time, grant and
assign to it.

SECTION 4. The following provisions shall apply to all committees of the
Board of Directors:

(a) Any power or authority granted to a committee by these bylaws may also
be exercised by the Board of Directors;

(b) Each member of a committee shall hold office until the next regular
annual meeting of the Board of Directors following his designation and until his
successor is designated as a member of a committee, or until the committee is
dissolved by a majority of the whole board or the member is removed as
hereinafter provided;

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<PAGE>

(c) Meetings of a committee may be called by any member thereof, the
chairman of the board and chief executive officer, the secretary, or any
assistant secretary upon twenty-four (24) hours notice to each member stating
the place, date, and hour of the meeting, which notice may be written or oral.
If mailed, the notice shall be deemed to be delivered when deposited in the
United States mail, addressed to the member of the committee at his business
address, provided it is mailed four (4) days prior to the meeting. Any member
of a committee may waive notice of any meeting and no notice of any meeting need
by given to any member thereof who attends in person. The notice of a meeting
of a committee need not state the business proposed to be transacted at the
meeting;

(d) The lesser of a majority of the members or two members of a committee
shall constitute a quorum for the transaction of business at any meeting thereof
and action of a committee must be authorized by the affirmative vote of a
majority of the members present at a meeting at which a quorum is present;

(e) Any action that may be taken by a committee at a meeting may be taken
without a meeting if a consent in writing, setting forth the action to be taken,
shall be signed by all of the members of a committee and filed with the minutes
of the committee, which action shall be effective as of the date stated in such
consent;

(f) Any vacancy on a committee may be filled by a resolution adopted by a
majority of the Board of Directors;

(g) Any member of a committee may be removed at any time with or without
cause by resolution adopted by a majority of the Board of Directors;

(h) The chairman of each committee of the Board of Directors shall be
appointed from among the members of such committee by the Board of Directors.
The chairman of the committee shall, if present, preside at all meetings of a
committee. A committee may fix its own rules of procedures which shall not be
inconsistent with these Bylaws. Each committee shall keep regular minutes of
its proceedings and report its proceedings at the next meeting of the Board of
Directors; and

(i) The chairman of the Board and chief executive officer shall act in an
advisory capacity to all committees.

ARTICLE IV
OFFICERS

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SECTION 1. The officers of the Corporation shall be the chairman of the
board and chief executive officer and the secretary, and may include a
president, one or more executive vice presidents, one or more senior vice
presidents, one or more group vice presidents, one or more corporate vice
presidents, one or more vice presidents, a treasurer, one or more assistant
secretaries, and such other officers as may from time to time be elected or
appointed by the Board of Directors. Any number of offices may be held by the
same person.

SECTION 2. CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER. The chairman
of the board and chief executive officer shall be the chief executive officer of
the Corporation and shall have the responsibility for the management of the
Corporation and such other powers and duties as may be assigned to him from time
to time by the board. The chairman of the board and chief executive officer
shall, when present, preside at all meetings of the stockholders and of the
Board of Directors. He shall act as liaison from and as spokesman for the
board. He shall participate in long range planning for the Corporation. He may
sign shares of the Corporation, any deeds, mortgages, bonds, contracts or other
instruments which the Board of Directors has authorized to be executed, or which
are in the ordinary course of business of the Corporation. He may vote, either
in person or by proxy, all the shares of the capital stock of any company which
the Corporation owns or is otherwise entitled to vote at any and all meetings of
the stockholders of such company and shall have the power to accept or waive
notice of such meetings. He shall in general perform all duties incident to the
office and such other duties as shall be prescribed by the Board of Directors
from time to time.

SECTION 3. PRESIDENT. The president shall have such duties and authority as
the chairman of the board and chief executive officer may determine from time to
time. In the absence or disability of the chairman of the board and chief
executive officer, the president shall exercise all powers and discharge all of
the duties of the chairman of the board and chief executive officer,, including
the general supervision and control of all the business and affairs of the
Corporation. He may sign any deeds, mortgages, bonds, contracts or other
instruments which the Board of Directors has authorized to be executed or which
are in the ordinary course of business of the Corporation. He may vote, either
in person or by proxy, all the shares of the capital stork of any company which
the Corporation owns or is otherwise entitled to vote at any and all meetings of
the stockholders of such company and shall have the power to accept or waive
notice of such meetings.

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<PAGE>

SECTION 4. VICE PRESIDENTS. In the absence or disability of the chairman of
the board and chief executive officer and the president, the functions of the
chairman of the board and chief executive officer shall be performed by the
executive vice president who was first elected to that office and who is not
then absent or disabled, or, if none, the senior vice president who was first
elected to that office and who is not then absent or disabled or, if none, the
group vice president who was first elected to that office and who is not then
absent or disabled, or, if none, the corporate vice president who was first
elected to that office and who is not then absent or disabled, or, if none, the
vice president who was first elected to that office and who is not then absent
or disabled. Each executive vice president, senior vice president, group vice
president, corporate vice president and vice president shall have such powers
and shall discharge such duties as may be assigned to him from time to time by
the chairman of the board and chief executive officer or the president and may
sign any deeds, mortgages, bonds, contracts or other instruments which the Board
of Directors has authorized to be executed or which are in the ordinary course
of business. Each executive vice president, senior vice president group vice
president, corporate vice president and vice president may vote, either in
person or by proxy, all the shares of the capital stock of any company which the
Corporation owns or is otherwise entitled to vote at any and all meetings of the
stockholders of such company and shall have the power to accept or waive notice
of such meetings.

SECTION 5. SECRETARY. The secretary shall give, or cause to be given,
notice of all meetings of stockholders and directors, and all other notices
required by law or by these Bylaws, and in the case of his absence or refusal or
neglect so to do, any such notice may be given by any person thereunto directed
by the chairman of the board and chief executive officer or the directors, upon
whose requisition the meeting is called as provided in these Bylaws. He shall
record all the proceedings of the meetings of the stockholders and of the
directors in a book to be kept for that purpose, and shall perform such other
duties as may be assigned to him by the Board of Directors, the chairman of the
board and chief executive officer, or the president. He shall have the custody
of the seal of the Corporation and shall affix the same to all instruments
requiring it, when authorized by the Board of Directors, the chairman of the
board and chief executive officer, or the president, and attest the same. He
shall have charge of the original stock books, transfer books and stock ledgers,
and act as transfer agent in respect of the stock and the securities of the
Corporation in the absence of designation by the Board of Directors of a
corporate transfer agent, and shall perform all of the other duties incident to
the office of secretary. He may vote, either in

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person or by proxy, all the shares of the capital stock of any company which the
Corporation owns or is otherwise entitled to vote at any and all meetings of the
stockholders of such company and shall have the power to accept or waive notice
of such meetings,

SECTION 6. ASSISTANT SECRETARY. Each assistant secretary shall have such
powers and perform such duties as shall be assigned to him by the Board of
Directors or delegated to him by the secretary, and in the absence or inability
of the secretary to act, shall have the same general powers as the secretary.

SECTION 7. TREASURER. The treasurer shall perform such duties as shall be
delegated to him by the Board of Directors, the chairman of the board and chief
executive officer, or the president.

ARTICLE V
RESIGNATIONS AND FILLING OF VACANCIES

SECTION 1. RESIGNATIONS. Any director, member of a committee or other
officer may resign at any time. Such resignations shall be made in writing and
shall take effect at the time specified therein and, if no time be specified, at
the time of the receipt of such resignation by the chairman of the board and
chief executive officer or secretary. The acceptance of the resignation shall
not be necessary to make it effective.

SECTION 2. FILLING OF VACANCIES. If the office of any member of a committee
or other officer becomes vacant, the vacancy may be filled only by the remaining
directors in office, who, by a majority vote, may appoint any qualified person
to fill such vacancy. Any vacancy on the Board of Directors, resulting from an
increase in the number of directors or for any other reason, may be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director. A person appointed to fill a vacancy shall hold office
for the unexpired term or until the next election of the class to which the
director has been assigned, and until his successor shall be elected and
qualify.

ARTICLE VI
CAPITAL STOCK

SECTION 1. CERTIFICATES OF STOCK. Certificates of stock, numbered and with
the seal of the Corporation affixed, signed by the chairman of the board and
chief executive officer, the president or any vice president, and the secretary
or an assistant

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secretary or the treasurer, shall be issued to each stockholder certifying the
number of shares owned by him in the Corporation. Any of or all the signatures
on these certificates may be facsimile. In case any officer or transfer agent
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer or transfer agent before such certificate
is issued, it may be issued by the Corporation with the same effect as if he
were such officer or transfer agent at the date of issue.

SECTION 2. LOST, STOLEN OR DESTROYED CERTIFICATES. A new certificate of
stock may be issued in the place of any certificate theretofore issued by the
Corporation, alleged to have been lost, stolen or destroyed, and the directors
may, in their discretion, require the owner of the lost, stolen or destroyed
certificate, or his legal representative, to give the Corporation a bond, in
such sum as they may direct, sufficient to indemnify the Corporation against any
claim that may be made against it on account of the alleged loss, theft or
destruction of any such certificate or the issuance of such new certificate.

SECTION 3. TRANSFER OF SHARES. The shares of stock of the Corporation shall
be transferable only upon its books by the holders thereof in person or by their
duly authorized attorneys or legal representatives, and upon such transfer the
old certificates shall be surrendered to the Corporation by the delivery thereof
to the person in charge of the stock and transfer books and ledgers, or to such
other person as the directors may designate, by whom they shall be canceled, and
new certificates shall thereupon be issued. A record shall be made of each
transfer, and whenever a transfer shall be made for collateral security, and not
absolutely, it shall be so expressed in the entry of the transfer.

SECTION 4. DETERMINATION OF RECORD DATE.

(a) In order that the Corporation may determine the stockholders entitled
to notice of or to vote at any meeting of stockholders or any adjournment
thereof or entitled to receive payment of any dividend or other distribution or
allotment of any rights, of or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other lawful
action, the Board of Directors may fix, in advance, a record date, which shall
not be more than sixty (60) no less than ten (10) days before the date of such
meeting, nor more than sixty (60) days prior to any other action.

(b) If no record date is fixed:

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(i) The record date for determining stockholders entitled to notice
of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next preceding the
day on which the meeting is held.

(ii) The record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto.

(c) A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.

SECTION 5. DIVIDENDS. Subject to the applicable provisions of the
Certificate of Incorporation, if any, end Delaware law, the directors may
declare dividends upon the capital stock of the Corporation as and when they
deem expedient.

ARTICLE VII
AMENDMENTS

SECTION 1. AMENDMENTS OF BYLAWS. The stockholders by the affirmative vote
of at least two-thirds of the Voting Stock (as defined in Article VIII of these
Bylaws), or the directors by the affirmative vote of a majority of the directors
present at any meeting, may amend or alter any of these Bylaws, provided the
substance of the proposed amendment shall have been stated in the notice of the
meeting.

ARTICLE VIII
MISCELLANEOUS PROVISIONS

SECTION 1. CORPORATE SEAL. The corporate seal of the Corporation shall be
circular in form and shall contain the name of the Corporation, and the words
"Corporate Seal, Delaware." Said seal may be used by causing it or facsimile
thereof to be impressed or affixed or reproduced or otherwise.

SECTION 2. FISCAL YEAR. The fiscal year of the Corporation shall be the
calendar year.

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SECTION 3. REGISTERED OFFICE. A registered office of the Corporation shall
be established and maintained at the office of The Corporation Trust Company, in
the City of Wilmington and County of New Castle, and such company shall be the
registered agent of this Corporation in the State of Delaware.

SECTION 4. BANK ACCOUNTS, CHECKS, DRAFTS, NOTES. The Corporation shall
maintain such bank accounts and checks upon such accounts shall be signed and/or
countersigned by such officers is may be designated by resolution of the Board
of Directors. Notes or other evidences of indebtedness issued in the name of
the Corporation shall be signed by such officer or officers, agent or agents of
the Corporation, and in such manner as shall from time to time be determined by
resolution of the Board of Directors.

SECTION 5. NOTICE AND WAIVER OF NOTICE. Whenever any notice is required by
these Bylaws to be given, personal notice is not meant unless expressly so
stated, and any notice so required shall be deemed to be sufficient if given by
depositing the same in a post office box in a scaled post paid wrapper,
addressed to the person entitled thereto at his last known post office address,
and such notice shall be deemed to have been given on the day of such mailing.
Any notice required to be given under these Bylaws may be waived by the person
entitled thereto. Stockholders not entitled to vote shall not be entitled to
receive notice of any meetings except as otherwise provided by statute.

SECTION 6. CERTAIN PURCHASES BY THE CORPORATION OF OUTSTANDING SHARES OF ITS
COMMON STOCK.

(a) VOTE REQUIRED FOR CERTAIN PURCHASES. Except as set forth in
subsection (b) of this Section 6, in addition to any vote of the Corporation's
stockholders required by law, the Corporation's Certificate of Incorporation or
these Bylaws, the affirmative vote of the holders of not less than a majority of
the Voting Stock (as defined below) of the Corporation shall be required before
the Corporation may purchase any outstanding shares of Common Stock of the
Corporation at a price known by the Corporation to be above Market Price (as
defined below) from a person known by the Corporation to be a Selling
Stockholder (as defined below). Such affirmative vote will be required
notwithstanding the fact that no vote may be required, or that a lesser
percentage may be specified, by law or any agreement with any national
securities exchange.

(b) WHEN A VOTE IS NOT REQUIRED. The provisions of subsection (a) of this
Section 6 will not apply to:

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(i) any purchase or other acquisition of securities made as part of a
tender or exchange offer by the Corporation to purchase securities of the
same class made on the same terms to all holders of such securities and
complying with the applicable requirements of the Exchange Act and the
rules and regulations promulgated thereunder;

(ii) any purchase or acquisition made pursuant to an open market
purchase program approved by the Board of Directors; or

(iii) any purchase or acquisition which is approved by the vote of
a majority of the directors then in office and winch is made at no more
than the Market Price, on the date that the understanding between the
Corporation and the Selling Stockholder is reached with respect to such
purchase (whether or not such purchase is made or a written agreement
relating to such purchase is executed on such date), of the shares of the
Common Stock of the Corporation to be purchased.

(i) "VOTING STOCK" means the outstanding shares of capital stock of
the Corporation entitled to vote generally in elections of directors of the
Corporation considered as one class.

(ii) "MARKET PRICE" means the highest closing sale price, during the
30-day period immediately preceding the date of the making of such purchase
agreement, of a share of the Common Stock of the Corporation on the
Composite Tape for the New York Stock Exchange. If such stock is not
quoted on the Composite Tape or is not listed on the New York Stock
Exchange, then such price during the 30-day period on the principal United
States securities exchange registered under the Exchange Act on which such
stock is listed. If such stock is not listed on any such exchange, then
the highest closing bid quotation with respect to a share of such stock
during the 30-day period on the National Association of Securities Dealers,
Inc. Automated Quotations System or any system then in use. If no such
quotations are available, the fair market value on the date in question of
a share of such stock.

(iii) "SELLING STOCKHOLDER" means and includes any person (other
than the Corporation, any of its Subsidiaries, any benefit plan or trust of
or for the benefit of the Corporation or any of its Subsidiaries, or any
trustee, agent

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or other representative of any of the foregoing) who or which is the beneficial
owner of in the aggregate five percent (5%) or more of the outstanding shares of
Common Stock of the Corporation and who or which has purchased or agreed to
purchase any of such shares within the most recent two-year period. For
purposes of determining whether a person is a Selling Stockholder, the number of
shares of Common Stock deemed to be outstanding and the number of shares
beneficially owned by such person shall include shares respectively deemed owned
through application of Article VIII, Section 6(c)(v), but shall not include any
other shares of Common Stock which may be issuable to any other person pursuant
to any agreement, arrangement or understanding, or upon exercise of Conversion
rights, warrants or options, or otherwise.

(iv) A "PERSON" means any individual, firm, partnership, limited
liability company, corporation or other entity (including, without
limitation, a "group" within the meaning of Section 13(d) of the Exchange
Act and the rules and regulations promulgated thereunder).

(v) A person shall be the "BENEFICIAL OWNER" of any shares of Common
Stock of the Corporation:

(A) which such person or any of its Affiliates or Associates (as
defined below) beneficially owns, directly or indirectly; or

(B) which such person or any of its Affiliates or Associates has
(1) the right to acquire (whether such right is conditional or
exercisable immediately or only after the passage of time), pursuant
to any agreement, arrangement or understanding or upon the exercise of
conversion rights, exchange rights, warrants or options, or otherwise,
or (2) the right to vote pursuant to any agreement, arrangement or
understanding; or

(C) which are beneficially owned, directly or indirectly, by any
other person with which such person or any of its Affiliates or
Associates has any agreement, arrangement or understanding for the
purpose of acquiring, holding, voting or disposing thereof.

(vi) The terms "AFFILIATE" and "ASSOCIATE" have the respective
meanings ascribed to such terms in Rule 12b-2 of the rules and regulations
under the Exchange Act.

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<PAGE>

(vii) "SUBSIDIARY" means any corporation at least a majority of
the outstanding securities of which having ordinary voting power to elect a
majority of the board of directors of such corporation (whether or not any
other class of securities has or might have voting power by reason of the
happening of a contingency) is at the time owned or controlled directly or
indirectly by the Corporation and/or one or more Subsidiaries.

(d) FIDUCIARY DUTY OF SELLING STOCKHOLDER. Nothing contained in this
Section 6 shall be construed to relieve any Selling Stockholder or any
other person from any fiduciary obligation imposed by law.

(e) INTERPRETATIONS. The Board of Directors of the Corporation has
the power to construe and interpret this Section 6, including, without
limitation, (i) whether a person is a Selling Stockholder, (ii) whether a
person is an Affiliate or Associate of another, (iii) whether this Section
6 is applicable to a proposed transaction, (iv) what is the Market Price
and whether a price is above Market Price, and (v) when or whether a
purchase or agreement to purchase any shares of Common Stock of the
Corporation has occurred and when or whether a person has become a
beneficial owner of any shares of Common Stock of the Corporation. Any
decision or action reasonably taken by the Board of Directors of the
Corporation in good faith in connection with the interpretation of this
Section 6 shall not constitute a violation of and shall be deemed to be in
accordance with the terms of this Section 6.

-21-

<PAGE>

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

ALLEGIANCE CORPORATION

---------------------------------------------------------
TRUSTEE

--------------

INDENTURE

DATED AS OF
--------------------

______________

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

<PAGE>

..............................................................
CERTAIN SECTIONS OF THIS INDENTURE RELATING TO SECTIONS 310 THROUGH 318,
INCLUSIVE, OF THE TRUST INDENTURE ACT OF 1939:

TRUST INDENTURE
ACT SECTION INDENTURE SECTION

Section 310(a)(1) . . . . . . . . . . . . . . . . . . . 609
(a)(2) . . . . . . . . . . . . . . . . . . . 609
(a)(3) . . . . . . . . . . . . . . . . . . . Not Applicable
(a)(4) . . . . . . . . . . . . . . . . . . . Not Applicable
(b) . . . . . . . . . . . . . . . . . . . 608
610

Section 311(a) . . . . . . . . . . . . . . . . . . . 613
(b) . . . . . . . . . . . . . . . . . . . 613
Section 312(a) . . . . . . . . . . . . . . . . . . . 701
702
(b) . . . . . . . . . . . . . . . . . . . 702
(c) . . . . . . . . . . . . . . . . . . . 702
Section 313(a) . . . . . . . . . . . . . . . . . . . 703
(b) . . . . . . . . . . . . . . . . . . . 703
(c) . . . . . . . . . . . . . . . . . . . 703
(d) . . . . . . . . . . . . . . . . . . . 703
Section 314(a) . . . . . . . . . . . . . . . . . . . 704
(a)(4) . . . . . . . . . . . . . . . . . . . 101
1004
(b) . . . . . . . . . . . . . . . . . . . Not Applicable
(c)(1) . . . . . . . . . . . . . . . . . . . 102
(c)(2) . . . . . . . . . . . . . . . . . . . 102
(c)(3) . . . . . . . . . . . . . . . . . . . Not Applicable
(d) . . . . . . . . . . . . . . . . . . . Not Applicable
(e) . . . . . . . . . . . . . . . . . . . 102
Section 315(a) . . . . . . . . . . . . . . . . . . . 601
(b) . . . . . . . . . . . . . . . . . . . 602
(c) . . . . . . . . . . . . . . . . . . . 601
(d) . . . . . . . . . . . . . . . . . . . 601
(e) . . . . . . . . . . . . . . . . . . . 514
Section 316(a) . . . . . . . . . . . . . . . . . . . 101
(a)(1)(A) . . . . . . . . . . . . . . . . . . . 502
512
(a)(1)(B) . . . . . . . . . . . . . . . . . . . 513
(a)(2) . . . . . . . . . . . . . . . . . . . Not Applicable
(b) . . . . . . . . . . . . . . . . . . . 508
(c) . . . . . . . . . . . . . . . . . . . 104
Section 317(a)(1) . . . . . . . . . . . . . . . . . . . 503
(a)(2) . . . . . . . . . . . . . . . . . . . 504
(b) . . . . . . . . . . . . . . . . . . . 1003
Section 318(a) . . . . . . . . . . . . . . . . . . . 107

- -------------------
NOTE: This reconciliation and tie shall not, for any purpose, be deemed to be a
part of the Indenture.

<PAGE>

INDENTURE, dated as of ___________, 1996, between Allegiance Corporation, a
corporation duly organized and existing under the laws of the State of Delaware
(herein called the "Company"), having its principal office at 1430 Waugkegan
Road, McGaw Park, Illinois 60085, and ______________________________, a
___________________________ duly organized and existing under the laws of
________, as Trustee (herein called the "Trustee").

RECITALS OF THE COMPANY

The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance from time to time of its unsecured
debentures, notes or other evidences of indebtedness (herein called the
"Securities"), to be issued in one or more series as in this Indenture provided.

All things necessary to make this Indenture a valid agreement of the
Company, in accordance with its terms, have been done.

NOW, THEREFORE, THIS INDENTURE WITNESSETH:

For and in consideration of the premises and the purchase of the Securities
by the Holders thereof, it is mutually agreed, for the equal and proportionate
benefit of all Holders of the Securities or of series thereof, as follows:

ARTICLE ONE

DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION

SECTION 101. DEFINITIONS.

For all purposes of this Indenture, except as otherwise expressly provided
or unless the context otherwise requires:

(1) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular;

(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;

(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles, and, except as otherwise herein expressly provided, the term
"generally accepted accounting principles" with respect to any computation
required or permitted hereunder shall mean such accounting principles as
are generally accepted at the date of such computation;

<PAGE>

(4) unless the context otherwise requires, any reference to an
"Article" or a "Section" refers to an Article or a Section, as the case may
be, of this Indenture; and

(5) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision.

"Act", when used with respect to any Holder, has the meaning specified in
Section 104.

"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.

"Attributable Debt" when used in connection with a Sale and Lease-Back
Transaction involving a Principal Property means, at the time of determination,
the lesser of: (a) the fair value of such property (as determined in good faith
by the Board of Directors of the Company); or (b) the present value of the total
net amount of rent required to be paid under such lease during the remaining
term thereof (including any renewal term or period for which such lease has been
extended), discounted at the rate of interest set forth or implicit in the terms
of such lease or, if not practicable to determine such rate, the weighted
average interest rate per annum (in the case of Original Issue Discount
Securities, the imputed interest rate) borne by the Securities of each series
outstanding pursuant to the Indenture compounded semi-annually. For purposes of
the foregoing definition, rent shall not include amounts required to be paid by
the lessee, whether or not designated as rent or additional rent, on account of
or contingent upon maintenance and repairs, insurance, taxes, assessments, water
rates and similar charges. In the case of any lease which is terminable by the
lessee upon the payment of a penalty, such net amount shall be the lesser of the
net amount determined assuming termination upon the first date such lease may be
terminated (in which case the net amount shall also include the amount of the
penalty, but no rent shall be considered as required to be paid under such lease
subsequent to the first date upon which it may be so terminated) and the net
amount determined assuming no such termination.

"Authenticating Agent" means any Person authorized by the Trustee pursuant
to Section 614 to act on behalf of the Trustee to authenticate Securities of one
or more series.

"Board of Directors" means either the board of directors of the Company or
any duly authorized committee of that board.

"Board Resolution" means a copy of a resolution certified by the Secretary
or an Assistant Secretary of the Company to have been duly adopted by the Board
of Directors

-2-

<PAGE>

and to be in full force and effect on the date of such certification, and
delivered to the Trustee. In the event the Board of Directors shall delegate to
any director or officer of the Company or any group consisting of directors of
the Company, officers of the Company or directors and officers of the Company
the authority to take any action which under the terms of this Indenture may be
taken by "Board Resolution," then any action so taken by, and set forth in a
resolution adopted by, the director, officer or group within the scope of such
delegation shall be deemed to be a "Board Resolution" for purposes of this
Indenture.

"Business Day", when used with respect to any Place of Payment, means each
Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which
banking institutions in that Place of Payment are authorized or obligated by law
or executive order to close.

"Commission" means the Securities and Exchange Commission, from time to
time constituted, created under the Exchange Act, or, if at any time after the
execution of this instrument such Commission is not existing and performing the
duties now assigned to it under the Trust Indenture Act, then the body
performing such duties at such time.

"Company" means the Person named as the "Company" in the first paragraph of
this instrument until a successor Person shall have become such pursuant to the
applicable provisions of this Indenture, and thereafter "Company" shall mean
such successor Person.

"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by its Chairman of the Board, its Vice
Chairman of the Board, its President or a Vice President, and by its Treasurer,
an Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered
to the Trustee.

"Consolidated Net Tangible Assets" means, as of any particular time, total
assets (excluding applicable reserves and other properly deductible items) less:
(a) total current liabilities, except for (1) notes and loans payable,
(2) current maturities of long-term debt, and (3) current maturities of
obligations under capital leases; and (b) goodwill, patents and trademarks, to
the extent included in total assets; all as set forth on the most recent
consolidated balance sheet of the Company and its Restricted Subsidiaries and
computed in accordance with generally accepted accounting principles.

"Corporate Trust Office" means the principal office of the Trustee in
................................................................ at which at any
particular time its corporate trust business shall be administered.

"corporation" means a corporation, association, company, joint-stock
company or business trust.

"Covenant Defeasance" has the meaning specified in Section 1303.

"Defaulted Interest" has the meaning specified in Section 307.

-3-

<PAGE>

"Defeasance" has the meaning specified in Section 1302.

"Depositary" means, with respect to Securities of any series issuable in
whole or in part in the form of one or more Global Securities, a clearing agency
registered under the Exchange Act that is designated to act as Depositary for
such Securities as contemplated by Section 301.

"Event of Default" has the meaning specified in Section 501.

"Exchange Act" means the Securities Exchange Act of 1934 and any statute
successor thereto, in each case as amended from time to time.

"Expiration Date" has the meaning specified in Section 104.

"Global Security" means a Security that evidences all or part of the
Securities of any series and bears the legend set forth in Section 204 (or such
legend as may be specified as contemplated by Section 301 for such Securities).

"Holder" means a Person in whose name a Security is registered in the
Security Register.

"Indenture" means this instrument as originally executed and as it may from
time to time be supplemented or amended by one or more indentures supplemental
hereto entered into pursuant to the applicable provisions hereof, including, for
all purposes of this instrument and any such supplemental indenture, the
provisions of the Trust Indenture Act that are deemed to be a part of and govern
this instrument and any such supplemental indenture, respectively. The term
"Indenture" shall also include the terms of particular series of Securities
established as contemplated by Section 301.

"interest", when used with respect to an Original Issue Discount Security
which by its terms bears interest only after Maturity, means interest payable
after Maturity.

"Interest Payment Date", when used with respect to any Security, means the
Stated Maturity of an instalment of interest on such Security.

"Investment Company Act" means the Investment Company Act of 1940 and any
statute successor thereto, in each case as amended from time to time.

"Maturity", when used with respect to any Security, means the date on which
the principal of such Security or an instalment of principal becomes due and
payable as therein or herein provided, whether at the Stated Maturity or by
declaration of acceleration, call for redemption or otherwise.

"Nonrecourse Obligation" means indebtedness or other obligations
substantially related to (i) the acquisition of assets not previously owned by
the Company or any Restricted Subsidiary or (ii) the financing of a project
involving the development or expansion of properties of the Company or any
Restricted Subsidiary, as to which the

-4-

<PAGE>

obligee with respect to such indebtedness or obligation has no recourse to the
Company or any Restricted Subsidiary or any assets of the Company or any
Restricted Subsidiary other than the assets which were acquired with the
proceeds of such transaction or the project financed with the proceeds of such
transaction (and the proceeds thereof).

"Notice of Default" means a written notice of the kind specified in
Section 501(4) or 501(5).

"Officers' Certificate" means a certificate signed by the Chairman of the
Board, a Vice Chairman of the Board, the President or a Vice President, and by
the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary,
of the Company, and delivered to the Trustee. One of the officers signing an
Officers' Certificate given pursuant to Section 1004 shall be the principal
executive, financial or accounting officer of the Company.

"Opinion of Counsel" means a written opinion of counsel, who may be counsel
for the Company, and who shall be acceptable to the Trustee.

"Original Issue Discount Security" means any Security which provides for an
amount less than the principal amount thereof to be due and payable upon a
declaration of acceleration of the Maturity thereof pursuant to Section 502.

"Outstanding", when used with respect to Securities, means, as of the date
of determination, all Securities theretofore authenticated and delivered under
this Indenture, EXCEPT:

(1) Securities theretofore cancelled by the Trustee or delivered to
the Trustee for cancellation;

(2) Securities for whose payment or redemption money in the necessary
amount has been theretofore deposited with the Trustee or any Paying Agent
(other than the Company) in trust or set aside and segregated in trust by
the Company (if the Company shall act as its own Paying Agent) for the
Holders of such Securities; PROVIDED that, if such Securities are to be
redeemed, notice of such redemption has been duly given pursuant to this
Indenture or provision therefor satisfactory to the Trustee has been made;

(3) Securities as to which Defeasance has been effected pursuant to
Section 1302; and

(4) Securities which have been paid pursuant to Section 306 or in
exchange for or in lieu of which other Securities have been authenticated
and delivered pursuant to this Indenture, other than any such Securities in
respect of which there shall have been presented to the Trustee proof
satisfactory to it that such Securities are held by a bona fide purchaser
in whose hands such Securities are valid obligations of the Company;

-5-

<PAGE>

PROVIDED, HOWEVER, that in determining whether the Holders of the requisite
principal amount of the Outstanding Securities have given, made or taken any
request, demand, authorization, direction, notice, consent, waiver or other
action hereunder as of any date, (A) the principal amount of an Original Issue
Discount Security which shall be deemed to be Outstanding shall be the amount of
the principal thereof which would be due and payable as of such date upon
acceleration of the Maturity thereof to such date pursuant to Section 502,
(B) if, as of such date, the principal amount payable at the Stated Maturity of
a Security is not determinable, the principal amount of such Security which
shall be deemed to be Outstanding shall be the amount as specified or determined
as contemplated by Section 301, (C) the principal amount of a Security
denominated in one or more foreign currencies or currency units which shall be
deemed to be Outstanding shall be the U.S. dollar equivalent, determined as of
such date in the manner provided as contemplated by Section 301, of the
principal amount of such Security (or, in the case of a Security described in
Clause (A) or (B) above, of the amount determined as provided in such Clause),
and (D) Securities owned by the Company or any other obligor upon the Securities
or any Affiliate of the Company or of such other obligor shall be disregarded
and deemed not to be Outstanding, except that, in determining whether the
Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent, waiver or other action, only
Securities which the Trustee knows to be so owned shall be so disregarded.
Securities so owned which have been pledged in good faith may be regarded as
Outstanding if the pledgee establishes to the satisfaction of the Trustee the
pledgee's right so to act with respect to such Securities and that the pledgee
is not the Company or any other obligor upon the Securities or any Affiliate of
the Company or of such other obligor.

"Paying Agent" means any Person authorized by the Company to pay the
principal of or any premium or interest on any Securities on behalf of the
Company.

"Person" means any individual, corporation, partnership, joint venture,
trust, unincorporated organization or government or any agency or political
subdivision thereof.

"Place of Payment", when used with respect to the Securities of any series,
means the place or places where the principal of and any premium and interest on
the Securities of that series are payable as specified as contemplated by
Section 301.

"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 306 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security shall be deemed to evidence the
same debt as the mutilated, destroyed, lost or stolen Security.

"Principal Property" means the land, land improvements, buildings and
fixtures (to the extent they constitute real property interests), (including any
leasehold interest therein) constituting the principal corporate office, any
manufacturing facility, or any distribution center (whether now owned or
hereafter acquired) which: (a) is owned by the Company or any Subsidiary; (b) is
located within any of the present 50 states of the

-6-

<PAGE>

United States (or the District of Columbia); (c) has not been determined in good
faith by the Board of Directors of the Company not to be materially important to
the total business conducted by the Company and its Subsidiaries taken as a
whole; and (d) has a market value on the date as of which the determination is
being made in excess of 1.0% of Consolidated Net Tangible Assets of the Company
as most recently determined on or prior to such date.

"Redemption Date", when used with respect to any Security to be redeemed,
means the date fixed for such redemption by or pursuant to this Indenture.

"Redemption Price", when used with respect to any Security to be redeemed,
means the price at which it is to be redeemed pursuant to this Indenture.

"Regular Record Date" for the interest payable on any Interest Payment Date
on the Securities of any series means the date specified for that purpose as
contemplated by Section 301.

"Restricted Subsidiary" means any Subsidiary which owns any Principal
Property.

"Sale and Lease-Back Transaction" means any arrangement with any person
providing for the leasing by the Company or any Restricted Subsidiary of any
Principal Property which property has been or is to be sold or transferred by
the Company or such Restricted Subsidiary to such person.

"Securities" has the meaning stated in the first recital of this Indenture
and more particularly means any Securities authenticated and delivered under
this Indenture.

"Securities Act" means the Securities Act of 1933 and any statute successor
thereto, in each case as amended from time to time.

"Security Register" and "Security Registrar" have the respective meanings
specified in Section 305.

"Special Record Date" for the payment of any Defaulted Interest means a
date fixed by the Trustee pursuant to Section 307.

"Stated Maturity", when used with respect to any Security or any instalment
of principal thereof or interest thereon, means the date specified in such
Security as the fixed date on which the principal of such Security or such
instalment of principal or interest is due and payable.

"Subsidiary" means any corporation of which at least a majority of the
outstanding voting stock having the power to elect a majority of the board of
directors of such corporation is at the time owned, directly or indirectly, by
the Company or by one or more other Subsidiaries, or by the Company and one or
more other Subsidiaries. For the purposes of this definition, "voting stock"
means stock which ordinarily has voting power

-7-

<PAGE>

for the election of directors, whether at all times or only so long as no senior
class of stock has such voting power by reason of any contingency.

"Trust Indenture Act" means the Trust Indenture Act of 1939 as in force at
the date as of which this instrument was executed; PROVIDED, HOWEVER, that in
the event the Trust Indenture Act of 1939 is amended after such date, "Trust
Indenture Act" means, to the extent required by any such amendment, the Trust
Indenture Act of 1939 as so amended.

"Trustee" means the Person named as the "Trustee" in the first paragraph of
this instrument until a successor Trustee shall have become such pursuant to the
applicable provisions of this Indenture, and thereafter "Trustee" shall mean or
include each Person who is then a Trustee hereunder, and if at any time there is
more than one such Person, "Trustee" as used with respect to the Securities of
any series shall mean the Trustee with respect to Securities of that series.

"U.S. Government Obligation" has the meaning specified in Section 1304.

"Vice President", when used with respect to the Company or the Trustee,
means any vice president, whether or not designated by a number or a word or
words added before or after the title "vice president".

SECTION 102. COMPLIANCE CERTIFICATES AND OPINIONS.

Upon any application or request by the Company to the Trustee to take
any action under any provision of this Indenture, the Company shall furnish to
the Trustee such certificates and opinions as may be required under the Trust
Indenture Act. Each such certificate or opinion shall be given in the form of an
Officers' Certificate, if to be given by an officer of the Company, or an
Opinion of Counsel, if to be given by counsel, and shall comply with the
requirements of the Trust Indenture Act and any other requirements set forth in
this Indenture.

Every certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture shall include,

(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;

(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;

(3) a statement that, in the opinion of each such individual, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition
has been complied with; and

-8-

<PAGE>

(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.

SECTION 103. FORM OF DOCUMENTS DELIVERED TO TRUSTEE.

In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.

Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or opinion of counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.

Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.

SECTION 104. ACTS OF HOLDERS; RECORD DATES.

Any request, demand, authorization, direction, notice, consent, waiver or
other action provided or permitted by this Indenture to be given, made or taken
by Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by agent duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee and, where it is hereby expressly required, to the Company. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments. Proof of execution of any such instrument or of
a writing appointing any such agent shall be sufficient for any purpose of this
Indenture and (subject to Section 601) conclusive in favor of the Trustee and
the Company, if made in the manner provided in this Section.

The fact and date of the execution by any Person of any such instrument or
writing may be proved by the affidavit of a witness of such execution or by a
certificate of a

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<PAGE>

notary public or other officer authorized by law to take acknowledgments of
deeds, certifying that the individual signing such instrument or writing
acknowledged to him the execution thereof. Where such execution is by a signer
acting in a capacity other than his individual capacity, such certificate or
affidavit shall also constitute sufficient proof of his authority. The fact and
date of the execution of any such instrument or writing, or the authority of the
Person executing the same, may also be proved in any other manner which the
Trustee deems sufficient.

The ownership of Securities shall be proved by the Security Register.

Any request, demand, authorization, direction, notice, consent, waiver or
other Act of the Holder of any Security shall bind every future Holder of the
same Security and the Holder of every Security issued upon the registration of
transfer thereof or in exchange therefor or in lieu thereof in respect of
anything done, omitted or suffered to be done by the Trustee or the Company in
reliance thereon, whether or not notation of such action is made upon such
Security.

The Company may set any day as a record date for the purpose of determining
the Holders of Outstanding Securities of any series entitled to give, make or
take any request, demand, authorization, direction, notice, consent, waiver or
other action provided or permitted by this Indenture to be given, made or taken
by Holders of Securities of such series, PROVIDED that the Company may not set a
record date for, and the provisions of this paragraph shall not apply with
respect to, the giving or making of any notice, declaration, request or
direction referred to in the next paragraph. If any record date is set pursuant
to this paragraph, the Holders of Outstanding Securities of the relevant series
on such record date, and no other Holders, shall be entitled to take the
relevant action, whether or not such Holders remain Holders after such record
date; PROVIDED that no such action shall be effective hereunder unless taken on
or prior to the applicable Expiration Date by Holders of the requisite principal
amount of Outstanding Securities of such series on such record date. Nothing in
this paragraph shall be construed to prevent the Company from setting a new
record date for any action for which a record date has previously been set
pursuant to this paragraph (whereupon the record date previously set shall
automatically and with no action by any Person be cancelled and of no effect),
and nothing in this paragraph shall be construed to render ineffective any
action taken by Holders of the requisite principal amount of Outstanding
Securities of the relevant series on the date such action is taken. Promptly
after any record date is set pursuant to this paragraph, the Company, at its own
expense, shall cause notice of such record date, the proposed action by Holders
and the applicable Expiration Date to be given to the Trustee in writing and to
each Holder of Securities of the relevant series in the manner set forth in
Section 106.

The Trustee may set any day as a record date for the purpose of determining
the Holders of Outstanding Securities of any series entitled to join in the
giving or making of (i) any Notice of Default, (ii) any declaration of
acceleration referred to in Section 502, (iii) any request to institute
proceedings referred to in Section 507(2) or (iv) any direction referred to in
Section 512, in each case with respect to Securities of such series. If any
record date is set pursuant to this paragraph, the Holders of Outstanding
Securities
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<PAGE>

of such series on such record date, and no other Holders, shall be entitled to
join in such notice, declaration, request or direction, whether or not such
Holders remain Holders after such record date; PROVIDED that no such action
shall be effective hereunder unless taken on or prior to the applicable
Expiration Date by Holders of the requisite principal amount of Outstanding
Securities of such series on such record date. Nothing in this paragraph shall
be construed to prevent the Trustee from setting a new record date for any
action for which a record date has previously been set pursuant to this
paragraph (whereupon the record date previously set shall automatically and with
no action by any Person be cancelled and of no effect), and nothing in this
paragraph shall be construed to render ineffective any action taken by Holders
of the requisite principal amount of Outstanding Securities of the relevant
series on the date such action is taken. Promptly after any record date is set
pursuant to this paragraph, the Trustee, at the Company's expense, shall cause
notice of such record date, the proposed action by Holders and the applicable
Expiration Date to be given to the Company in writing and to each Holder of
Securities of the relevant series in the manner set forth in Section 106.

With respect to any record date set pursuant to this Section, the party
hereto which sets such record dates may designate any day as the "Expiration
Date" and from time to time may change the Expiration Date to any earlier or
later day PROVIDED that no Expiration Date shall be later than the 180th day
after the applicable record date; and PROVIDED, FURTHER, that no such change
shall be effective unless notice of the proposed new Expiration Date is given to
the other party hereto in writing, and to each Holder of Securities of the
relevant series in the manner set forth in Section 106, on or prior to the
existing Expiration Date. If an Expiration Date is not designated with respect
to any record date set pursuant to this Section, the party hereto which set such
record date shall be deemed to have initially designated the 180th day after
such record date as the Expiration Date with respect thereto, subject to its
right to change the Expiration Date as provided in this paragraph.

Without limiting the foregoing, a Holder entitled hereunder to take any
action hereunder with regard to any particular Security may do so with regard to
all or any part of the principal amount of such Security or by one or more duly
appointed agents each of which may do so pursuant to such appointment with
regard to all or any part of such principal amount.

SECTION 105. NOTICES, ETC., TO TRUSTEE AND COMPANY.

Any request, demand, authorization, direction, notice, consent, waiver or
Act of Holders or other document provided or permitted by this Indenture to be
made upon, given or furnished to, or filed with,

(1) the Trustee by any Holder or by the Company shall be sufficient
for every purpose hereunder if made, given, furnished or filed in writing
to or with the Trustee at its Corporate Trust Office, Attention:
_________________, or

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<PAGE>

(2) the Company by the Trustee or by any Holder shall be sufficient
for every purpose hereunder (unless otherwise herein expressly provided) if
in writing and mailed, first-class postage prepaid, to the Company
addressed to it at the address of its principal office specified in the
first paragraph of this instrument or at any other address previously
furnished in writing to the Trustee by the Company.

SECTION 106. NOTICE TO HOLDERS; WAIVER.

Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first-class postage prepaid, to each Holder affected
by such event, at his address as it appears in the Security Register, not later
than the latest date (if any), and not earlier than the earliest date (if any),
prescribed for the giving of such notice. In any case where notice to Holders is
given by mail, neither the failure to mail such notice, nor any defect in any
notice so mailed, to any particular Holder shall affect the sufficiency of such
notice with respect to other Holders. Where this Indenture provides for notice
in any manner, such notice may be waived in writing by the Person entitled to
receive such notice, either before or after the event, and such waiver shall be
the equivalent of such notice. Waivers of notice by Holders shall be filed with
the Trustee, but such filing shall not be a condition precedent to the validity
of any action taken in reliance upon such waiver.

In case by reason of the suspension of regular mail service or by reason of
any other cause it shall be impracticable to give such notice by mail, then such
notification as shall be made with the approval of the Trustee shall constitute
a sufficient notification for every purpose hereunder.

SECTION 107. CONFLICT WITH TRUST INDENTURE ACT.

If any provision hereof limits, qualifies or conflicts with a provision of
the Trust Indenture Act which is required under such Act to be a part of and
govern this Indenture, the latter provision shall control. If any provision of
this Indenture modifies or excludes any provision of the Trust Indenture Act
which may be so modified or excluded, the latter provision shall be deemed to
apply to this Indenture as so modified or to be excluded, as the case may be.

SECTION 108. EFFECT OF HEADINGS AND TABLE OF CONTENTS.

The Article and Section headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.

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<PAGE>

SECTION 109. SUCCESSORS AND ASSIGNS.

All covenants and agreements in this Indenture by the Company shall
bind its successors and assigns, whether so expressed or not.

SECTION 110. SEPARABILITY CLAUSE.

In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.

SECTION 111. BENEFITS OF INDENTURE.

Nothing in this Indenture or in the Securities, express or implied, shall
give to any Person, other than the parties hereto and their successors hereunder
and the Holders, any benefit or any legal or equitable right, remedy or claim
under this Indenture.

SECTION 112. GOVERNING LAW.

This Indenture and the Securities shall be governed by and construed in
accordance with the law of the State of New York.

SECTION 113. LEGAL HOLIDAYS.

In any case where any Interest Payment Date, Redemption Date or Stated
Maturity of any Security shall not be a Business Day at any Place of Payment,
then (notwithstanding any other provision of this Indenture or of the Securities
(other than a provision of any Security which specifically states that such
provision shall apply in lieu of this Section)) payment of interest or principal
(and premium, if any) need not be made at such Place of Payment on such date,
but may be made on the next succeeding Business Day at such Place of Payment
with the same force and effect as if made on the Interest Payment Date or
Redemption Date, or at the Stated Maturity.

ARTICLE TWO

SECURITY FORMS

SECTION 201. FORMS GENERALLY.

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<PAGE>

The Securities of each series shall be in substantially the form set forth
in this Article, or in such other form as shall be established by or pursuant to
a Board Resolution or in one or more indentures supplemental hereto, in each
case with such appropriate insertions, omissions, substitutions and other
variations as are required or permitted by this Indenture, and may have such
letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may be required to comply with the rules of any
securities exchange or Depositary therefor or as may, consistently herewith, be
determined by the officers executing such Securities, as evidenced by their
execution thereof. If the form of Securities of any series is established by
action taken pursuant to a Board Resolution, a copy of an appropriate record of
such action shall be certified by the Secretary or an Assistant Secretary of the
Company and delivered to the Trustee at or prior to the delivery of the Company
Order contemplated by Section 303 for the authentication and delivery of such
Securities.

The definitive Securities shall be typewritten, printed, lithographed or
engraved on steel engraved borders or may be produced in any other manner, all
as determined by the officers executing such Securities, as evidenced by their
execution of such Securities.

SECTION 202. FORM OF FACE OF SECURITY.

[INSERT ANY LEGEND REQUIRED BY THE INTERNAL REVENUE CODE AND THE
REGULATIONS THEREUNDER.]

----------------------------------------------------------

--------------------------------------------------------------------------

No. $
--------- --------

__________________________, a corporation duly organized and existing under
the laws of _______________ (herein called the "Company", which term includes
any successor Person under the Indenture hereinafter referred to), for value
received, hereby promises to pay to
_______________________________________________, or registered assigns, the
principal sum of ______________________________________ Dollars on
________________________________________________________ [IF THE SECURITY IS TO
BEAR INTEREST PRIOR TO MATURITY, INSERT -- , and to pay interest thereon from
_____________ or from the most recent Interest Payment Date to which interest
has been paid or duly provided for, semi-annually on ____________ and
____________ in each year, commencing _________, at the rate of ____% per annum,
until the principal hereof is paid or made available for payment [IF APPLICABLE,
INSERT -- , PROVIDED that any principal and premium, and any such instalment of
interest, which is overdue shall bear interest at the rate of ___% per annum (to
the extent that the payment of such interest shall be legally enforceable), from
the dates such amounts are due until they are paid or made available for
payment, and such interest shall be payable on demand]. The interest so payable,
and punctually paid or duly provided for, on any Interest Payment Date will, as
provided in such Indenture, be paid to the Person in whose name this Security
(or one or more Predecessor Securities) is registered at the close of business
on the Regular Record Date

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<PAGE>

for such interest, which shall be the _______ or _______ (whether or not a
Business Day), as the case may be, next preceding such Interest Payment Date.
Any such interest not so punctually paid or duly provided for will forthwith
cease to be payable to the Holder on such Regular Record Date and may either be
paid to the Person in whose name this Security (or one or more Predecessor
Securities) is registered at the close of business on a Special Record Date for
the payment of such Defaulted Interest to be fixed by the Trustee, notice
whereof shall be given to Holders of Securities of this series not less than
10 days prior to such Special Record Date, or be paid at any time in any other
lawful manner not inconsistent with the requirements of any securities exchange
on which the Securities of this series may be listed, and upon such notice as
may be required by such exchange, all as more fully provided in said Indenture].

[IF THE SECURITY IS NOT TO BEAR INTEREST PRIOR TO MATURITY, INSERT -- The
principal of this Security shall not bear interest except in the case of a
default in payment of principal upon acceleration, upon redemption[, repayment]
or at Stated Maturity and in such case the overdue principal and any overdue
premium shall bear interest at the rate of ....% per annum (to the extent that
the payment of such interest shall be legally enforceable), from the dates such
amounts are due until they are paid or made available for payment. Interest on
any overdue principal or premium shall be payable on demand. [Any such interest
on overdue principal or premium which is not paid on demand shall bear interest
at the rate of ......% per annum (to the extent that the payment of such
interest on interest shall be legally enforceable), from the date of such demand
until the amount so demanded is paid or made available for payment. Interest on
any overdue interest shall be payable on demand.]]

Payment of the principal of (and premium, if any) and [if applicable,
insert ___ any such] interest on this Security will be made at the office or
agency of the Company maintained for that purpose in ____________, in such coin
or currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts [IF APPLICABLE, INSERT -- ;
PROVIDED, HOWEVER, that at the option of the Company payment of interest may be
made by check mailed to the address of the Person entitled thereto as such
address shall appear in the Security Register].

Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.

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<PAGE>

Unless the certificate of authentication hereon has been executed by the
Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.

IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.

Dated:

--------------------------------------------------
By
------------------------------------------------
Attest:

- -----------------------------------------

SECTION 203. FORM OF REVERSE OF SECURITY.

This Security is one of a duly authorized issue of securities of the
Company (herein called the "Securities"), issued and to be issued in one or
more series under an Indenture, dated as of _______________ (herein called the
"Indenture", which term shall have the meaning assigned to it in such
instrument), between the Company and ___________________, as Trustee (herein
called the "Trustee", which term includes any successor trustee under the
Indenture), and reference is hereby made to the Indenture for a statement of the
respective rights, limitations of rights, duties and immunities thereunder of
the Company, the Trustee and the Holders of the Securities and of the terms upon
which the Securities are, and are to be, authenticated and delivered. This
Security is one of the series designated on the face hereof [IF APPLICABLE,
INSERT -- , limited in aggregate principal amount to $___________].

[IF APPLICABLE, INSERT -- The Securities of this Series are subject to
repayment on or after ________, ____, at the option of the Holder upon not less
than 30 days' (but not more than 60 days') notice by mail to the Paying Agent
prior to the repayment date including (a) appropriate wire instructions and (b)
either (i) the Security with the form entitled Option to Elect Repayment (as set
forth below) attached to the Security duly completed or (ii) a telegram, telex,
facsimile transmission or letter from a member of a national securities exchange
or the National Association of Securities Dealers, Inc. or a commercial bank or
trust company in the United States setting forth the name of the Holder of such
Security, the principal amount of such Debenture, the portion of the principal
amount of such Security to be repaid, the certificate number or a description of
the tenor and terms of such Security, a statement that the option to elect
repayment is being exercised thereby and a guarantee that such Security to be
repaid with the form entitled Option to Elect Repayment (substantially in the
form set out in the Indenture) attached to such Security duly completed will be
received by the Paying Agent not later

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<PAGE>

than five Business Days after the date of such telegram, telex, facsimile
transmission or letter and such Security and form duly completed must be
received by the Paying Agent by such fifth Business Day. Exercise of the
repayment option by the Holder of such Security shall be irrevocable. The
repayment option may be exercised by the Holder of such Security for less than
the entire principal amount of the Security provided that the principal amount
of the Security remaining outstanding after repayment is an authorized
denomination. No registration of, transfer or exchange of such Security (or, in
the event that such Security is to be repaid in part, the portion of the
Security to be repaid) will be permitted after exercise of a repayment option.]

[IF APPLICABLE, INSERT -- The Securities of this series are subject to
redemption upon not less than 30 days' notice by mail, [IF APPLICABLE, INSERT --
(1) on ___________ in any year commencing with the year ______ and ending with
the year ______ through operation of the sinking fund for this series at a
Redemption Price equal to 100% of the principal amount, and (2)] at any time [IF
APPLICABLE, INSERT -- on or after __________, 19__], as a whole or in part, at
the election of the Company, at the following Redemption Prices (expressed as
percentages of the principal amount): If redeemed [IF APPLICABLE, INSERT -- on
or before _______________, ___%, and if redeemed] during the 12-month period
beginning _____________ of the years indicated,

Redemption Redemption
Year Price Year Price
- ---- ---------- ---- ----------

and thereafter at a Redemption Price equal to ___% of the principal amount,
together in the case of any such redemption [IF APPLICABLE, INSERT -- (whether
through operation of the sinking fund or otherwise)] with accrued interest to
the Redemption Date, but interest installments whose Stated Maturity is on or
prior to such Redemption Date will be payable to the Holders of such Securities,
or one or more Predecessor Securities, of record at the close of business on the
relevant Record Dates referred to on the face hereof, all as provided in the
Indenture.]

[IF APPLICABLE, INSERT -- The Securities of this series are subject to
redemption upon not less than 30 days' notice by mail, (1) on ____________ in
any year commencing with the year ____ and ending with the year ____ through
operation of the sinking fund for this series at the Redemption Prices for
redemption through operation of the sinking fund (expressed as percentages of
the principal amount) set forth in the table below, and (2) at any time [IF
APPLICABLE, INSERT -- on or after ____________], as a whole or in part, at the
election of the Company, at the Redemption Prices for redemption otherwise than
through operation of the sinking fund (expressed as percentages of the principal
amount) set forth

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<PAGE>

in the table below: If redeemed during the 12-month period beginning
____________ of the years indicated,

Redemption Price
For Redemption Redemption Price For
Through Operation Redemption Otherwise
of the Than Through Operation
Year Sinking Fund of the Sinking Fund
- ---- ----------------- ----------------------

and thereafter at a Redemption Price equal to _____% of the principal amount,
together in the case of any such redemption (whether through operation of the
sinking fund or otherwise) with accrued interest to the Redemption Date, but
interest installments whose Stated Maturity is on or prior to such Redemption
Date will be payable to the Holders of such Securities, or one or more
Predecessor Securities, of record at the close of business on the relevant
Record Dates referred to on the face hereof, all as provided in the Indenture.]

[IF APPLICABLE, INSERT -- Notwithstanding the foregoing, the Company may
not, prior to _____________, redeem any Securities of this series as
contemplated by [IF APPLICABLE, INSERT -- Clause (2) of] the preceding paragraph
as a part of, or in anticipation of, any refunding operation by the application,
directly or indirectly, of moneys borrowed having an interest cost to the
Company (calculated in accordance with generally accepted financial practice) of
less than _____% per annum.]

[IF APPLICABLE, INSERT -- The sinking fund for this series provides for the
redemption on ____________ in each year beginning with the year _______ and
ending with the year ______ of [IF APPLICABLE, INSERT -- not less than
$__________ ("mandatory sinking fund") and not more than] $_________ aggregate
principal amount of Securities of this series. Securities of this series
acquired or redeemed by the Company otherwise than through [IF APPLICABLE,
INSERT -- mandatory] sinking fund payments may be credited against subsequent
[IF APPLICABLE, INSERT -- mandatory] sinking fund payments otherwise required to
be made [IF APPLICABLE, INSERT -- , in the inverse order in which they become
due].]

[IF THE SECURITY IS SUBJECT TO REDEMPTION OF ANY KIND, INSERT -- In the
event of redemption of this Security in part only, a new Security or Securities
of this series and of like tenor for the unredeemed portion hereof will be
issued in the name of the Holder hereof upon the cancellation hereof.]

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<PAGE>

[IF APPLICABLE, INSERT -- The Indenture contains provisions for defeasance
at any time of [the entire indebtedness of this Security] [or] [certain
restrictive covenants and Events of Default with respect to this Security] [, in
each case] upon compliance with certain conditions set forth in the Indenture.]

[IF THE SECURITY IS NOT AN ORIGINAL ISSUE DISCOUNT SECURITY, INSERT -- If
an Event of Default with respect to Securities of this series shall occur and be
continuing, the principal of the Securities of this series may be declared due
and payable in the manner and with the effect provided in the Indenture.]

[IF THE SECURITY IS AN ORIGINAL ISSUE DISCOUNT SECURITY, INSERT -- If an
Event of Default with respect to Securities of this series shall occur and be
continuing, an amount of principal of the Securities of this series may be
declared due and payable in the manner and with the effect provided in the
Indenture. Such amount shall be equal to -- INSERT FORMULA FOR DETERMINING THE
AMOUNT. Upon payment (i) of the amount of principal so declared due and payable
and (ii) of interest on any overdue principal, premium and interest (in each
case to the extent that the payment of such interest shall be legally
enforceable), all of the Company's obligations in respect of the payment of the
principal of and premium and interest, if any, on the Securities of this series
shall terminate.]

The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities of each series to be
affected under the Indenture at any time by the Company and the Trustee with the
consent of the Holders of 66 2/3% in principal amount of the Securities at the
time Outstanding of each series to be affected. The Indenture also contains
provisions permitting the Holders of specified percentages in principal amount
of the Securities of each series at the time Outstanding, on behalf of the
Holders of all Securities of such series, to waive compliance by the Company
with certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences. Any such consent or waiver by the Holder of
this Security shall be conclusive and binding upon such Holder and upon all
future Holders of this Security and of any Security issued upon the registration
of transfer of this Security or in exchange for or in lieu of this Security,
whether or not notation of such consent or waiver is made upon this Security.

As provided in and subject to the provisions of the Indenture, the Holder
of this Security shall not have the right to institute any proceeding with
respect to the Indenture or for the appointment of a receiver or trustee or for
any other remedy thereunder, unless such Holder shall have previously given the
Trustee written notice of a continuing Event of Default with respect to the
Securities of this series, the Holders of not less than 25% in principal amount
of the Securities of this series at the time Outstanding shall have made written
request to the Trustee to institute proceedings in respect of such Event of
Default as Trustee and offered the Trustee reasonable indemnity, and the Trustee
shall not have received from the Holders of a majority in principal amount of
Securities of this series at the time Outstanding a direction inconsistent with
such request, and shall have failed to institute any such proceeding, for 60
days after receipt of such notice, request

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<PAGE>

and offer of indemnity. The foregoing shall not apply to any suit instituted by
the Holder of this Security for the enforcement of any payment of principal
hereof or any premium or interest hereon on or after the respective due dates
expressed herein.

No reference herein to the Indenture and no provision of this Security or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and any premium and interest
on this Security at the times, place and rate, and in the coin or currency,
herein prescribed.

As provided in the Indenture and subject to certain limitations therein set
forth, the transfer of this Security is registrable in the Security Register,
upon surrender of this Security for registration of transfer at the office or
agency of the Company in any place where the principal of and any premium and
interest on this Security are payable, duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to the Company and the
Security Registrar duly executed by, the Holder hereof or his attorney duly
authorized in writing, and thereupon one or more new Securities of this series
and of like tenor, of authorized denominations and for the same aggregate
principal amount, will be issued to the designated transferee or transferees.

The Securities of this series are issuable only in registered form without
coupons in denominations of $_______ and any integral multiple thereof. As
provided in the Indenture and subject to certain limitations therein set forth,
Securities of this series are exchangeable for a like aggregate principal amount
of Securities of this series and of like tenor of a different authorized
denomination, as requested by the Holder surrendering the same.

No service charge shall be made for any such registration of transfer or
exchange, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.

Prior to due presentment of this Security for registration of transfer, the
Company, the Trustee and any agent of the Company or the Trustee may treat the
Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.

All terms used in this Security which are defined in the Indenture shall
have the meanings assigned to them in the Indenture.

SECTION 204. FORM OF LEGEND FOR GLOBAL SECURITIES.

Unless otherwise specified as contemplated by Section 301 for the
Securities evidenced thereby, every Global Security authenticated and delivered
hereunder shall bear a legend in substantially the following form:

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<PAGE>

THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A
NOMINEE THEREOF. THIS SECURITY MAY NOT BE EXCHANGED IN WHOLE OR IN PART FOR A
SECURITY REGISTERED, AND NO TRANSFER OF THIS SECURITY IN WHOLE OR IN PART MAY BE
REGISTERED, IN THE NAME OF ANY PERSON OTHER THAN SUCH DEPOSITARY OR A NOMINEE
THEREOF, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.

SECTION 205. FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION.

The Trustee's certificates of authentication shall be in substantially the
following form:

This is one of the Securities of the series designated therein referred to
in the within-mentioned Indenture.

,
----------------------------
AS TRUSTEE

By
--------------------------
AUTHORIZED OFFICER

ARTICLE THREE

THE SECURITIES

SECTION 301. AMOUNT UNLIMITED; ISSUABLE IN SERIES.

The aggregate principal amount of Securities which may be authenticated and
delivered under this Indenture is unlimited.

The Securities may be issued in one or more series. There shall be
established in or pursuant to a Board Resolution and, subject to Section 303,
set forth, or determined in the manner provided, in an Officers' Certificate, or
established in one or more indentures supplemental hereto, prior to the first
issuance of a Security of any series,

(1) the title of the Securities of the series (which shall
distinguish the Securities of the series from Securities of any other
series);

(2) any limit upon the aggregate principal amount of the Securities
of the series which may be authenticated and delivered under this Indenture
(except for Securities authenticated and delivered upon registration of
transfer of, or in exchange for, or in

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<PAGE>

lieu of, other Securities of the series pursuant to Section 304, 305, 306,
906 or 1107 and except for any Securities which, pursuant to Section 303,
are deemed never to have been authenticated and delivered hereunder);

(3) the Person to whom any interest on a Security of the series shall
be payable, if other than the Person in whose name that Security (or one or
more Predecessor Securities) is registered at the close of business on the
Regular Record Date for such interest;

(4) the date or dates on which the principal of any Securities of the
series is payable;

(5) the rate or rates at which any Securities of the series shall
bear interest, if any, the date or dates from which any such interest shall
accrue, the Interest Payment Dates on which any such interest shall be
payable and the Regular Record Date for any such interest payable on any
Interest Payment Date;

(6) the place or places where the principal of and any premium and
interest on any Securities of the series shall be payable;

(7) the period or periods within which, the price or prices at which
and the terms and conditions upon which any Securities of the series may be
redeemed, in whole or in part, at the option of the Company and, if other
than by a Board Resolution, the manner in which any election by the Company
to redeem the Securities shall be evidenced;

(8) the obligation, if any, of the Company to redeem or purchase any
Securities of the series pursuant to any sinking fund or analogous
provisions or at the option of the Holder thereof and the period or periods
within which, the price or prices at which and the terms and conditions
upon which any Securities of the series shall be redeemed or purchased, in
whole or in part, pursuant to such obligation;

(9) if other than denominations of $1,000 and any integral multiple
thereof, the denominations in which any Securities of the series shall be
issuable;

(10) if the amount of principal of or any premium or interest on any
Securities of the series may be determined with reference to an index or
pursuant to a formula, the manner in which such amounts shall be
determined;

(11) if other than the currency of the United States of America, the
currency, currencies or currency units in which the principal of or any
premium or interest on any Securities of the series shall be payable and
the manner of determining the equivalent thereof in the currency of the
United States of America for any purpose, including for purposes of the
definition of "Outstanding" in Section 101;

(12) if the principal of or any premium or interest on any Securities
of the series is to be payable, at the election of the Company or the
Holder thereof, in one or more

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currencies or currency units other than that or those in which such
Securities are stated to be payable, the currency, currencies or currency
units in which the principal of or any premium or interest on such
Securities as to which such election is made shall be payable, the periods
within which and the terms and conditions upon which such election is to be
made and the amount so payable (or the manner in which such amount shall be
determined);

(13) if other than the entire principal amount thereof, the portion of
the principal amount of any Securities of the series which shall be payable
upon declaration of acceleration of the Maturity thereof pursuant to
Section 502;

(14) if the principal amount payable at the Stated Maturity of any
Securities of the series will not be determinable as of any one or more
dates prior to the Stated Maturity, the amount which shall be deemed to be
the principal amount of such Securities as of any such date for any purpose
thereunder or hereunder, including the principal amount thereof which shall
be due and payable upon any Maturity other than the Stated Maturity or
which shall be deemed to be Outstanding as of any date prior to the Stated
Maturity (or, in any such case, the manner in which such amount deemed to
be the principal amount shall be determined);

(15) if applicable, that the Securities of the series, in whole or any
specified part, shall be defeasible pursuant to Section 1302 or
Section 1303 or both such Sections and, if other than by a Board
Resolution, the manner in which any election by the Company to defease such
Securities shall be evidenced;

(16) if applicable, that any Securities of the series shall be
issuable in whole or in part in the form of one or more Global Securities
and, in such case, the respective Depositaries for such Global Securities,
the form of any legend or legends which shall be borne by any such Global
Security in addition to or in lieu of that set forth in Section 204 and any
circumstances in addition to or in lieu of those set forth in Clause (2) of
the last paragraph of Section 305 in which any such Global Security may be
exchanged in whole or in part for Securities registered, and any transfer
of such Global Security in whole or in part may be registered, in the name
or names of Persons other than the Depositary for such Global Security or a
nominee thereof;

(17) any addition to or change in the Events of Default which applies
to any Securities of the series and any change in the right of the Trustee
or the requisite Holders of such Securities to declare the principal amount
thereof due and payable pursuant to Section 502;

(18) any addition to or change in the covenants set forth in Article
Ten which applies to Securities of the series; and

(19) any other terms of the series (which terms shall not be
inconsistent with the provisions of this Indenture, except as permitted by
Section 901(5)).

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All Securities of any one series shall be substantially identical except as
to denomination and except as may otherwise be provided in or pursuant to the
Board Resolution referred to above and (subject to Section 303) set forth, or
determined in the manner provided, in the Officers' Certificate referred to
above or in any such indenture supplemental hereto.

If any of the terms of the series are established by action taken pursuant
to a Board Resolution, a copy of an appropriate record of such action shall be
certified by the Secretary or an Assistant Secretary of the Company and
delivered to the Trustee at or prior to the delivery of the Officers'
Certificate setting forth the terms of the series.

SECTION 302. DENOMINATIONS.

The Securities of each series shall be issuable only in registered form
without coupons and only in such denominations as shall be specified as
contemplated by Section 301. In the absence of any such specified denomination
with respect to the Securities of any series, the Securities of such series
shall be issuable in denominations of $1,000 and any integral multiple thereof.

SECTION 303. EXECUTION, AUTHENTICATION, DELIVERY AND DATING.

The Securities shall be executed on behalf of the Company by its Chairman
of the Board, its Vice Chairman of the Board, its President or one of its Vice
Presidents, under its corporate seal reproduced thereon attested by its
Secretary or one of its Assistant Secretaries. The signature of any of these
officers on the Securities may be manual or facsimile.

Securities bearing the manual or facsimile signatures of individuals who
were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.

At any time and from time to time after the execution and delivery of this
Indenture, the Company may deliver Securities of any series executed by the
Company to the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Securities, and the Trustee in accordance
with the Company Order shall authenticate and deliver such Securities. If the
form or terms of the Securities of the series have been established by or
pursuant to one or more Board Resolutions as permitted by Sections 201 and 301,
in authenticating such Securities, and accepting the

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additional responsibilities under this Indenture in relation to such Securities,
the Trustee shall be entitled to receive, and (subject to Section 601) shall be
fully protected in relying upon, an Opinion of Counsel stating,

(1) if the form of such Securities has been established by or
pursuant to Board Resolution as permitted by Section 201, that such form
has been established in conformity with the provisions of this Indenture;

(2) if the terms of such Securities have been established by or
pursuant to Board Resolution as permitted by Section 301, that such terms
have been established in conformity with the provisions of this Indenture;
and

(3) that such Securities, when authenticated and delivered by the
Trustee and issued by the Company in the manner and subject to any
conditions specified in such Opinion of Counsel, will constitute valid and
legally binding obligations of the Company enforceable in accordance with
their terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity
principles.

If such form or terms have been so established, the Trustee shall not be
required to authenticate such Securities if the issue of such Securities
pursuant to this Indenture will affect the Trustee's own rights, duties or
immunities under the Securities and this Indenture or otherwise in a manner
which is not reasonably acceptable to the Trustee.

Notwithstanding the provisions of Section 301 and of the preceding
paragraph, if all Securities of a series are not to be originally issued at one
time, it shall not be necessary to deliver the Officers' Certificate otherwise
required pursuant to Section 301 or the Company Order and Opinion of Counsel
otherwise required pursuant to such preceding paragraph at or prior to the
authentication of each Security of such series if such documents are delivered
at or prior to the authentication upon original issuance of the first Security
of such series to be issued.

Each Security shall be dated the date of its authentication.

No Security shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by manual signature, and such certificate upon any
Security shall be conclusive evidence, and the only evidence, that such Security
has been duly authenticated and delivered hereunder. Notwithstanding the
foregoing, if any Security shall have been authenticated and delivered hereunder
but never issued and sold by the Company, and the Company shall deliver such
Security to the Trustee for cancellation as provided in Section 309, for all
purposes of this Indenture such Security shall be deemed never to have been
authenticated and delivered hereunder and shall never be entitled to the
benefits of this Indenture.

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SECTION 304. TEMPORARY SECURITIES.

Pending the preparation of definitive Securities of any series, the Company
may execute, and upon Company Order the Trustee shall authenticate and deliver,
temporary Securities which are typewritten, printed, lithographed, typewritten,
mimeographed or otherwise produced, in any authorized denomination,
substantially of the tenor of the definitive Securities in lieu of which they
are issued and with such appropriate insertions, omissions, substitutions and
other variations as the officers executing such Securities may determine, as
evidenced by their execution of such Securities.

If temporary Securities of any series are issued, the Company will cause
definitive Securities of that series to be prepared without unreasonable delay.
After the preparation of definitive Securities of such series, the temporary
Securities of such series shall be exchangeable for definitive Securities of
such series upon surrender of the temporary Securities of such series at the
office or agency of the Company in a Place of Payment for that series, without
charge to the Holder. Upon surrender for cancellation of any one or more
temporary Securities of any series, the Company shall execute and the Trustee
shall authenticate and deliver in exchange therefor one or more definitive
Securities of the same series, of any authorized denominations and of like tenor
and aggregate principal amount. Until so exchanged, the temporary Securities of
any series shall in all respects be entitled to the same benefits under this
Indenture as definitive Securities of such series and tenor.

SECTION 305. REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE.

The Company shall cause to be kept at the Corporate Trust Office of the
Trustee a register (the register maintained in such office and in any other
office or agency of the Company in a Place of Payment being herein sometimes
collectively referred to as the "Security Register") in which, subject to such
reasonable regulations as it may prescribe, the Company shall provide for the
registration of Securities and of transfers of Securities. The Trustee is hereby
appointed "Security Registrar" for the purpose of registering Securities and
transfers of Securities as herein provided.

Upon surrender for registration of transfer of any Security of a series at
the office or agency of the Company in a Place of Payment for that series, the
Company shall execute, and the Trustee shall authenticate and deliver, in the
name of the designated transferee or transferees, one or more new Securities of
the same series, of any authorized denominations and of like tenor and aggregate
principal amount.

At the option of the Holder, Securities of any series may be exchanged for
other Securities of the same series, of any authorized denominations and of like
tenor and aggregate principal amount, upon surrender of the Securities to be
exchanged at such office or agency. Whenever any Securities are so surrendered
for exchange, the Company shall execute, and the Trustee shall authenticate and
deliver, the Securities which the Holder making the exchange is entitled to
receive.

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All Securities issued upon any registration of transfer or exchange of
ecurities shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Securities
surrendered upon such registration of transfer or exchange.

Every Security presented or surrendered for registration of transfer or for
exchange shall (if so required by the Company or the Trustee) be duly endorsed,
or be accompanied by a written instrument of transfer in form satisfactory to
the Company and the Security Registrar duly executed, by the Holder thereof or
his attorney duly authorized in writing.

No service charge shall be made for any registration of transfer or
exchange of Securities, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
with any registration of transfer or exchange of Securities, other than
exchanges pursuant to Section 304, 906 or 1107 not involving any transfer.

If the Securities of any series (or of any series and specified tenor) are
to be redeemed in part, the Company shall not be required (A) to issue, register
the transfer of or exchange any Securities of that series (or of that series and
specified tenor, as the case may be) during a period beginning at the opening of
business 15 days before the day of the mailing of a notice of redemption of any
such Securities selected for redemption under Section 1103 and ending at the
close of business on the day of such mailing, or (B) to register the transfer of
or exchange any Security so selected for redemption in whole or in part, except
the unredeemed portion of any Security being redeemed in part.

The provisions of Clauses (1), (2), (3) and (4) below shall apply only to
Global Securities:

(1) Each Global Security authenticated under this Indenture shall be
registered in the name of the Depositary designated for such Global
Security or a nominee thereof and delivered to such Depositary or a nominee
thereof or custodian therefor, and each such Global Security shall
constitute a single Security for all purposes of this Indenture.

(2) Notwithstanding any other provision in this Indenture, no Global
Security may be exchanged in whole or in part for Securities registered,
and no transfer of a Global Security in whole or in part may be registered,
in the name of any Person other than the Depositary for such Global
Security or a nominee thereof unless (A) such Depositary (i) has notified
the Company that it is unwilling or unable to continue as Depositary for
such Global Security or (ii) has ceased to be a clearing agency registered
under the Exchange Act, (B) there shall have occurred and be continuing an
Event of Default with respect to such Global Security or (C) there shall
exist such circumstances, if any, in addition to or in lieu of the
foregoing as have been specified for this purpose as contemplated by
Section 301.

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(3) Subject to Clause (2) above, any exchange of a Global Security
for other Securities may be made in whole or in part, and all Securities
issued in exchange for a Global Security or any portion thereof shall be
registered in such names as the Depositary for such Global Security shall
direct.

(4) Every Security authenticated and delivered upon registration of
transfer of, or in exchange for or in lieu of, a Global Security or any
portion thereof, whether pursuant to this Section, Section 304, 306, 906 or
1107 or otherwise, shall be authenticated and delivered in the form of, and
shall be, a Global Security, unless such Security is registered in the name
of a Person other than the Depositary for such Global Security or a nominee
thereof.

SECTION 306. MUTILATED, DESTROYED, LOST AND STOLEN SECURITIES.

If any mutilated Security is surrendered to the Trustee, the Company shall
execute and the Trustee shall authenticate and deliver in exchange therefor a
new Security of the same series and of like tenor and principal amount and
bearing a number not contemporaneously outstanding.

If there shall be delivered to the Company and the Trustee (i) evidence to
their satisfaction of the destruction, loss or theft of any Security and
(ii) such security or indemnity as may be required by them to save each of them
and any agent of either of them harmless, then, in the absence of notice to the
Company or the Trustee that such Security has been acquired by a bona fide
purchaser, the Company shall execute and the Trustee shall authenticate and
deliver, in lieu of any such destroyed, lost or stolen Security, a new Security
of the same series and of like tenor and principal amount and bearing a number
not contemporaneously outstanding.

In case any such mutilated, destroyed, lost or stolen Security has become
or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, pay such Security.

Upon the issuance of any new Security under this Section, the Company may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other expenses (including
the fees and expenses of the Trustee) connected therewith.

Every new Security of any series issued pursuant to this Section in lieu of
any destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Securities of that series duly issued hereunder.

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The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities.

SECTION 307. PAYMENT OF INTEREST; INTEREST RIGHTS PRESERVED.

Except as otherwise provided as contemplated by Section 301 with respect to
any series of Securities, interest on any Security which is payable, and is
punctually paid or duly provided for, on any Interest Payment Date shall be paid
to the Person in whose name that Security (or one or more Predecessor
Securities) is registered at the close of business on the Regular Record Date
for such interest.

Any interest on any Security of any series which is payable, but is not
punctually paid or duly provided for, on any Interest Payment Date (herein
called "Defaulted Interest") shall forthwith cease to be payable to the Holder
on the relevant Regular Record Date by virtue of having been such Holder, and
such Defaulted Interest may be paid by the Company, at its election in each
case, as provided in Clause (1) or (2) below:

(1) The Company may elect to make payment of any Defaulted Interest
to the Persons in whose names the Securities of such series (or their
respective Predecessor Securities) are registered at the close of business
on a Special Record Date for the payment of such Defaulted Interest, which
shall be fixed in the following manner. The Company shall notify the
Trustee in writing of the amount of Defaulted Interest proposed to be paid
on each Security of such series and the date of the proposed payment, and
at the same time the Company shall deposit with the Trustee an amount of
money equal to the aggregate amount proposed to be paid in respect of such
Defaulted Interest or shall make arrangements satisfactory to the Trustee
for such deposit prior to the date of the proposed payment, such money when
deposited to be held in trust for the benefit of the Persons entitled to
such Defaulted Interest as in this Clause provided. Thereupon the Trustee
shall fix a Special Record Date for the payment of such Defaulted Interest
which shall be not more than 15 days and not less than 10 days prior to the
date of the proposed payment and not less than 10 days after the receipt by
the Trustee of the notice of the proposed payment. The Trustee shall
promptly notify the Company of such Special Record Date and, in the name
and at the expense of the Company, shall cause notice of the proposed
payment of such Defaulted Interest and the Special Record Date therefor to
be given to each Holder of Securities of such series in the manner set
forth in Section 106, not less than 10 days prior to such Special Record
Date. Notice of the proposed payment of such Defaulted Interest and the
Special Record Date therefor having been so mailed, such Defaulted Interest
shall be paid to the Persons in whose names the Securities of such series
(or their respective Predecessor Securities) are registered at the close of
business on such Special Record Date and shall no longer be payable
pursuant to the following Clause (2).

(2) The Company may make payment of any Defaulted Interest on the
Securities of any series in any other lawful manner not inconsistent with
the

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requirements of any securities exchange on which such Securities may be
listed, and upon such notice as may be required by such exchange, if, after
notice given by the Company to the Trustee of the proposed payment pursuant
to this Clause, such manner of payment shall be deemed practicable by the
Trustee.

Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Security.

SECTION 308. PERSONS DEEMED OWNERS.

Prior to due presentment of a Security for registration of transfer, the
Company, the Trustee and any agent of the Company or the Trustee may treat the
Person in whose name such Security is registered as the owner of such Security
for the purpose of receiving payment of principal of and any premium and
(subject to Section 307) any interest on such Security and for all other
purposes whatsoever, whether or not such Security be overdue, and neither the
Company, the Trustee nor any agent of the Company or the Trustee shall be
affected by notice to the contrary.

SECTION 309. CANCELLATION.

All Securities surrendered for payment, redemption, registration of
transfer or exchange or for credit against any sinking fund payment shall, if
surrendered to any Person other than the Trustee, be delivered to the Trustee
and shall be promptly cancelled by it. The Company may at any time deliver to
the Trustee for cancellation any Securities previously authenticated and
delivered hereunder which the Company may have acquired in any manner
whatsoever, and may deliver to the Trustee (or to any other Person for delivery
to the Trustee) for cancellation any Securities previously authenticated
hereunder which the Company has not issued and sold, and all Securities so
delivered shall be promptly cancelled by the Trustee. No Securities shall be
authenticated in lieu of or in exchange for any Securities cancelled as provided
in this Section, except as expressly permitted by this Indenture. All cancelled
Securities held by the Trustee shall be disposed of as directed by a Company
Order.

SECTION 310. COMPUTATION OF INTEREST.

Except as otherwise specified as contemplated by Section 301 for Securities
of any series, interest on the Securities of each series shall be computed on
the basis of a 360-day year of twelve 30-day months.

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ARTICLE FOUR

SATISFACTION AND DISCHARGE

SECTION 401. SATISFACTION AND DISCHARGE OF INDENTURE.

This Indenture shall upon Company Request cease to be of further effect
except as to any surviving rights of registration of transfer or exchange of
Securities herein expressly provided for), and the Trustee, at the expense of
the Company, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture, when

(1) either

(A) all Securities theretofore authenticated and delivered (other
than (i) Securities which have been destroyed, lost or stolen and
which have been replaced or paid as provided in Section 306 and
(ii) Securities for whose payment money has theretofore been deposited
in trust or segregated and held in trust by the Company and thereafter
repaid to the Company or discharged from such trust, as provided in
Section 1003) have been delivered to the Trustee for cancellation; or

(B) all such Securities not theretofore delivered to the Trustee for
cancellation

(i) have become due and payable, or

(ii) will become due and payable at their Stated Maturity
within one year, or

(iii) are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice
of redemption by the Trustee in the name, and at the expense, of
the Company,

and the Company, in the case of (i), (ii) or (iii) above, has
deposited or caused to be deposited with the Trustee as trust funds in
trust for the purpose money in an amount sufficient to pay and
discharge the entire indebtedness on such Securities not theretofore
delivered to the Trustee for cancellation, for principal and any
premium and interest to the date of such deposit (in the case of
Securities which have become due and payable) or to the Stated
Maturity or Redemption Date, as the case may be;

(2) the Company has paid or caused to be paid all other sums payable
hereunder by the Company; and

(3) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent
herein provided for relating to the satisfaction and discharge of this
Indenture have been complied with.

Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 607, the obligations of
the Trustee to any

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Authenticating Agent under Section 614 and, if money shall have been deposited
with the Trustee pursuant to subclause (B) of Clause (1) of this Section, the
obligations of the Trustee under Section 402 and the last paragraph of
Section 1003 shall survive.

SECTION 402. APPLICATION OF TRUST MONEY.

Subject to the provisions of the last paragraph of Section 1003, all money
deposited with the Trustee pursuant to Section 401 shall be held in trust and
applied by it, in accordance with the provisions of the Securities and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal and any premium and
interest for whose payment such money has been deposited with the Trustee.

ARTICLE FIVE

REMEDIES

SECTION 501. EVENTS OF DEFAULT.

"Event of Default", wherever used herein with respect to Securities of any
series, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):

(1) default in the payment of any interest upon any Security of that
series when it becomes due and payable, and continuance of such default for
a period of 30 days; or

(2) default in the payment of the principal of or any premium on any
Security of that series at its Maturity; or

(3) default in the deposit of any sinking fund payment, when and as
due by the terms of a Security of that series; or

(4) default in the performance, or breach, of any covenant or
warranty of the Company in this Indenture (other than a covenant or
warranty a default in whose performance or whose breach is elsewhere in
this Section specifically dealt with or which has expressly been included
in this Indenture solely for the benefit of series of Securities other than
that series), and continuance of such default or breach for a period of 60
days after there has been given, by registered or certified mail, to the
Company by the Trustee or to the Company and the Trustee by the Holders of
at least 10% in principal amount of the Outstanding Securities of that
series a written notice

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specifying such default or breach and requiring it to be remedied and
stating that such notice is a "Notice of Default" hereunder; or

(5) a default under any bond, debenture, note or other evidence of
indebtedness for money borrowed by the Company (including a default with
respect to Securities of any series other than that series), or under any
mortgage, indenture or instrument (including this Indenture) under which
there may be issued or by which there may be secured or evidenced any
indebtedness for money borrowed by the Company having an aggregate
principal amount outstanding of at least $10 million, whether such
indebtedness now exists or shall hereafter be created, which default (A)
shall constitute a failure to pay any portion of the principal of such
indebtedness when due and payable after the expiration of any applicable
grace period with respect thereto or (B) shall have resulted in such
indebtedness becoming or being declared due and payable prior to the date
on which it would otherwise have become due and payable, without, in the
case of Clause (A), such indebtedness having been discharged or without, in
the case of Clause (B), such indebtedness having been discharged or such
acceleration having been rescinded or annulled, in each such case, within a
period of 10 days after there shall have been given, by registered or
certified mail, to the Company by the Trustee or to the Company and the
Trustee by the Holders of at least 10% in principal amount of the
Outstanding Securities of that series a written notice specifying such
default and requiring the Company to cause such indebtedness to be
discharged or cause such acceleration to be rescinded or annulled, as the
case may be, and stating that such notice is a "Notice of Default"
hereunder; or

(6) the entry by a court having jurisdiction in the premises of (A) a
decree or order for relief in respect of the Company or any of its
Restricted Subsidiaries in an involuntary case or proceeding under any
applicable Federal or State bankruptcy, insolvency, reorganization or other
similar law or (B) a decree or order adjudging the Company or any of its
Restricted Subsidiaries a bankrupt or insolvent, or approving as properly
filed a petition seeking reorganization, arrangement, adjustment or
composition of or in respect of the Company or any of its Restricted
Subsidiaries under any applicable Federal or State law, or appointing a
custodian, receiver, liquidator, assignee, trustee, sequestrator or other
similar official of the Company or any of its Restricted Subsidiaries or of
any substantial part of its property (or that of any such Restricted
Subsidiary), or ordering the winding up or liquidation of its affairs, and
the continuance of any such decree or order for relief or any such other
decree or order unstayed and in effect for a period of 60 consecutive days;
or

(7) the commencement by the Company of a voluntary case or proceeding
under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or of any other case or proceeding to
be adjudicated a bankrupt or insolvent, or the consent by it to the entry
of a decree or order for relief in respect of the Company or any of its
Restricted Subsidiaries in an involuntary case or proceeding under any
applicable Federal or State bankruptcy, insolvency, reorganization or other
similar law or to the commencement of any bankruptcy or insolvency case or
proceeding against it, or the filing by it of a petition or answer or
consent seeking reorganization or relief under any applicable Federal or
State law, or the consent by it to the filing of such

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petition or to the appointment of or taking possession by a custodian,
receiver, liquidator, assignee, trustee, sequestrator or other similar
official of the Company or any of its Restricted Subsidiaries or of any
substantial part of its property ( or that of any such Restricted
Subsidiary), or the making by it of an assignment for the benefit of
creditors, or the admission by it in writing of its inability to pay its
debts generally as they become due, or the taking of corporate action by
the Company or any of its Restricted Subsidiaries in furtherance of any
such action; or

(8) any other Event of Default provided with respect to Securities of
that series.

SECTION 502. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT.

If an Event of Default (other than an Event of Default specified in
Section 501(6) or 501(7)) with respect to Securities of any series at the time
Outstanding occurs and is continuing, then in every such case the Trustee or the
Holders of not less than 25% in principal amount of the Outstanding Securities
of that series may declare the principal amount of all the Securities of that
series (or, if any Securities of that series are Original Issue Discount
Securities, such portion of the principal amount of such Securities as may be
specified by the terms thereof) to be due and payable immediately, by a notice
in writing to the Company (and to the Trustee if given by Holders), and upon any
such declaration such principal amount (or specified amount) shall become
immediately due and payable. If an Event of Default specified in Section 501(6)
or 501 (7) with respect to Securities of any series at the time Outstanding
occurs, the principal amount of all the Securities of that series (or, if any
Securities of that series are Original Issue Discount Securities, such portion
of the principal amount of such Securities as may be specified by the terms
thereof) shall automatically, and without any declaration or other action on the
part of the Trustee or any Holder, become immediately due and payable.

At any time after such a declaration of acceleration with respect to
Securities of any series has been made and before a judgment or decree for
payment of the money due has been obtained by the Trustee as hereinafter in this
Article provided, the Holders of a majority in principal amount of the
Outstanding Securities of that series, by written notice to the Company and the
Trustee, may rescind and annul such declaration and its consequences if

(1) the Company has paid or deposited with the Trustee a sum sufficient to
pay

(A) all overdue interest on all Securities of that series,

(B) the principal of (and premium, if any, on) any Securities of that
series which have become due otherwise than by such declaration of
acceleration and any interest thereon at the rate or rates prescribed
therefor in such Securities,

(C) to the extent that payment of such interest is lawful, interest
upon overdue interest at the rate or rates prescribed therefor in such
Securities, and

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(D) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel;

and

(2) all Events of Default with respect to Securities of that series,
other than the non-payment of the principal of Securities of that series
which have become due solely by such declaration of acceleration, have been
cured or waived as provided in Section 513.

No such rescission shall affect any subsequent default or impair any right
consequent thereon.

SECTION 503. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY TRUSTEE.

The Company covenants that if

(1) default is made in the payment of any interest on any Security
when such interest becomes due and payable and such default continues for a
period of 30 days, or

(2) default is made in the payment of the principal of (or premium,
if any, on) any Security at the Maturity thereof,

the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Securities, the whole amount then due and payable on such
Securities for principal and any premium and interest and, to the extent that
payment of such interest shall be legally enforceable, interest on any overdue
principal and premium and on any overdue interest, at the rate or rates
prescribed therefor in such Securities, and, in addition thereto, such further
amount as shall be sufficient to cover the costs and expenses of collection,
including the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel.

If an Event of Default with respect to Securities of any series occurs and
is continuing, the Trustee may in its discretion proceed to protect and enforce
its rights and the rights of the Holders of Securities of such series by such
appropriate judicial proceedings as the Trustee shall deem most effectual to
protect and enforce any such rights, whether for the specific enforcement of any
covenant or agreement in this Indenture or in aid of the exercise of any power
granted herein, or to enforce any other proper remedy.

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SECTION 504. TRUSTEE MAY FILE PROOFS OF CLAIM.

In case of any judicial proceeding relative to the Company (or any other
obligor upon the Securities), its property or its creditors, the Trustee shall
be entitled and empowered, by intervention in such proceeding or otherwise, to
take any and all actions authorized under the Trust Indenture Act in order to
have claims of the Holders and the Trustee allowed in any such proceeding. In
particular, the Trustee shall be authorized to collect and receive any moneys or
other property payable or deliverable on any such claims and to distribute the
same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator
or other similar official in any such judicial proceeding is hereby authorized
by each Holder to make such payments to the Trustee and, in the event that the
Trustee shall consent to the making of such payments directly to the Holders, to
pay to the Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 607.

No provision of this Indenture shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding; PROVIDED, HOWEVER,
that the Trustee may, on behalf of the Holders, vote for the election of a
trustee in bankruptcy or similar official and be a member of a creditors' or
other similar committee.

SECTION 505. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF SECURITIES.

All rights of action and claims under this Indenture or the Securities may
be prosecuted and enforced by the Trustee without the possession of any of the
Securities or the production thereof in any proceeding relating thereto, and any
such proceeding instituted by the Trustee shall be brought in its own name as
trustee of an express trust, and any recovery of judgment shall, after provision
for the payment of the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, be for the ratable benefit of
the Holders of the Securities in respect of which such judgment has been
recovered.

SECTION 506. APPLICATION OF MONEY COLLECTED.

Any money collected by the Trustee pursuant to this Article shall be
applied in the following order, at the date or dates fixed by the Trustee and,
in case of the distribution of such money on account of principal or any premium
or interest, upon presentation of the Securities and the notation thereon of the
payment if only partially paid and upon surrender thereof if fully paid:

FIRST: To the payment of all amounts due the Trustee under
Section 607; and

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SECOND: To the payment of the amounts then due and unpaid for
principal of and any premium and interest on the Securities in respect of
which or for the benefit of which such money has been collected, ratably,
without preference or priority of any kind, according to the amounts due
and payable on such Securities for principal and any premium and interest,
respectively.

SECTION 507. LIMITATION ON SUITS.

No Holder of any Security of any series shall have any right to institute
any proceeding, judicial or otherwise, with respect to this Indenture, or for
the appointment of a receiver or trustee, or for any other remedy hereunder,
unless

(1) such Holder has previously given written notice to the Trustee of
a continuing Event of Default with respect to the Securities of that
series;

(2) the Holders of not less than 25% in principal amount of the
Outstanding Securities of that series shall have made written request to
the Trustee to institute proceedings in respect of such Event of Default in
its own name as Trustee hereunder;

(3) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request;

(4) the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such proceeding; and

(5) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a majority
in principal amount of the Outstanding Securities of that series;

it being understood and intended that no one or more of such Holders shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other of
such Holders, or to obtain or to seek to obtain priority or preference over any
other of such Holders or to enforce any right under this Indenture, except in
the manner herein provided and for the equal and ratable benefit of all of such
Holders.

SECTION 508. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL,
PREMIUM AND INTEREST.

Notwithstanding any other provision in this Indenture, the Holder of any
Security shall have the right, which is absolute and unconditional, to receive
payment of the principal of and any premium and (subject to Section 307)
interest on such Security on the respective Stated Maturities expressed in such
Security (or, in the case of redemption,

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on the Redemption Date) and to institute suit for the enforcement of any such
payment, and such rights shall not be impaired without the consent of such
Holder.

SECTION 509. RESTORATION OF RIGHTS AND REMEDIES.

If the Trustee or any Holder has instituted any proceeding to enforce any
ight or remedy under this Indenture and such proceeding has been discontinued or
abandoned for any reason, or has been determined adversely to the Trustee or to
such Holder, then and in every such case, subject to any determination in such
proceeding, the Company, the Trustee and the Holders shall be restored severally
and respectively to their former positions hereunder and thereafter all rights
and remedies of the Trustee and the Holders shall continue as though no such
proceeding had been instituted.

SECTION 510. RIGHTS AND REMEDIES CUMULATIVE.

Except as otherwise provided with respect to the replacement or payment of
mutilated, destroyed, lost or stolen Securities in the last paragraph of
Section 306, no right or remedy herein conferred upon or reserved to the Trustee
or to the Holders is intended to be exclusive of any other right or remedy, and
every right and remedy shall, to the extent permitted by law, be cumulative and
in addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.

SECTION 511. DELAY OR OMISSION NOT WAIVER.

No delay or omission of the Trustee or of any Holder of any Securities to
exercise any right or remedy accruing upon any Event of Default shall impair any
such right or remedy or constitute a waiver of any such Event of Default or an
acquiescence therein. Every right and remedy given by this Article or by law to
the Trustee or to the Holders may be exercised from time to time, and as often
as may be deemed expedient, by the Trustee or by the Holders, as the case may
be.

SECTION 512. CONTROL BY HOLDERS.

The Holders of a majority in principal amount of the Outstanding Securities
of any series shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or exercising
any trust or power conferred on the Trustee, with respect to the Securities of
such series, PROVIDED that

(1) such direction shall not be in conflict with any rule of law or
with this Indenture, and

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(2) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction.

SECTION 513. WAIVER OF PAST DEFAULTS.

The Holders of not less than a majority in principal amount of the
Outstanding Securities of any series may on behalf of the Holders of all the
Securities of such series waive any past default hereunder with respect to such
series and its consequences, except a default

(1) in the payment of the principal of or any premium or interest on
any Security of such series, or

(2) in respect of a covenant or provision hereof which under Article
Nine cannot be modified or amended without the consent of the Holder of
each Outstanding Security of such series affected.

Upon any such waiver, such default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured, for every purpose
of this Indenture; but no such waiver shall extend to any subsequent or other
default or impair any right consequent thereon.

SECTION 514. UNDERTAKING FOR COSTS.

In any suit for the enforcement of any right or remedy under this
Indenture, or in any suit against the Trustee for any action taken, suffered or
omitted by it as Trustee, a court may require any party litigant in such suit to
file an undertaking to pay the costs of such suit, and may assess costs against
any such party litigant, in the manner and to the extent provided in the Trust
Indenture Act; PROVIDED that neither this Section nor the Trust Indenture Act
shall be deemed to authorize any court to require such an undertaking or to make
such an assessment in any suit instituted by the Company.

SECTION 515. WAIVER OF USURY, STAY OR EXTENSION LAWS.

The Company covenants (to the extent that it may lawfully do so) that it
will not at any time insist upon, or plead, or in any manner whatsoever claim or
take the benefit or advantage of, any usury, stay or extension law wherever
enacted, now or at any time hereafter in force, which may affect the covenants
or the performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such law
and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.

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ARTICLE SIX

THE TRUSTEE

SECTION 601. CERTAIN DUTIES AND RESPONSIBILITIES.

The duties and responsibilities of the Trustee shall be as provided by the
Trust Indenture Act. Notwithstanding the foregoing, no provision of this
Indenture shall require the Trustee to expend or risk its own funds or otherwise
incur any financial liability in the performance of any of its duties hereunder,
or in the exercise of any of its rights or powers, if it shall have reasonable
grounds for believing that repayment of such funds or adequate indemnity against
such risk or liability is not reasonably assured to it. Whether or not therein
expressly so provided, every provision of this Indenture relating to the conduct
or affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section.

SECTION 602. NOTICE OF DEFAULTS.

If a default occurs hereunder with respect to Securities of any series, the
Trustee shall give the Holders of Securities of such series notice of such
default as and to the extent provided by the Trust Indenture Act; PROVIDED,
HOWEVER, that in the case of any default of the character specified in
Section 501(4) with respect to Securities of such series, no such notice to
Holders shall be given until at least 30 days after the occurrence thereof. For
the purpose of this Section, the term "default" means any event which is, or
after notice or lapse of time or both would become, an Event of Default with
respect to Securities of such series.

SECTION 603. CERTAIN RIGHTS OF TRUSTEE.

Subject to the provisions of Section 601:

(1) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document believed by it to be genuine and to have been signed or presented
by the proper party or parties;

(2) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order, and any
resolution of the Board of Directors shall be sufficiently evidenced by a
Board Resolution;

(3) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting

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any action hereunder, the Trustee (unless other evidence be herein
specifically prescribed) may, in the absence of bad faith on its part, rely
upon an Officers' Certificate;

(4) the Trustee may consult with counsel and the written advice of
such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon;

(5) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction
of any of the Holders pursuant to this Indenture, unless such Holders shall
have offered to the Trustee reasonable security or indemnity against the
costs, expenses and liabilities which might be incurred by it in compliance
with such request or direction;

(6) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document, but the Trustee, in its discretion, may make such further inquiry
or investigation into such facts or matters as it may see fit, and, if the
Trustee shall determine to make such further inquiry or investigation, it
shall be entitled to examine the books, records and premises of the
Company, personally or by agent or attorney; and

(7) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by
it hereunder.

SECTION 604. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES.

The recitals contained herein and in the Securities, except the Trustee's
certificates of authentication, shall be taken as the statements of the Company,
and neither the Trustee nor any Authenticating Agent assumes any responsibility
for their correctness. The Trustee makes no representations as to the validity
or sufficiency of this Indenture or of the Securities. Neither the Trustee nor
any Authenticating Agent shall be accountable for the use or application by the
Company of Securities or the proceeds thereof.

SECTION 605. MAY HOLD SECURITIES.

The Trustee, any Authenticating Agent, any Paying Agent, any Security
Registrar or any other agent of the Company, in its individual or any other
capacity, may become the owner or pledgee of Securities and, subject to
Sections 608 and 613, may otherwise deal with the Company with the same rights
it would have if it were not Trustee, Authenticating Agent, Paying Agent,
Security Registrar or such other agent.

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SECTION 606. MONEY HELD IN TRUST.

Money held by the Trustee in trust hereunder need not be segregated from
other funds except to the extent required by law. The Trustee shall be under no
liability for interest on any money received by it hereunder except as otherwise
agreed with the Company.

SECTION 607. COMPENSATION AND REIMBURSEMENT.

The Company agrees

(1) to pay to the Trustee from time to time reasonable compensation
for all services rendered by it hereunder (which compensation shall not be
limited by any provision of law in regard to the compensation of a trustee
of an express trust);

(2) except as otherwise expressly provided herein, to reimburse the
Trustee upon its request for all reasonable expenses, disbursements and
advances incurred or made by the Trustee in accordance with any provision
of this Indenture (including the reasonable compensation and the expenses
and disbursements of its agents and counsel), except any such expense,
disbursement or advance as may be attributable to its negligence or bad
faith; and

(3) to indemnify the Trustee for, and to hold it harmless against,
any loss, liability or expense incurred without negligence or bad faith on
its part, arising out of or in connection with the acceptance or
administration of the trust or trusts hereunder, including the costs and
expenses of defending itself against any claim or liability in connection
with the exercise or performance of any of its powers or duties hereunder.

SECTION 608. CONFLICTING INTERESTS.

If the Trustee has or shall acquire a conflicting interest within the
meaning of the Trust Indenture Act, the Trustee shall either eliminate such
interest or resign, to the extent and in the manner provided by, and subject to
the provisions of, the Trust Indenture Act and this Indenture. To the extent
permitted by such Act, the Trustee shall not be deemed to have a conflicting
interest by virtue of being a trustee under this Indenture with respect to
Securities of more than one series.

SECTION 609. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY.

There shall at all times be one (and only one) Trustee hereunder with
respect to the Securities of each series, which may be Trustee hereunder for
Securities of one or more other series. Each Trustee shall be a Person that is
eligible pursuant to the Trust Indenture Act to act as such has a combined
capital and surplus of at least $50,000,000

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and has its Corporate Trust Office in _________________________________ If any
such Person publishes reports of condition at least annually, pursuant to law or
to the requirements of its supervising or examining authority, then for the
purposes of this Section and to the extent permitted by the Trust Indenture Act,
the combined capital and surplus of such Person shall be deemed to be its
combined capital and surplus as set forth in its most recent report of condition
so published. If at any time the Trustee with respect to the Securities of any
series shall cease to be eligible in accordance with the provisions of this
Section, it shall resign immediately in the manner and with the effect
hereinafter specified in this Article.

SECTION 610. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.

No resignation or removal of the Trustee and no appointment of a successor
Trustee pursuant to this Article shall become effective until the acceptance of
appointment by the successor Trustee in accordance with the applicable
requirements of Section 611.

The Trustee may resign at any time with respect to the Securities of one or
more series by giving written notice thereof to the Company. If the instrument
of acceptance by a successor Trustee required by Section 611 shall not have been
delivered to the Trustee within 30 days after the giving of such notice of
resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee with respect to the
Securities of such series.

The Trustee may be removed at any time with respect to the Securities of
any series by Act of the Holders of a majority in principal amount of the
Outstanding Securities of such series, delivered to the Trustee and to the
Company.

If at any time:

(1) the Trustee shall fail to comply with Section 608 after written
request therefor by the Company or by any Holder who has been a bona fide
Holder of a Security for at least six months, or

(2) the Trustee shall cease to be eligible under Section 609 and
shall fail to resign after written request therefor by the Company or by
any such Holder, or

(3) the Trustee shall become incapable of acting or shall be adjudged
a bankrupt or insolvent or a receiver of the Trustee or of its property
shall be appointed or any public officer shall take charge or control of
the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,

then, in any such case, (A) the Company by a Board Resolution may remove the
Trustee with respect to all Securities, or (B) subject to Section 514, any
Holder who has been a bona fide Holder of a Security for at least six months
may, on behalf of himself and all others similarly situated, petition any court
of competent jurisdiction for the removal of

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the Trustee with respect to all Securities and the appointment of a successor
Trustee or Trustees.

If the Trustee shall resign, be removed or become incapable of acting, or
if a vacancy shall occur in the office of Trustee for any cause, with respect to
the Securities of one or more series, the Company, by a Board Resolution, shall
promptly appoint a successor Trustee or Trustees with respect to the Securities
of that or those series (it being understood that any such successor Trustee may
be appointed with respect to the Securities of one or more or all of such series
and that at any time there shall be only one Trustee with respect to the
Securities of any particular series) and shall comply with the applicable
requirements of Section 611. If, within one year after such resignation, removal
or incapability, or the occurrence of such vacancy, a successor Trustee with
respect to the Securities of any series shall be appointed by Act of the Holders
of a majority in principal amount of the Outstanding Securities of such series
delivered to the Company and the retiring Trustee, the successor Trustee so
appointed shall, forthwith upon its acceptance of such appointment in accordance
with the applicable requirements of Section 611, become the successor Trustee
with respect to the Securities of such series and to that extent supersede the
successor Trustee appointed by the Company. If no successor Trustee with respect
to the Securities of any series shall have been so appointed by the Company or
the Holders and accepted appointment in the manner required by Section 611, any
Holder who has been a bona fide Holder of a Security of such series for at least
six months may, on behalf of himself and all others similarly situated, petition
any court of competent jurisdiction for the appointment of a successor Trustee
with respect to the Securities of such series.

The Company shall give notice of each resignation and each removal of
the Trustee with respect to the Securities of any series and each appointment of
a successor Trustee with respect to the Securities of any series to all Holders
of Securities of such series in the manner provided in Section 106. Each notice
shall include the name of the successor Trustee with respect to the Securities
of such series and the address of its Corporate Trust Office.

SECTION 611. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.

In case of the appointment hereunder of a successor Trustee with respect to
all Securities, every such successor Trustee so appointed shall execute,
acknowledge and deliver to the Company and to the retiring Trustee an instrument
accepting such appointment, and thereupon the resignation or removal of the
retiring Trustee shall become effective and such successor Trustee, without any
further act, deed or conveyance, shall become vested with all the rights,
powers, trusts and duties of the retiring Trustee; but, on the request of the
Company or the successor Trustee, such retiring Trustee shall, upon payment of
its charges, execute and deliver an instrument transferring to such successor
Trustee all the rights, powers and trusts of the retiring Trustee and shall duly
assign, transfer and deliver to such successor Trustee all property and money
held by such retiring Trustee hereunder.

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In case of the appointment hereunder of a successor Trustee with
respect to the Securities of one or more (but not all) series, the Company, the
retiring Trustee and each successor Trustee with respect to the Securities of
one or more series shall execute and deliver an indenture supplemental hereto
wherein each successor Trustee shall accept such appointment and which (1) shall
contain such provisions as shall be necessary or desirable to transfer and
confirm to, and to vest in, each successor Trustee all the rights, powers,
trusts and duties of the retiring Trustee with respect to the Securities of that
or those series to which the appointment of such successor Trustee relates,
(2) if the retiring Trustee is not retiring with respect to all Securities,
shall contain such provisions as shall be deemed necessary or desirable to
confirm that all the rights, powers, trusts and duties of the retiring Trustee
with respect to the Securities of that or those series as to which the retiring
Trustee is not retiring shall continue to be vested in the retiring Trustee, and
(3) shall add to or change any of the provisions of this Indenture as shall be
necessary to provide for or facilitate the administration of the trusts
hereunder by more than one Trustee, it being understood that nothing herein or
in such supplemental indenture shall constitute such Trustees co-trustees of the
same trust and that each such Trustee shall be trustee of a trust or trusts
hereunder separate and apart from any trust or trusts hereunder administered by
any other such Trustee; and upon the execution and delivery of such supplemental
indenture the resignation or removal of the retiring Trustee shall become
effective to the extent provided therein and each such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, trusts and duties of the retiring Trustee with respect to the
Securities of that or those series to which the appointment of such successor
Trustee relates; but, on request of the Company or any successor Trustee, such
retiring Trustee shall duly assign, transfer and deliver to such successor
Trustee all property and money held by such retiring Trustee hereunder with
respect to the Securities of that or those series to which the appointment of
such successor Trustee relates.

Upon request of any such successor Trustee, the Company shall execute any
and all instruments for more fully and certainly vesting in and confirming to
such successor Trustee all such rights, powers and trusts referred to in the
first or second preceding paragraph, as the case may be.

No successor Trustee shall accept its appointment unless at the time of
such acceptance such successor Trustee shall be qualified and eligible under
this Article.

SECTION 612. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS.

Any corporation into which the Trustee may be merged or converted or with
which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all the corporate trust business
of the Trustee, shall be the successor of the Trustee hereunder, provided such
corporation shall be otherwise qualified and eligible under this Article,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto. In case any Securities shall have been authenticated,
but not delivered, by the Trustee then in office, any successor by merger,
conversion or

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consolidation to such authenticating Trustee may adopt such authentication and
deliver the Securities so authenticated with the same effect as if such
successor Trustee had itself authenticated such Securities.

SECTION 613. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.

If and when the Trustee shall be or become a creditor of the Company (or
any other obligor upon the Securities), the Trustee shall be subject to the
provisions of the Trust Indenture Act regarding the collection of claims against
the Company (or any such other obligor).

SECTION 614. APPOINTMENT OF AUTHENTICATING AGENT.

The Trustee may appoint an Authenticating Agent or Agents with respect to
one or more series of Securities which shall be authorized to act on behalf of
the Trustee to authenticate Securities of such series issued upon original issue
and upon exchange, registration of transfer or partial redemption thereof or
pursuant to Section 306, and Securities so authenticated shall be entitled to
the benefits of this Indenture and shall be valid and obligatory for all
purposes as if authenticated by the Trustee hereunder. Wherever reference is
made in this Indenture to the authentication and delivery of Securities by the
Trustee or the Trustee's certificate of authentication, such reference shall be
deemed to include authentication and delivery on behalf of the Trustee by an
Authenticating Agent and a certificate of authentication executed on behalf of
the Trustee by an Authenticating Agent. Each Authenticating Agent shall be
acceptable to the Company and shall at all times be a corporation organized and
doing business under the laws of the United States of America, any State thereof
or the District of Columbia, authorized under such laws to act as Authenticating
Agent, having a combined capital and surplus of not less than $50,000,000 and
subject to supervision or examination by Federal or State authority. If such
Authenticating Agent publishes reports of condition at least annually, pursuant
to law or to the requirements of said supervising or examining authority, then
for the purposes of this Section, the combined capital and surplus of such
Authenticating Agent shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published. If at any time an
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, such Authenticating Agent shall resign immediately
in the manner and with the effect specified in this Section.

Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to the corporate agency or
corporate trust business of an Authenticating Agent, shall continue to be an
Authenticating Agent, provided such corporation shall be otherwise eligible
under this Section, without the execution or filing of any paper or any further
act on the part of the Trustee or the Authenticating Agent.

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An Authenticating Agent may resign at any time by giving written notice
thereof to the Trustee and to the Company. The Trustee may at any time terminate
the agency of an Authenticating Agent by giving written notice thereof to such
Authenticating Agent and to the Company. Upon receiving such a notice of
resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may appoint a successor Authenticating
Agent which shall be acceptable to the Company and shall give notice of such
appointment in the manner provided in Section 106 to all Holders of Securities
of the series with respect to which such Authenticating Agent will serve. Any
successor Authenticating Agent upon acceptance of its appointment hereunder
shall become vested with all the rights, powers and duties of its predecessor
hereunder, with like effect as if originally named as an Authenticating Agent.
No successor Authenticating Agent shall be appointed unless eligible under the
provisions of this Section.

The Trustee agrees to pay to each Authenticating Agent from time to time
reasonable compensation for its services under this Section, and the Trustee
shall be entitled to be reimbursed for such payments, subject to the provisions
of Section 607.

If an appointment with respect to one or more series is made pursuant to
this Section, the Securities of such series may have endorsed thereon, in
addition to the Trustee's certificate of authentication, an alternative
certificate of authentication in the following form:

This is one of the Securities of the series designated therein referred to
in the within-mentioned Indenture.

,
---------------------------------------
AS TRUSTEE

By ,
-------------------------------------
AS AUTHENTICATING AGENT

By
--------------------------------------
AUTHORIZED OFFICER

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ARTICLE SEVEN

HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY

SECTION 701. COMPANY TO FURNISH TRUSTEE NAMES AND ADDRESSES OF HOLDERS.

The Company will furnish or cause to be furnished to the Trustee

(1) semi-annually, not later than January 15 and July 15 in each
year, a list, in such form as the Trustee may reasonably require, of
the names and addresses of the Holders of Securities of each series as
of the preceding .............. or .............., as the case may be,
and

(2) at such other times as the Trustee may request in writing,
within 30 days after the receipt by the Company of any such request, a
list of similar form and content as of a date not more than 15 days
prior to the time such list is furnished;

EXCLUDING from any such list names and addresses received by the Trustee in its
capacity as Security Registrar.

SECTION 702. PRESERVATION OF INFORMATION; COMMUNICATIONS TO HOLDERS.

The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 701 and the names and
addresses of Holders received by the Trustee in its capacity as Security
Registrar. The Trustee may destroy any list furnished to it as provided in
Section 701 upon receipt of a new list so furnished.

The rights of Holders to communicate with other Holders with respect to
their rights under this Indenture or under the Securities, and the corresponding
rights and privileges of the Trustee, shall be as provided by the Trust
Indenture Act.

Every Holder of Securities, by receiving and holding the same, agrees with
the Company and the Trustee that neither the Company nor the Trustee nor any
agent of either of them shall be held accountable by reason of any disclosure of
information as to names and addresses of Holders made pursuant to the Trust
Indenture Act.

SECTION 703. REPORTS BY TRUSTEE.

The Trustee shall transmit to Holders such reports concerning the Trustee
and its actions under this Indenture as may be required pursuant to the Trust
Indenture Act at the times and in the manner provided pursuant thereto.

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A copy of each such report shall, at the time of such transmission to
Holders, be filed by the Trustee with each stock exchange upon which any
Securities are listed, with the Commission and with the Company. The Company
will notify the Trustee when any Securities are listed on any stock exchange.

SECTION 704. REPORTS BY COMPANY.

The Company shall file with the Trustee and the Commission, and transmit to
Holders, such information, documents and other reports, and such summaries
thereof, as may be required pursuant to the Trust Indenture Act at the times and
in the manner provided pursuant to such Act; PROVIDED that any such information,
documents or reports required to be filed with the Commission pursuant to
Section 13 or 15(d) of the Exchange Act shall be filed with the Trustee within
15 days after the same is so required to be filed with the Commission.

ARTICLE EIGHT

CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE

SECTION 801. COMPANY MAY CONSOLIDATE, ETC., ONLY ON CERTAIN TERMS.

The Company shall not consolidate with or merge into any other Person
or convey, transfer or lease its properties and assets substantially as an
entirety to any Person, and the Company shall not permit any Person to
consolidate with or merge into the Company or convey, transfer or lease its
properties and assets substantially as an entirety to the Company, unless:

(1) in case the Company shall consolidate with or merge into another
Person or convey, transfer or lease its properties and assets substantially
as an entirety to any Person, the Person formed by such consolidation or
into which the Company is merged or the Person which acquires by conveyance
or transfer, or which leases, the properties and assets of the Company
substantially as an entirety shall be a corporation, partnership or trust,
shall be organized and validly existing under the laws of the United States
of America, any State thereof or the District of Columbia and shall
expressly assume, by an indenture supplemental hereto, executed and
delivered to the Trustee, in form satisfactory to the Trustee, the due and
punctual payment of the principal of and any premium and interest on all
the Securities and the performance or observance of every covenant of this
Indenture on the part of the Company to be performed or observed;

(2) immediately after giving effect to such transaction and treating
any indebtedness which becomes an obligation of the Company or any
Subsidiary as a result of such transaction as having been incurred by the
Company or such Subsidiary at the time of such transaction, no Event of
Default, and no event which, after notice or

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lapse of time or both, would become an Event of Default, shall have
happened and be continuing;

(3) if, as a result of any such consolidation or merger or such
conveyance, transfer or lease, properties or assets of the Company would
become subject to a mortgage, pledge, lien, security interest or other
encumbrance which would not be permitted by this Indenture, the Company or
such successor Person, as the case may be, shall take such steps as shall
be necessary effectively to secure the Securities equally and ratably with
(or prior to) all indebtedness secured thereby; and

(4) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that such consolidation, merger,
conveyance, transfer or lease and, if a supplemental indenture is required
in connection with such transaction, such supplemental indenture comply
with this Article and that all conditions precedent herein provided for
relating to such transaction have been complied with.

SECTION 802. SUCCESSOR SUBSTITUTED.

Upon any consolidation of the Company with, or merger of the Company
into, any other Person or any conveyance, transfer or lease of the properties
and assets of the Company substantially as an entirety in accordance with
Section 801, the successor Person formed by such consolidation or into which the
Company is merged or to which such conveyance, transfer or lease is made shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company under this Indenture with the same effect as if such successor
Person had been named as the Company herein, and thereafter, except in the case
of a lease, the predecessor Person shall be relieved of all obligations and
covenants under this Indenture and the Securities.

ARTICLE NINE

SUPPLEMENTAL INDENTURES

SECTION 901. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF HOLDERS.

Without the consent of any Holders, the Company, when authorized by a
Board Resolution, and the Trustee, at any time and from time to time, may enter
into one or more indentures supplemental hereto, in form satisfactory to the
Trustee, for any of the following purposes:

(1) to evidence the succession of another Person to the Company and
the assumption by any such successor of the covenants of the Company herein
and in the Securities; or

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(2) to add to the covenants of the Company for the benefit of the
Holders of all or any series of Securities (and if such covenants are to be
for the benefit of less than all series of Securities, stating that such
covenants are expressly being included solely for the benefit of such
series) or to surrender any right or power herein conferred upon the
Company; or

(3) to add any additional Events of Default for the benefit of the
Holders of all or any series of Securities (and if such additional Events
of Default are to be for the benefit of less than all series of Securities,
stating that such additional Events of Default are expressly being included
solely for the benefit of such series); or

(4) to add to or change any of the provisions of this Indenture to
such extent as shall be necessary to permit or facilitate the issuance of
Securities in bearer form, registrable or not registrable as to principal,
and with or without interest coupons, or to permit or facilitate the
issuance of Securities in uncertificated form; or

(5) to add to, change or eliminate any of the provisions of this
Indenture in respect of one or more series of Securities, PROVIDED that any
such addition, change or elimination (A) shall neither (i) apply to any
Security of any series created prior to the execution of such supplemental
indenture and entitled to the benefit of such provision nor (ii) modify the
rights of the Holder of any such Security with respect to such provision or
(B) shall become effective only when there is no such Security Outstanding;
or

(6) to secure the Securities pursuant to the requirements of Section
1008 or otherwise; or

(7) to establish the form or terms of Securities of any series as
permitted by Sections 201 and 301; or

(8) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Securities of one or
more series and to add to or change any of the provisions of this Indenture
as shall be necessary to provide for or facilitate the administration of
the trusts hereunder by more than one Trustee, pursuant to the requirements
of Section 611; or

(9) to cure any ambiguity, to correct or supplement any provision
herein which may be defective or inconsistent with any other provision
herein, or to make any other provisions with respect to matters or
questions arising under this Indenture, PROVIDED that such action pursuant
to this Clause (9) shall not adversely affect the interests of the Holders
of Securities of any series.

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SECTION 902. SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS.

With the consent of the Holders of not less than 66 2/3% in principal
amount of the Outstanding Securities of each series affected by such
supplemental indenture, by Act of said Holders delivered to the Company and the
Trustee, the Company, when authorized by a Board Resolution, and the Trustee may
enter into an indenture or indentures supplemental hereto for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of this Indenture or of modifying in any manner the rights of the
Holders of Securities of such series under this Indenture; PROVIDED, HOWEVER,
that no such supplemental indenture shall, without the consent of the Holder of
each Outstanding Security affected thereby,

(1) change the Stated Maturity of the principal of, or any instalment
of principal of or interest on, any Security, or reduce the principal
amount thereof or the rate of interest thereon or any premium payable upon
the redemption thereof, or reduce the amount of the principal of an
Original Issue Discount Security or any other Security which would be due
and payable upon a declaration of acceleration of the Maturity thereof
pursuant to Section 502, or change any Place of Payment where, or the coin
or currency in which, any Security or any premium or interest thereon is
payable, or impair the right to institute suit for the enforcement of any
such payment on or after the Stated Maturity thereof (or, in the case of
redemption, on or after the Redemption Date), or

(2) reduce the percentage in principal amount of the Outstanding
Securities of any series, the consent of whose Holders is required for any
such supplemental indenture, or the consent of whose Holders is required
for any waiver (of compliance with certain provisions of this Indenture or
certain defaults hereunder and their consequences) provided for in this
Indenture, or

(3) modify any of the provisions of this Section, Section 513 or
Section 1010, except to increase any such percentage or to provide that
certain other provisions of this Indenture cannot be modified or waived
without the consent of the Holder of each Outstanding Security affected
thereby; PROVIDED, HOWEVER, that this clause shall not be deemed to require
the consent of any Holder with respect to changes in the references to "the
Trustee" and concomitant changes in this Section and Section 1010, or the
deletion of this proviso, in accordance with the requirements of
Sections 611 and 901(8).

A supplemental indenture which changes or eliminates any covenant or other
provision of this Indenture which has expressly been included solely for the
benefit of one or more particular series of Securities, or which modifies the
rights of the Holders of Securities of such series with respect to such covenant
or other provision, shall be deemed not to affect the rights under this
Indenture of the Holders of Securities of any other series.

It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.

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SECTION 903. EXECUTION OF SUPPLEMENTAL INDENTURES.

In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and (subject to Section 601) shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture. The Trustee may, but shall not be
obligated to, enter into any such supplemental indenture which affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise.

SECTION 904. EFFECT OF SUPPLEMENTAL INDENTURES.

Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.

SECTION 905. CONFORMITY WITH TRUST INDENTURE ACT.

Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act.

SECTION 906. REFERENCE IN SECURITIES TO SUPPLEMENTAL INDENTURES.

Securities of any series authenticated and delivered after the
execution of any supplemental indenture pursuant to this Article may, and shall
if required by the Trustee, bear a notation in form approved by the Trustee as
to any matter provided for in such supplemental indenture. If the Company shall
so determine, new Securities of any series so modified as to conform, in the
opinion of the Trustee and the Company, to any such supplemental indenture may
be prepared and executed by the Company and authenticated and delivered by the
Trustee in exchange for Outstanding Securities of such series.

ARTICLE TEN

COVENANTS

SECTION 1001. PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST.

The Company covenants and agrees for the benefit of each series of
Securities that it will duly and punctually pay the principal of and any premium
and interest on the Securities of that series in accordance with the terms of
the Securities and this Indenture.

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SECTION 1002. MAINTENANCE OF OFFICE OR AGENCY.

The Company will maintain in each Place of Payment for any series of
Securities an office or agency where Securities of that series may be presented
or surrendered for payment, where Securities of that series may be surrendered
for registration of transfer or exchange and where notices and demands to or
upon the Company in respect of the Securities of that series and this Indenture
may be served. The Company will give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the Corporate Trust
Office of the Trustee, and the Company hereby appoints the Trustee as its agent
to receive all such presentations, surrenders, notices and demands.

The Company may also from time to time designate one or more other
offices or agencies where the Securities of one or more series may be presented
or surrendered for any or all such purposes and may from time to time rescind
such designations; PROVIDED, HOWEVER, that no such designation or rescission
shall in any manner relieve the Company of its obligation to maintain an office
or agency in each Place of Payment for Securities of any series for such
purposes. The Company will give prompt written notice to the Trustee of any such
designation or rescission and of any change in the location of any such other
office or agency.

SECTION 1003. MONEY FOR SECURITIES PAYMENTS TO BE HELD IN TRUST.

If the Company shall at any time act as its own Paying Agent with
respect to any series of Securities, it will, on or before each due date of the
principal of or any premium or interest on any of the Securities of that series,
segregate and hold in trust for the benefit of the Persons entitled thereto a
sum sufficient to pay the principal and any premium and interest so becoming due
until such sums shall be paid to such Persons or otherwise disposed of as herein
provided and will promptly notify the Trustee of its action or failure so to
act.

Whenever the Company shall have one or more Paying Agents for any
series of Securities, it will, prior to each due date of the principal of or any
premium or interest on any Securities of that series, deposit with a Paying
Agent a sum sufficient to pay such amount, such sum to be held as provided by
the Trust Indenture Act, and (unless such Paying Agent is the Trustee) the
Company will promptly notify the Trustee of its action or failure so to act.

The Company will cause each Paying Agent for any series of Securities
other than the Trustee to execute and deliver to the Trustee an instrument in
which such Paying Agent shall agree with the Trustee, subject to the provisions
of this Section, that such Paying Agent will (1) comply with the provisions of
the Trust Indenture Act applicable to it as a Paying Agent and (2) during the
continuance of any default by the Company

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(or any other obligor upon the Securities of that series) in the making of any
payment in respect of the Securities of that series, upon the written request of
the Trustee, forthwith pay to the Trustee all sums held in trust by such Paying
Agent for payment in respect of the Securities of that series.

The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such money.

Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of or any premium or
interest on any Security of any series and remaining unclaimed for two years
after such principal, premium or interest has become due and payable shall be
paid to the Company on Company Request, or (if then held by the Company) shall
be discharged from such trust; and the Holder of such Security shall thereafter,
as an unsecured general creditor, look only to the Company for payment thereof,
and all liability of the Trustee or such Paying Agent with respect to such trust
money, and all liability of the Company as trustee thereof, shall thereupon
cease; PROVIDED, HOWEVER, that the Trustee or such Paying Agent, before being
required to make any such repayment, may at the expense of the Company cause to
be published once, in a newspaper published in the English language, customarily
published on each Business Day and of general circulation in New York City,
notice that such money remains unclaimed and that, after a date specified
therein, which shall not be less than 30 days from the date of such publication,
any unclaimed balance of such money then remaining will be repaid to the
Company.

SECTION 1004. STATEMENT BY OFFICERS AS TO DEFAULT.

The Company will deliver to the Trustee, within 120 days after the end
of each fiscal year of the Company ending after the date hereof, an Officers'
Certificate, stating whether or not to the best knowledge of the signers thereof
the Company is in default in the performance and observance of any of the terms,
provisions and conditions of this Indenture (without regard to any period of
grace or requirement of notice provided hereunder) and, if the Company shall be
in default, specifying all such defaults and the nature and status thereof of
which they may have knowledge.

SECTION 1005. EXISTENCE.

Subject to Article Eight, the Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its existence,
rights (charter and statutory) and franchises; PROVIDED, HOWEVER, that the
Company shall not be required to preserve any such right or franchise if the
Board of Directors shall determine that the

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preservation thereof is no longer desirable in the conduct of the business of
the Company and that the loss thereof is not disadvantageous in any material
respect to the Holders.

SECTION 1006. MAINTENANCE OF PROPERTIES.

The Company will cause all properties used or useful in the conduct of
its business or the business of any Subsidiary to be maintained and kept in good
condition, repair and working order and supplied with all necessary equipment
and will cause to be made all necessary repairs, renewals, replacements,
betterments and improvements thereof, all as in the judgment of the Company may
be necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; PROVIDED, HOWEVER, that
nothing in this Section shall prevent the Company from discontinuing the
operation or maintenance of any of such properties if such discontinuance is, in
the judgment of the Company, desirable in the conduct of its business or the
business of any Subsidiary and not disadvantageous in any material respect to
the Holders.

SECTION 1007. PAYMENT OF TAXES AND OTHER CLAIMS.

The Company will pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (1) all taxes, assessments and
governmental charges levied or imposed upon the Company or any Subsidiary or
upon the income, profits or property of the Company or any Subsidiary, and
(2) all lawful claims for labor, materials and supplies which, if unpaid, might
by law become a lien upon the property of the Company or any Subsidiary;
PROVIDED, HOWEVER, that the Company shall not be required to pay or discharge or
cause to be paid or discharged any such tax, assessment, charge or claim whose
amount, applicability or validity is being contested in good faith by
appropriate proceedings.

SECTION 1008. LIMITATION ON LIENS.

The Company will not issue, incur, create, assume or guarantee, and
will not permit any Restricted Subsidiary to issue, incur, create, assume or
guarantee, any debt for borrowed money secured by a mortgage, security interest,
pledge, lien, charge or other encumbrance ("mortgages") upon any Principal
Property of the Company or any Restricted Subsidiary or upon any shares of stock
or indebtedness of any Restricted Subsidiary (whether such Principal Property,
shares or indebtedness are now existing or owned or hereafter created or
acquired) without in any such case effectively providing concurrently with the
issuance, incurrence, creation, assumption or guarantee of any such secured
debt, or the grant of a mortgage with respect to any such indebtedness, that the
Securities (together with, if the Company shall so determine, any other
indebtedness of or guarantee by the Company or such Restricted Subsidiary
ranking equally with the Securities) shall be secured equally and ratably with
(or, at the option of the Company, prior to) such secured debt. The foregoing
restriction, however, will not apply to:

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(1) mortgages on property existing at the time of acquisition
thereof by the Company or any Subsidiary, provided that such mortgages were
in existence prior to the contemplation of such acquisition;

(2) mortgages on property, shares of stock or indebtedness or
other assets of any corporation existing at the time such corporation
becomes a Restricted Subsidiary, provided that such mortgages are not
incurred in anticipation of such corporation becoming a Restricted
Subsidiary;

(3) mortgages on property, shares of stock or indebtedness
existing at the time of acquisition thereof by the Company or a Restricted
Subsidiary or mortgages thereon to secure the payment of all or any part of
the purchase price thereof, or mortgages on property, shares of stock or
indebtedness to secure any indebtedness for borrowed money incurred prior
to, at the time of or within 270 days after, the latest of the acquisition
thereof, or, in the case of property, the completion of construction, the
completion of improvements, or the commencement of substantial commercial
operation of such property for the purpose of financing all or any part of
the purchase price thereof, such construction, or the making of such
improvements;

(4) mortgages to secure indebtedness owing to the Company or
to a Restricted Subsidiary;

(5) mortgages existing at the date of this Indenture;

(6) mortgages on property of a corporation existing at the
time such corporation is merged into or consolidated with the Company or a
Restricted Subsidiary or at the time of a sale, lease or other disposition
of the properties of a corporation as an entirety or substantially as an
entirety to the Company or a Restricted Subsidiary, provided that such
mortgage was not incurred in anticipation of such merger or consolidation
or sale, lease or other disposition;

(7) mortgages in favor of the United States or any State,
territory or possession thereof (or the District of Columbia), or any
department, agency, instrumentality or political subdivision of the United
States or any State, territory or possession thereof (or the District of
Columbia), to secure partial, progress, advance or other payments pursuant
to any contract or statute or to secure any indebtedness incurred for the
purpose of financing all or any part of the purchase price or the cost of
constructing or improving the property subject to such mortgages;

(8) mortgages created in connection with the acquisition of
assets or a project financed with, and created to secure, a Nonrecourse
Obligation; and

(9) extensions, renewals, refinancings or replacements of any
mortgage referred to in the foregoing clauses (1), (2), (3), (5), (6), (7)
and (8) provided, however, that any mortgages permitted by any of the
foregoing clauses (1), (2), (3), (5), (6), (7) and (8) shall not extend to
or cover any property of the Company or such

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Restricted Subsidiary, as the case may be, other than the property, if any,
specified in such clauses and improvements thereto, and provided further
that any refinancing or replacement of any mortgages permitted by the
foregoing clauses (7) and (8) shall be of the type referred to in such
clauses (7) or (8), as the case may be.

Notwithstanding the restrictions set forth in the preceding paragraph,
the Company or any Restricted Subsidiary will be permitted to issue, incur,
create, assume or guarantee debt secured by a mortgage which would otherwise by
subject to such restrictions, without equally and ratably securing the
Securities, provided that after giving effect thereto, the aggregate amount of
all debt so secured by mortgages (not including mortgages permitted under
clauses (1) through (9) above) does not exceed 10% of the Consolidated Net
Tangible Assets of the Company as most recently determined on or prior to such
date.

SECTION 1009. LIMITATION ON SALE AND LEASE-BACK TRANSACTIONS.

The Company will not, nor will it permit any Restricted Subsidiary to,
enter into any Sale and Lease-Back Transaction with respect to any Principal
Property, other than any such transaction involving a lease for a term of not
more than three years or any such transaction between the Company and a
Restricted Subsidiary or between Restricted Subsidiaries, unless: (1) the
Company or such Restricted Subsidiary would be entitled to incur indebtedness
secured by a mortgage on the Principal Property involved in such transaction at
least equal in amount to the Attributable Debt with respect to such Sale and
Lease-Back Transaction, without equally and ratably securing the Securities,
pursuant to Section 1008; or (2) the Company shall apply an amount equal to the
greater of the net proceeds of such sale or the Attributable Debt with respect
to such Sale and Lease-Back Transaction within 180 days of such sale to either
(or a combination of) the retirement (other than any mandatory retirement,
mandatory prepayment or sinking fund payment or by payment at maturity) of debt
for borrowed money of the Company or a Restricted Subsidiary that matures more
than 12 months after the creation of such indebtedness or the purchase,
construction or development of other comparable property.

SECTION 1010. WAIVER OF CERTAIN COVENANTS.

Except as otherwise specified as contemplated by Section 301 for
Securities of such series, the Company may, with respect to the Securities of
any series, omit in any particular instance to comply with any term, provision
or condition set forth in any covenant provided pursuant to Section 301(18),
901(2) or 901(7) for the benefit of the Holders of such series or in any of
Sections 1008 to 1009, inclusive, if before the time for such compliance the
Holders of at least 66 2/3% in principal amount of the Outstanding Securities of
such series shall, by Act of such Holders, either waive such compliance in such
instance or generally waive compliance with such term, provision or condition,
but no such waiver shall extend to or affect such term, provision or condition
except to the extent so expressly waived, and, until such waiver shall become
effective, the obligations

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of the Company and the duties of the Trustee in respect of any such term,
provision or condition shall remain in full force and effect.

ARTICLE ELEVEN

REDEMPTION OR REPAYMENT OF SECURITIES

SECTION 1101. APPLICABILITY OF ARTICLE.

Securities of any series which are redeemable or repayable before
their Stated Maturity shall be redeemable or repayable in accordance with their
terms and (except as otherwise specified as contemplated by Section 301 for such
Securities) in accordance with this Article.

SECTION 1102. ELECTION TO REDEEM; NOTICE TO TRUSTEE.

The election of the Company to redeem any Securities shall be
evidenced by a Board Resolution or in another manner specified as contemplated
by Section 301 for such Securities. In case of any redemption at the election of
the Company of less than all the Securities of any series (including any such
redemption affecting only a single Security), the Company shall, at least
60 days prior to the Redemption Date fixed by the Company (unless a shorter
notice shall be satisfactory to the Trustee), notify the Trustee of such
Redemption Date, of the principal amount of Securities of such series to be
redeemed and, if applicable, of the tenor of the Securities to be redeemed. In
the case of any redemption of Securities prior to the expiration of any
restriction on such redemption provided in the terms of such Securities or
elsewhere in this Indenture, the Company shall furnish the Trustee with an
Officers' Certificate evidencing compliance with such restriction.

SECTION 1103. SELECTION BY TRUSTEE OF SECURITIES TO BE REDEEMED.

If less than all the Securities of any series are to be redeemed
(unless all the Securities of such series and of a specified tenor are to be
redeemed or unless such redemption affects only a single Security), the
particular Securities to be redeemed shall be selected not more than 60 days

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prior to the Redemption Date by the Trustee, from the Outstanding Securities of
such series not previously called for redemption, by such method as the Trustee
shall deem fair and appropriate and which may provide for the selection for
redemption of a portion of the principal amount of any Security of such series,
PROVIDED that the unredeemed portion of the principal amount of any Security
shall be in an authorized denomination (which shall not be less than the minimum
authorized denomination) for such Security. If less than all the Securities of
such series and of a specified tenor are to be redeemed (unless such redemption
affects only a single Security), the particular Securities to be redeemed shall
be selected not more than 60 days prior to the Redemption Date by the Trustee,
from the Outstanding Securities of such series and specified tenor not
previously called for redemption in accordance with the preceding sentence.

The Trustee shall promptly notify the Company in writing of the Securities
selected for redemption as aforesaid and, in case of any Securities selected for
partial redemption as aforesaid, the principal amount thereof to be redeemed.

The provisions of the two preceding paragraphs shall not apply with respect
to any redemption affecting only a single Security, whether such Security is to
be redeemed in whole or in part. In the case of any such redemption in part, the
unredeemed portion of the principal amount of the Security shall be in an
authorized denomination (which shall not be less than the minimum authorized
denomination) for such Security.

For all purposes of this Indenture, unless the context otherwise requires,
all provisions relating to the redemption of Securities shall relate, in the
case of any Securities redeemed or to be redeemed only in part, to the portion
of the principal amount of such Securities which has been or is to be redeemed.

SECTION 1104. NOTICE OF REDEMPTION.

Notice of redemption shall be given by first-class mail, postage
prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption
Date, to each Holder of Securities to be redeemed, at his address appearing in
the Security Register.

All notices of redemption shall state:

(1) the Redemption Date,

(2) the Redemption Price,

(3) if less than all the Outstanding Securities of any series
consisting of more than a single Security are to be redeemed, the
identification (and, in the case of partial redemption of any such
Securities, the principal amounts) of the particular Securities to be
redeemed and, if less than all the Outstanding Securities of any series
consisting of a single Security are to be redeemed, the principal amount of
the particular Security to be redeemed,

(4) that on the Redemption Date the Redemption Price will become due
and payable upon each such Security to be redeemed and, if applicable, that
interest thereon will cease to accrue on and after said date,

(5) the place or places where each such Security is to be surrendered
for payment of the Redemption Price, and

(6) that the redemption is for a sinking fund, if such is the case.

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Notice of redemption of Securities to be redeemed at the election of the
Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company and shall be irrevocable.

SECTION 1105. DEPOSIT OF REDEMPTION PRICE.

Prior to any Redemption Date, the Company shall deposit with the Trustee or
with a Paying Agent (or, if the Company is acting as its own Paying Agent,
segregate and hold in trust as provided in Section 1003) an amount of money
sufficient to pay the Redemption Price of, and (except if the Redemption Date
shall be an Interest Payment Date) accrued interest on, all the Securities which
are to be redeemed on that date.

SECTION 1106. SECURITIES PAYABLE ON REDEMPTION DATE.

Notice of redemption having been given as aforesaid, the Securities so to
be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified, and from and after such date (unless the
Company shall default in the payment of the Redemption Price and accrued
interest) such Securities shall cease to bear interest. Upon surrender of any
such Security for redemption in accordance with said notice, such Security shall
be paid by the Company at the Redemption Price, together with accrued interest
to the Redemption Date; PROVIDED, HOWEVER, that, unless otherwise specified as
contemplated by Section 301, installments of interest whose Stated Maturity is
on or prior to the Redemption Date will be payable to the Holders of such
Securities, or one or more Predecessor Securities, registered as such at the
close of business on the relevant Record Dates according to their terms and the
provisions of Section 307.

If any Security called for redemption shall not be so paid upon surrender
thereof for redemption, the principal and any premium shall, until paid, bear
interest from the Redemption Date at the rate prescribed therefor in the
Security.

SECTION 1107. SECURITIES REDEEMED IN PART.

Any Security which is to be redeemed only in part shall be surrendered at a
Place of Payment therefor (with, if the Company or the Trustee so requires, due
endorsement by, or a written instrument of transfer in form satisfactory to the
Company and the Trustee duly executed by, the Holder thereof or his attorney
duly authorized in writing), and the Company shall execute, and the Trustee
shall authenticate and deliver to the Holder of such Security without service
charge, a new Security or Securities of the same series and of like tenor, of
any authorized denomination as requested by such Holder, in aggregate principal
amount equal to and in exchange for the unredeemed portion of the principal of
the Security so surrendered.

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SECTION 1108. RIGHT OF REPAYMENT.

In order for any Security that is subject to repayment at the option of the
Holder to be repaid, the Paying Agent must receive at least 30 days but not more
than 60 days prior to the repayment date (a) appropriate wire instructions and
(b) either (i) the Security with the form entitled Option to Elect Repayment (as
set forth below) attached to the Security duly completed or (ii) a telegram,
telex, facsimile transmission or letter from a member of a national securities
exchange or the National Association of Securities Dealers, Inc. or a commercial
bank or trust company in the United States setting forth the name of the Holder
of such Security, the principal amount of such Debenture, the portion of the
principal amount of such Security to be repaid, the certificate number or a
description of the tenor and terms of such Security, a statement that the option
to elect repayment is being exercised thereby and a guarantee that such Security
to be repaid with the form entitled Option to Elect Repayment attached to such
Security duly completed will be received by the Paying Agent not later than five
Business Days after the date of such telegram, telex, facsimile transmission or
letter and such Security and form duly completed must be received by the Paying
Agent by such fifth Business Day. Exercise of the repayment option by the
Holder of such Security shall be irrevocable, except as otherwise provided in
the Board Resolution establishing the term of the Security. The repayment option
may be exercised by the Holder of such Security for less than the entire
principal amount of the Security provided that the principal amount of the
Security remaining outstanding after repayment is an authorized denomination.
No registration of, transfer or exchange of such Security (or, in the event that
such Security is to be repaid in part, the portion of the Security to be repaid)
will be permitted after exercise of a repayment option. All questions as to the
validity, eligibility (including time of receipt) and acceptance of any Security
for repayment will be determined by the Company, whose determination will be
final, binding and non-appealable.

SECTION 1109. FORM OF OPTION TO ELECT REPAYMENT

The following text shall be attached to each Security to which the
provisions of Section 1108 apply:

FORM OF OPTION TO ELECT REPAYMENT ON ___________, __________

I or we hereby irrevocably elect to exercise the option to have the
principal sum of together with accrued
interest thereon to __________, ___ repaid by the Company on ________________,
______. If less than the entire principal amount of the Security is to be
repaid specify the denomination or denominations (which shall be in authorized
denominations) of the Securities to be issued to the Holder for the portion of
the within Security not being repaid (in the absence of any such specification,
one such Security will be issued for the portion not being repaid.

Dated:
Signed:

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Signature Guarantee:
----------------------------------------
(Signature must be guaranteed by an
eligible institution within the
meaning of Rule 17A(d)-15
under the Securities Exchange
Act of 1934, as amended)

ARTICLE TWELVE

SINKING FUNDS

SECTION 1201. APPLICABILITY OF ARTICLE.

The provisions of this Article shall be applicable to any sinking fund for
the retirement of Securities of any series except as otherwise specified as
contemplated by Section 301 for such Securities.

The minimum amount of any sinking fund payment provided for by the terms of
any Securities is herein referred to as a "mandatory sinking fund payment", and
any payment in excess of such minimum amount provided for by the terms of such
Securities is herein referred to as an "optional sinking fund payment". If
provided for by the terms of any Securities, the cash amount of any sinking fund
payment may be subject to reduction as provided in Section 1202. Each sinking
fund payment shall be applied to the redemption of Securities as provided for by
the terms of such Securities.

SECTION 1202. SATISFACTION OF SINKING FUND PAYMENTS WITH SECURITIES.

The Company (1) may deliver Outstanding Securities of a series (other than
any previously called for redemption) and (2) may apply as a credit Securities
of a series which have been redeemed either at the election of the Company
pursuant to the terms of such Securities or through the application of permitted
optional sinking fund payments pursuant to the terms of such Securities, in each
case in satisfaction of all or any part of any sinking fund payment with respect
to any Securities of such series required to be made pursuant to the terms of
such Securities as and to the extent provided for by the terms of such
Securities; PROVIDED that the Securities to be so credited have not been
previously so credited. The Securities to be so credited shall be received and
credited for such purpose by the Trustee at the Redemption Price, as specified
in the Securities so to be redeemed, for redemption through operation of the
sinking fund and the amount of such sinking fund payment shall be reduced
accordingly.

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SECTION 1203. REDEMPTION OF SECURITIES FOR SINKING FUND.

Not less than 30 days prior to each sinking fund payment date for any
Securities, the Company will deliver to the Trustee an Officers' Certificate
specifying the amount of the next ensuing sinking fund payment for such
Securities pursuant to the terms of such Securities, the portion thereof, if
any, which is to be satisfied by payment of cash and the portion thereof, if
any, which is to be satisfied by delivering and crediting Securities pursuant to
Section 1202 and will also deliver to the Trustee any Securities to be so
delivered. Not less than 20 days prior to each such sinking fund payment date,
the Trustee shall select the Securities to be redeemed upon such sinking fund
payment date in the manner specified in Section 1103 and cause notice of the
redemption thereof to be given in the name of and at the expense of the Company
in the manner provided in Section 1104. Such notice having been duly given, the
redemption of such Securities shall be made upon the terms and in the manner
stated in Sections 1106 and 1107.

ARTICLE THIRTEEN

DEFEASANCE AND COVENANT DEFEASANCE

SECTION 1301. COMPANY'S OPTION TO EFFECT DEFEASANCE OR COVENANT DEFEASANCE.

The Company may elect, at its option at any time, to have Section 1302 or
Section 1303 applied to any Securities or any series of Securities, as the case
may be, designated pursuant to Section 301 as being defeasible pursuant to such
Section 1302 or 1303, in accordance with any applicable requirements provided
pursuant to Section 301 and upon compliance with the conditions set forth below
in this Article. Any such election shall be evidenced by a Board Resolution or
in another manner specified as contemplated by Section 301 for such Securities.

SECTION 1302. DEFEASANCE AND DISCHARGE.

Upon the Company's exercise of its option (if any) to have this Section
applied to any Securities or any series of Securities, as the case may be, the
Company shall be deemed to have been discharged from its obligations with
respect to such Securities as provided in this Section on and after the date the
conditions set forth in Section 1304 are satisfied (hereinafter called
"Defeasance"). For this purpose, such Defeasance means that the Company shall be
deemed to have paid and discharged the entire indebtedness represented by such
Securities and to have satisfied all its other obligations under such Securities
and this Indenture insofar as such Securities are concerned (and the Trustee, at
the expense of the Company, shall execute proper instruments acknowledging the
same), subject to the following which shall survive until otherwise terminated
or discharged hereunder: (1) the rights of Holders of such Securities to
receive, solely from the trust fund described in Section 1304 and as more fully
set forth in such Section, payments in respect of the principal of and any
premium and interest on such securities

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when payments are due, (2) the Company's obligations with respect to such
Securities under Sections 304, 305, 306, 1002 and 1003, (3) the rights, powers,
trusts, duties and immunities of the Trustee hereunder and (4) this Article.
Subject to compliance with this Article, the Company may exercise its option (if
any) to have this Section applied to any Securities notwithstanding the prior
exercise of its option (if any) to have Section 1303 applied to such Securities.

SECTION 1303. COVENANT DEFEASANCE.

Upon the Company's exercise of its option (if any) to have this Section
applied to any Securities or any series of Securities, as the case may be,
(1) the Company shall be released from its obligations under Section 801(3),
Sections 1006 through 1009, inclusive, and any covenants provided pursuant to
Section 301(18), 901(2) or 901(7) for the benefit of the Holders of such
Securities and (2) the occurrence of any event specified in Sections 501(4)
(with respect to any of Section 801(3), Sections 1006 through 1009, inclusive,
and any such covenants provided pursuant to Section 301(18), 901(2) or 901(7)),
501(5) and 501(8) shall be deemed not to be or result in an Event of Default, in
each case with respect to such Securities as provided in this Section on and
after the date the conditions set forth in Section 1304 are satisfied
(hereinafter called "Covenant Defeasance"). For this purpose, such Covenant
Defeasance means that, with respect to such Securities, the Company may omit to
comply with and shall have no liability in respect of any term, condition or
limitation set forth in any such specified Section (to the extent so specified
in the case of Section 501(4)), whether directly or indirectly by reason of any
reference elsewhere herein to any such Section or by reason of any reference in
any such Section to any other provision herein or in any other document, but the
remainder of this Indenture and such Securities shall be unaffected thereby.

SECTION 1304. CONDITIONS TO DEFEASANCE OR COVENANT DEFEASANCE.

The following shall be the conditions to the application of Section 1302 or
Section 1303 to any Securities or any series of Securities, as the case may be:

(1) The Company shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee which satisfies the
requirements contemplated by Section 609 and agrees to comply with the
provisions of this Article applicable to it) as trust funds in trust for
the purpose of making the following payments, specifically pledged as
security for, and dedicated solely to, the benefits of the Holders of such
Securities, (A) money in an amount, or (B) U.S. Government Obligations
which through the scheduled payment of principal and interest in respect
thereof in accordance with their terms will provide, not later than one day
before the due date of any payment, money in an amount, or (C) a
combination thereof, in each case sufficient, in the opinion of a
nationally recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee, to pay and
discharge, and which shall be applied by the Trustee (or any such other
qualifying trustee) to pay and discharge, the principal of and any premium
and interest on such

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Securities on the respective Stated Maturities, in accordance with the
terms of this Indenture and such Securities. As used herein, "U.S.
Government Obligation" means (x) any security which is (i) a direct
obligation of the United States of America for the payment of which the
full faith and credit of the United States of America is pledged or (ii) an
obligation of a Person controlled or supervised by and acting as an agency
or instrumentality of the United States of America the payment of which is
unconditionally guaranteed as a full faith and credit obligation by the
United States of America, which, in either case (i) or (ii), is not
callable or redeemable at the option of the issuer thereof, and (y) any
depositary receipt issued by a bank (as defined in Section 3(a)(2) of the
Securities Act) as custodian with respect to any U.S. Government Obligation
which is specified in Clause (x) above and held by such bank for the
account of the holder of such depositary receipt, or with respect to any
specific payment of principal of or interest on any U.S. Government
Obligation which is so specified and held, PROVIDED that (except as
required by law) such custodian is not authorized to make any deduction
from the amount payable to the holder of such depositary receipt from any
amount received by the custodian in respect of the U.S. Government
Obligation or the specific payment of principal or interest evidenced by
such depositary receipt.

(2) In the event of an election to have Section 1302 apply to any
Securities or any series of Securities, as the case may be, the Company
shall have delivered to the Trustee an Opinion of Counsel stating that
(A) the Company has received from, or there has been published by, the
Internal Revenue Service a ruling or (B) since the date of this instrument,
there has been a change in the applicable Federal income tax law, in either
case (A) or (B) to the effect that, and based thereon such opinion shall
confirm that, the Holders of such Securities will not recognize gain or
loss for Federal income tax purposes as a result of the deposit, Defeasance
and discharge to be effected with respect to such Securities and will be
subject to Federal income tax on the same amount, in the same manner and at
the same times as would be the case if such deposit, Defeasance and
discharge were not to occur.

(3) In the event of an election to have Section 1303 apply to any
Securities or any series of Securities, as the case may be, the Company
shall have delivered to the Trustee an Opinion of Counsel to the effect
that the Holders of such Securities will not recognize gain or loss for
Federal income tax purposes as a result of the deposit and Covenant
Defeasance to be effected with respect to such Securities and will be
subject to Federal income tax on the same amount, in the same manner and at
the same times as would be the case if such deposit and Covenant Defeasance
were not to occur.

(4) The Company shall have delivered to the Trustee an Officer's
Certificate to the effect that neither such Securities nor any other
Securities of the same series, if then listed on any securities exchange,
will be delisted as a result of such deposit.

(5) No event which is, or after notice or lapse of time or both would
become, an Event of Default with respect to such Securities or any other
Securities shall have occurred and be continuing at the time of such
deposit or, with regard to any such event specified in Sections 501(6) and
(7), at any time on or prior to the 90th day after

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the date of such deposit (it being understood that this condition shall not
be deemed satisfied until after such 90th day).

(6) Such Defeasance or Covenant Defeasance shall not cause the
Trustee to have a conflicting interest within the meaning of the Trust
Indenture Act (assuming all Securities are in default within the meaning of
such Act).

(7) Such Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under, any other agreement
or instrument to which the Company is a party or by which it is bound.

(8) Such Defeasance or Covenant Defeasance shall not result in the
trust arising from such deposit constituting an investment company within
the meaning of the Investment Company Act unless such trust shall be
registered under such Act or exempt from registration thereunder.

(9) The Company shall have delivered to the Trustee an Officer's
Certificate and an Opinion of Counsel, each stating that all conditions
precedent with respect to such Defeasance or Covenant Defeasance have been
complied with.

SECTION 1305. DEPOSITED MONEY AND U.S. GOVERNMENT OBLIGATIONS TO BE
HELD IN TRUST; MISCELLANEOUS PROVISIONS.

Subject to the provisions of the last paragraph of Section 1003, all money
and U.S. Government Obligations (including the proceeds thereof) deposited with
the Trustee or other qualifying trustee (solely for purposes of this Section and
Section 1306, the Trustee and any such other trustee are referred to
collectively as the "Trustee") pursuant to Section 1304 in respect of any
Securities shall be held in trust and applied by the Trustee, in accordance with
the provisions of such Securities and this Indenture, to the payment, either
directly or through any such Paying Agent (including the Company acting as its
own Paying Agent) as the Trustee may determine, to the Holders of such
Securities, of all sums due and to become due thereon in respect of principal
and any premium and interest, but money so held in trust need not be segregated
from other funds except to the extent required by law.

The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the U.S. Government Obligations
deposited pursuant to Section 1304 or the principal and interest received in
respect thereof other than any such tax, fee or other charge which by law is for
the account of the Holders of Outstanding Securities.

Anything in this Article to the contrary notwithstanding, the Trustee shall
deliver or pay to the Company from time to time upon Company Request any money
or U.S. Government Obligations held by it as provided in Section 1304 with
respect to any Securities which, in the opinion of a nationally recognized firm
of independent public accountants expressed in a written certification thereof
delivered to the Trustee, are in

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excess of the amount thereof which would then be required to be deposited to
effect the Defeasance or Covenant Defeasance, as the case may be, with respect
to such Securities.

SECTION 1306. REINSTATEMENT.

If the Trustee or the Paying Agent is unable to apply any money in
accordance with this Article with respect to any Securities by reason of any
order or judgment of any court or governmental authority enjoining, restraining
or otherwise prohibiting such application, then the obligations under this
Indenture and such Securities from which the Company has been discharged or
released pursuant to Section 1302 or 1303 shall be revived and reinstated as
though no deposit had occurred pursuant to this Article with respect to such
Securities, until such time as the Trustee or Paying Agent is permitted to apply
all money held in trust pursuant to Section 1305 with respect to such Securities
in accordance with this Article; PROVIDED, HOWEVER, that if the Company makes
any payment of principal of or any premium or interest on any such Security
following such reinstatement of its obligations, the Company shall be subrogated
to the rights (if any) of the Holders of such Securities to receive such payment
from the money so held in trust.

_____________________________

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This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.

IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.

.........................................

By........................................
Attest:

.............................

..........................................

By........................................

Attest:

..............................

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STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )

On the .... day of ..........., ...., before me personally came
.........................., to me known, who, being by me duly sworn, did depose
and say that he is .................... of .................................,
one of the corporations described in and which executed the foregoing
instrument; that he knows the seal of said corporation; that the seal affixed to
said instrument is such corporate seal; that it was so affixed by authority of
the Board of Directors of said corporation; and that he signed his name thereto
by like authority.

.................................

STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )

On the .... day of ..........., ...., before me personally came
..........................., to me known, who, being by me duly sworn, did
depose and say that he is .................... of ..........................,
one of the corporations described in and which executed the foregoing
instrument; that he knows the seal of said corporation; that the seal affixed
to said instrument is such corporate seal; that it was so affixed by
authority of the Board of Directors of said corporation; and that he signed
his name thereto by like authority.

...................................

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TABLE OF CONTENTS
__________

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RECITALS OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . 1

ARTICLE ONE

DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION

SECTION 101 Definitions:
Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Affiliate; control . . . . . . . . . . . . . . . . . . . . . 2
Authenticating Agent . . . . . . . . . . . . . . . . . . . . 2
Board of Directors . . . . . . . . . . . . . . . . . . . . . 2
Board Resolution . . . . . . . . . . . . . . . . . . . . . . 2
Business Day . . . . . . . . . . . . . . . . . . . . . . . . 3
Commission . . . . . . . . . . . . . . . . . . . . . . . . . 3
Company. . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Company Request; Company Order . . . . . . . . . . . . . . . 3
Corporate Trust Office . . . . . . . . . . . . . . . . . . . 3
corporation. . . . . . . . . . . . . . . . . . . . . . . . . 3
Covenant Defeasance. . . . . . . . . . . . . . . . . . . . . 3
Defaulted Interest . . . . . . . . . . . . . . . . . . . . . 3
Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . 3
Depositary . . . . . . . . . . . . . . . . . . . . . . . . . 3
Event of Default . . . . . . . . . . . . . . . . . . . . . . 4
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . 4
Expiration Date. . . . . . . . . . . . . . . . . . . . . . . 4
Global Security. . . . . . . . . . . . . . . . . . . . . . . 4
Holder . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Indenture. . . . . . . . . . . . . . . . . . . . . . . . . . 4
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Interest Payment Date. . . . . . . . . . . . . . . . . . . . 4
Investment Company Act . . . . . . . . . . . . . . . . . . . 4
Maturity . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Notice of Default. . . . . . . . . . . . . . . . . . . . . . 5
Officers' Certificate. . . . . . . . . . . . . . . . . . . . 5
Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . 5
Original Issue Discount Security . . . . . . . . . . . . . . 5
Outstanding. . . . . . . . . . . . . . . . . . . . . . . . . 5
Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . 6

________________________

NOTE: This table of contents shall not, for any purpose, be deemed to be a
part of the Indenture.

<PAGE>

Person . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Place of Payment . . . . . . . . . . . . . . . . . . . . . . 6
Predecessor Security . . . . . . . . . . . . . . . . . . . . 6
Principal Property . . . . . . . . . . . . . . . . . . . . . 6
Redemption Date. . . . . . . . . . . . . . . . . . . . . . . 7
Redemption Price . . . . . . . . . . . . . . . . . . . . . . 7
Regular Record Date. . . . . . . . . . . . . . . . . . . . . 7
Restricted Security. . . . . . . . . . . . . . . . . . . . . 7
Sale and Lease-Back Transaction. . . . . . . . . . . . . . . 7
Securities . . . . . . . . . . . . . . . . . . . . . . . . . 7
Securities Act . . . . . . . . . . . . . . . . . . . . . . . 7
Security Register and Security Registrar . . . . . . . . . . 7
Special Record Date. . . . . . . . . . . . . . . . . . . . . 7
Stated Maturity. . . . . . . . . . . . . . . . . . . . . . . 7
Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . 7
Trust Indenture Act. . . . . . . . . . . . . . . . . . . . . 7
Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . 8
U.S. Government Obligation . . . . . . . . . . . . . . . . . 8
Vice President . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 102. Compliance Certificates and Opinions . . . . . . . . . . . . 8
SECTION 103. Form of Documents Delivered to Trustee . . . . . . . . . . . 8
SECTION 104. Acts of Holders; Record Dates. . . . . . . . . . . . . . . . 9
SECTION 105. Notices, Etc., to Trustee and Company. . . . . . . . . . . . 11
SECTION 106. Notice to Holders; Waiver. . . . . . . . . . . . . . . . . . 11
SECTION 107. Conflict with Trust Indenture Act. . . . . . . . . . . . . . 12
SECTION 108. Effect of Headings and Table of Contents . . . . . . . . . . 12
SECTION 109. Successors and Assigns . . . . . . . . . . . . . . . . . . . 12
SECTION 110. Separability Clause. . . . . . . . . . . . . . . . . . . . . 12
SECTION 111. Benefits of Indenture. . . . . . . . . . . . . . . . . . . . 13
SECTION 112. Governing Law. . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 113. Legal Holidays . . . . . . . . . . . . . . . . . . . . . . . 13

ARTICLE TWO

SECURITY FORMS

SECTION 201. Forms Generally. . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 202. Form of Face of Security . . . . . . . . . . . . . . . . . . 13
SECTION 203. Form of Reverse of Security. . . . . . . . . . . . . . . . . 14
SECTION 204. Form of Legend for Global Securities . . . . . . . . . . . . 16
SECTION 205. Form of Trustee's Certificate of Authentication. . . . . . . 20

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ARTICLE THREE

THE SECURITIES

SECTION 301. Amount Unlimited; Issuable in Series . . . . . . . . . . . . 20
SECTION 302. Denominations. . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 303. Execution, Authentication, Delivery and Dating . . . . . . . 23
SECTION 304. Temporary Securities . . . . . . . . . . . . . . . . . . . . 25
SECTION 305. Registration, Registration of Transfer and Exchange. . . . . 25
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities . . . . . . 27
SECTION 307. Payment of Interest; Interest Rights Preserved . . . . . . . 28
SECTION 308. Persons Deemed Owners. . . . . . . . . . . . . . . . . . . . 29
SECTION 309. Cancellation . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 310. Computation of Interest. . . . . . . . . . . . . . . . . . . 30

ARTICLE FOUR

SATISFACTION AND DISCHARGE

SECTION 401. Satisfaction and Discharge of Indenture. . . . . . . . . . . 30
SECTION 402. Application of Trust Money . . . . . . . . . . . . . . . . . 31

ARTICLE FIVE

REMEDIES

SECTION 501. Events of Default. . . . . . . . . . . . . . . . . . . . . . 31
SECTION 502. Acceleration of Maturity; Rescission and Annulment . . . . . 33
SECTION 503. Collection of Indebtedness and Suits for
Enforcement by Trustee . . . . . . . . . . . . . . . . . 34
SECTION 504. Trustee May File Proofs of Claim . . . . . . . . . . . . . . 35
SECTION 505. Trustee May Enforce Claims Without Possession
of Securities. . . . . . . . . . . . . . . . . . . . . . 35
SECTION 506. Application of Money Collected . . . . . . . . . . . . . . . 36
SECTION 507. Limitation on Suits. . . . . . . . . . . . . . . . . . . . . 36
SECTION 508. Unconditional Right of Holders to Receive Principal,
Premium and Interest . . . . . . . . . . . . . . . . . . 37
SECTION 509. Restoration of Rights and Remedies . . . . . . . . . . . . . 37
SECTION 510. Rights and Remedies Cumulative . . . . . . . . . . . . . . . 37

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Page
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SECTION 511. Delay or Omission Not Waiver . . . . . . . . . . . . . . . . 37
SECTION 512. Control by Holders . . . . . . . . . . . . . . . . . . . . . 38
SECTION 513. Waiver of Past Defaults. . . . . . . . . . . . . . . . . . . 38
SECTION 514. Undertaking for Costs. . . . . . . . . . . . . . . . . . . . 38
SECTION 515. Waiver of Usury, Stay or Extension Laws. . . . . . . . . . . 39

ARTICLE SIX

THE TRUSTEE

SECTION 601. Certain Duties and Responsibilities. . . . . . . . . . . . . 39
SECTION 602. Notice of Defaults . . . . . . . . . . . . . . . . . . . . . 39
SECTION 603. Certain Rights of Trustee. . . . . . . . . . . . . . . . . . 40
SECTION 604. Not Responsible for Recitals or Issuance of Securities . . . 41
SECTION 605. May Hold Securities. . . . . . . . . . . . . . . . . . . . . 41
SECTION 606. Money Held in Trust. . . . . . . . . . . . . . . . . . . . . 41
SECTION 607. Compensation and Reimbursement . . . . . . . . . . . . . . . 41
SECTION 608. Conflicting Interests. . . . . . . . . . . . . . . . . . . . 42
SECTION 609. Corporate Trustee Required; Eligibility. . . . . . . . . . . 42
SECTION 610. Resignation and Removal; Appointment of Successor. . . . . . 42
SECTION 611. Acceptance of Appointment by Successor . . . . . . . . . . . 44
SECTION 612. Merger, Conversion, Consolidation or Succession
to Business. . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 613. Preferential Collection of Claims Against Company. . . . . . 45
SECTION 614. Appointment of Authenticating Agent. . . . . . . . . . . . . 45

ARTICLE SEVEN

HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY

SECTION 701. Company to Furnish Trustee Names and Addresses
of Holders . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 702. Preservation of Information; Communication
to Holders . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 703. Reports by Trustee . . . . . . . . . . . . . . . . . . . . . 48
SECTION 704. Reports by Company . . . . . . . . . . . . . . . . . . . . . 48

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<PAGE>

Page
----

ARTICLE EIGHT

CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE

SECTION 801. Company May Consolidate, Etc., Only on
Certain Terms. . . . . . . . . . . . . . . . . . . . . . 48
SECTION 802. Successor Substituted. . . . . . . . . . . . . . . . . . . . 48

ARTICLE NINE

SUPPLEMENTAL INDENTURES

SECTION 901. Supplemental Indentures Without Consent of Holders . . . . . 50
SECTION 902. Supplemental Indentures with Consent of Holders. . . . . . . 50
SECTION 903. Execution of Supplemental Indentures . . . . . . . . . . . . 51
SECTION 904. Effect of Supplemental Indentures. . . . . . . . . . . . . . 52
SECTION 905. Conformity with Trust Indenture Act. . . . . . . . . . . . . 52
SECTION 906. Reference in Securities to Supplemental Indentures . . . . . 52

ARTICLE TEN

COVENANTS

SECTION 1001. Payment of Principal, Premium and Interest . . . . . . . . . 53
SECTION 1002. Maintenance of Office or Agency. . . . . . . . . . . . . . . 53
SECTION 1003. Money for Securities Payments to Be Held in Trust. . . . . . 54
SECTION 1004. Statement by Officers as to Default. . . . . . . . . . . . . 55
SECTION 1005. Existence. . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 1006. Maintenance of Properties. . . . . . . . . . . . . . . . . . 55
SECTION 1007. Payment of Taxes and Other Claims. . . . . . . . . . . . . . 55
SECTION 1008. Limitation on Liens. . . . . . . . . . . . . . . . . . . . . 56
SECTION 1009. Limitation on Sale and Lease-Back Transactions . . . . . . . 57
SECTION 1010. Waiver of Certain Covenants. . . . . . . . . . . . . . . . . 58

ARTICLE ELEVEN

REDEMPTION OF SECURITIES

SECTION 1101. Applicability of Article . . . . . . . . . . . . . . . . . . 58
SECTION 1102. Election to Redeem; Notice to Trustee. . . . . . . . . . . . 58

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Page
----

SECTION 1103. Selection by Trustee of Securities to Be Redeemed. . . . . . 59
SECTION 1104. Notice of Redemption . . . . . . . . . . . . . . . . . . . . 59
SECTION 1105. Deposit of Redemption Price. . . . . . . . . . . . . . . . . 60
SECTION 1106. Securities Payable on Redemption Date. . . . . . . . . . . . 60
SECTION 1107. Securities Redeemed in Part. . . . . . . . . . . . . . . . . 61

ARTICLE TWELVE

SINKING FUNDS

SECTION 1201. Applicability of Article . . . . . . . . . . . . . . . . . . 61
SECTION 1202. Satisfaction of Sinking Fund Payments with Securities. . . . 61
SECTION 1203. Redemption of Securities for Sinking Fund. . . . . . . . . . 62

ARTICLE THIRTEEN

DEFEASANCE AND COVENANT DEFEASANCE

SECTION 1301. Company's Option to Effect Defeasance or
Covenant Defeasance. . . . . . . . . . . . . . . . . . . 62
SECTION 1302. Defeasance and Discharge . . . . . . . . . . . . . . . . . . 63
SECTION 1303. Covenant Defeasance. . . . . . . . . . . . . . . . . . . . . 63
SECTION 1304. Conditions to Defeasance or Covenant Defeasance. . . . . . . 64
SECTION 1305. Deposited Money and U.S. Government Obligations
to Be Held in Trust; Miscellaneous Provisions. . . . . . 65
SECTION 1306. Reinstatement. . . . . . . . . . . . . . . . . . . . . . . . 66

-vi-

<PAGE>

CERTIFICATE OF AUTHORIZED OFFICERS

The undersigned, pursuant to resolutions adopted by the Board of
Directors of Allegiance Corporation, a Delaware corporation (the "Company"), on
September 16, 1996 (the "Board Resolutions"), hereby certify that there is
hereby approved and established pursuant to Section 301 of the Indenture, dated
as of October 1, 1996 (the "Indenture"), among the Company, as issuer, and PNC
Bank, Kentucky, Inc., as trustee, a series of Securities of the Company under
the Indenture whose terms shall be as follows (capitalized terms used but not
defined herein have the meanings ascribed thereto in the Indenture):

1. The Securities of such series shall be known and designated as
the "_____% Notes due __________" of the Company.

2. The aggregate principal amount of Securities of such series which
may be authenticated and delivered under the Indenture is limited to
$__________ (except for Securities of such series authenticated and
delivered upon registration of transfer of, or in exchange for, or in lieu
of, other Securities of such series pursuant to Section 304, 305, 306, 906
or 1107 of the Indenture and except for Securities which, pursuant to
Section 303 of the Indenture, are deemed never to have been authenticated
and delivered thereunder).

3. The Stated Maturity of the principal of the Securities of such
series shall be __________, _____.

4. The Securities of such series shall bear interest at the rate of
_____% per annum, which will accrue from __________, _____, or from the
most recent Interest Payment Date to which interest has been paid or duly
provided for, as the case may be, payable semi-annually on __________ and
__________ in each year, commencing __________, to the Person in whose name
such Securities of such series (or one or more Predecessor Securities) are
registered at the close of business on the Regular Record Date next
preceding the Interest Payment Date. Each __________ and __________ shall
be an "Interest Payment Date" for such Securities of such series, and the
__________ and

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<PAGE>

__________ (whether or not a Business Day), as the case may be, next
preceding an Interest Payment shall be the "Regular Record Date" for the
interest payable on such Interest Payment Date.

5. Payment of the principal of and interest on the Securities of
such series will be made at the office of agency of the Company maintained
for such purposes in the City of __________, __________; provided, however,
that at the option of the Company payment of interest may be made by check
mailed to the address of the Person entitled thereto as such address shall
appear in the Security Register.

6. The Securities of such series will not be redeemable at the
option of the Company.

7. The Company shall not be obligated to redeem or purchase the
Securities of such series pursuant to any sinking fund or analogous
provision, or at the option of any Holder thereof.

8. The Securities of such series shall be issued in the form of one
or more permanent Global Securities registered in the name of __________ or
its nominee, to be deposited with, or on behalf of __________.

9. __________ shall act as paying agent with respect to the
Securities of such series.

10. The Securities of such series shall be in such form or forms as
may be approved by the officers of the Company as provided in the Board
Resolutions, such approval to be evidenced by such officers' manual or
facsimile signatures on the Securities of such series, provided that such
form or forms of the Securities are not inconsistent with the requirements
of the Indenture or the Board Resolutions.

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<PAGE>

IN WITNESS WHEREOF, we have hereunto signed our names as of this
_____th day of __________, 1996.

----------------------------------
Name:
Title:

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<PAGE>

CERTIFICATE OF AUTHORIZED OFFICERS

1. The Securities of such series shall be known and designated as
the "_____% Debentures due __________" of the Company.

3. The Stated Maturity of the principal of the Securities of such
series shall be __________, _____.

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<PAGE>

__________ (whether or not a Business Day), as the case may be, next
preceding an Interest Payment shall be the "Regular Record Date" for the
interest payable on such Interest Payment Date.

6. The Securities of such series will not be redeemable at the
option of the Company.

7. The Company shall not be obligated to redeem or purchase the
Securities of such series pursuant to any sinking fund or analogous
provision, or at the option of any Holder thereof.

9. __________ shall act as paying agent with respect to the
Securities of such series.

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<PAGE>

IN WITNESS WHEREOF, we have hereunto signed our names as of this
_____th day of __________, 1996.

----------------------------------
Name:
Title:

-6-

<PAGE>

ALLEGIANCE CORPORATION

CERTIFICATE OF AUTHORIZED OFFICERS

1. The Securities of such series shall be known and designated as
the "_____% Debentures due __________" of the Company.

2. The aggregate principal amount of the Securities of such series
which may be authenticated and delivered under the Indenture is limited to
$__________ (except for Securities of such series authenticated and
delivered upon registration of transfer of, or in exchange for, or in lieu
of, other Securities of such series pursuant to Section 304, 305, 306, 906
or 1107 of the Indenture and except for Securities which, pursuant to
Section 303 of the Indenture, are deemed never to have been authenticated
and delivered thereunder).

3. The Stated Maturity of the principal of the Securities of such
series shall be ____________, _____.

4. The Securities of such series shall bear interest at the rate of
_____% per annum, which will accrue from __________, _____, or from the
most recent Interest Payment Date to which interest has been paid or duly
provided for, as the case may be, payable semi-annually on __________ and
__________ in each year, commencing __________, to the Person in whose name
such Securities of such series (or one more Predecessor Securities) are
registered at the close of business on the Regular Record Date next
preceding

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<PAGE>

the Interest Payment Date. Each __________ and __________ shall be an
"Interest Payment Date" for such Securities of such series, and the
__________ and __________ (whether or not a Business Day), as the case may
be, next preceding an Interest Payment shall be the "Regular Record Date"
for the interest payable on such Interest Payment Date.

5. Payment of the principal of and interest on the Securities of
such series will be made at the office or agency of the Company maintained
for such purposes in the City of __________, __________; provided, however,
that at the option of the Company payment of interest may be made by check
mailed to the address of the Person entitled thereto as such address shall
appear in the Securities Register.

6. The Securities of such series will not be redeemable at the
option of the Company.

7. The Company shall not be obligated to redeem or purchase the
Securities of such series pursuant to any sinking fund or analogous
provision, or at the option of any Holder thereof, except that any Holder
of a Security of this series may elect to have that Security, or any
portion of the principal amount thereof that is a multiple of $1,000,
repaid on __________ at 100% of the principal amount thereof, together with
accrued interest to __________. Such election, which is irrevocable when
made, must be made within the period commencing on __________ and ending at
the close of business on _______________.

8. The Securities of such series shall be issued in the form of one
or more permanent Global Securities registered in the name of _____________
or its nominee, to be deposited with, or on behalf of _______________.

9. ____________ shall act as paying agent with respect to the
Securities of such series.

-8-

<PAGE>

IN WITNESS WHEREOF, we have hereunto signed our names as of this ___th
day of _____________, 1996.

-----------------------------
Name:
Title:

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<PAGE>

September 30, 1996

Allegiance Corporation
1430 Waukegan Road
McGaw Park, Illinois 60085

Re: Registration of Debt Securities on Form S-1
-------------------------------------------

Ladies and Gentlemen:

We have acted as special counsel to Allegiance Corporation, a Delaware
corporation (the "Company"), in connection with the preparation of (i) a
proposed Indenture (the "Indenture") between the Company and PNC Bank,
Kentucky, Inc., as Trustee (the "Trustee"), under which the Company may issue
debt securities in one or more series, and (ii) the Registration Statement on
Form S-1 of the Company relating to $600,000,000 aggregate principal amount
of debt securities (the "Securities") which was filed with the Securities and
Exchange Commission (the "Commission") on or about the date hereof (the
"Registration Statement").

We have reviewed resolutions adopted on September 16, 1996 by the
Company's Board of Directors which authorize and approve the issuance of the
Securities in one or more series with such terms and in such manner as may be
determined by certain officers and other designated persons ("Authorized
Officers") and which empower the Authorized Officers, among other things, (i)
to approve and authorize the form, terms, execution and delivery of the
Indenture and (ii) to file the Registration Statement. Such resolutions are
referred to herein as "Board Resolutions." The actions which the Authorized
Officers must hereafter take in accordance with the Board Resolutions and
Article Three of the Indenture in order to establish the terms and manner of
issuance of any series of the Securities are referred to herein as "Officers'
Certifications." We have reviewed such other records and documents as we
have deemed necessary in order to enable us to express the opinion stated
herein. In rendering such opinion we have assumed that the Indenture in the
form in which it is executed and delivered will not contain any material
change from the proposed form of
<PAGE>

Indenture originally filed as an exhibit to the Registration
Statement.

On the basis of the foregoing, it is our opinion that, with respect to
the Securities of any series, when (a) the Registration Statement has become
effective pursuant to the provisions of the Securities Act of 1933, as
amended, (b) the Indenture has been duly executed and delivered by the
parties thereto, (c) the terms of such Securities have been established as
prescribed in accordance with Article Three of the Indenture and the Board
Resolutions by appropriate Officers' Certifications of the Authorized
Officers, (e) such Securities have been duly executed by the Company,
authenticated by the Trustee and sold by the Company, and (f) the Company has
received the prescribed consideration for the issuance of such Securities,
all in accordance with terms and conditions of the Indenture, the Board
Resolutions and the Officers' Certifications and in the manner contemplated
by the Registration Statement, such Securities will have been legally issued
and will be binding obligations of the Company except as may be limited by
bankruptcy, insolvency, reorganization and other laws of general
applicability relating to or affecting creditors' rights or the effect of
general equity principles.

The foregoing opinion shall also be applicable to a subsequent
registration statement hereafter filed under Commission Rule 462(b) solely to
increase the aggregate principal amount of securities being offered by not
more than $100,000,000.

We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name under the caption "Validity
of Securities" in the Prospectus. In giving this opinion, we do not thereby
admit that we come within the category of persons whose consent is required
under Section 7 of the Securities Act of 1933, as amended, or the rules and
regulations of the Commission thereunder.

Very truly yours,

McDermott, Will & Emery

<PAGE>

ALLEGIANCE CORPORATION
1996 OUTSIDE DIRECTOR INCENTIVE COMPENSATION PLAN

1. PURPOSE. The purpose of the Allegiance Corporation 1996 Outside Director
Incentive Compensation Plan (the "Plan") is to foster and promote the long-
term financial success of Allegiance Corporation (the "Company") by
(i) more closely aligning the personal interests of the directors with
those of the Company's stockholders and (ii) attracting and retaining
outstanding persons to serve as directors by enabling them to participate
in the Company's growth through stock ownership.

2. SHARES RESERVED.

2.1 NUMBER OF SHARES RESERVED. There is hereby reserved for issuance
under the Plan an aggregate of 350,000 shares of Common Stock of the
Company ("Common Stock") which may be authorized and unissued or
treasury shares. If the Company shall at any time change the number
of issued shares of Common Stock without new consideration to the
Company (such as by stock dividend or stock split), the number of
shares reserved for issuance under this Plan shall be correspondingly
changed.

2.2 REUSAGE OF SHARES. In the event of the termination (by reason of
expiration, cancellation, surrender, or otherwise) of any Annual
Option under the Plan, that number of shares of Common Stock that was
subject to the Annual Option but not delivered shall be available
again for an Annual Option under the Plan.

2.3 ADJUSTMENTS TO SHARES RESERVED. In the event of any merger,
consolidation, reorganization, recapitalization, spinoff, stock
dividend, stock split, reverse stock split, exchange, or other
distribution with respect to shares of Common Stock or other change in
the corporate structure or capitalization affecting the Common Stock,
the type and number of shares of stock which are or may be subject to
Annual Options under the Plan and the terms of any outstanding Annual
Option (including the Option Price ) shall be equitably adjusted by
the Board of Directors to preserve the value of the Annual Options
awarded or to be awarded under the Plan.

3. PARTICIPATION. Participation in this Plan is limited to members of the
Board of Directors of the Company (a "Director") who are not salaried
officers or employees of the Company or any subsidiary (an "Outside
Director"). Each Outside Director shall begin participation in the Plan on
the first day of his or her first term as a Director and participation
shall continue until the Outside Director no longer serves as a Director.

<PAGE>

4. ADMINISTRATION. This Plan is intended to be self-governing. All grants of
options to Outside Directors under the Plan shall be automatic and
nondiscretionary and shall be made strictly in accordance with the terms of
the Plan. To the extent that questions of administration arise, they shall
be resolved by the entire Board of Directors and the Board of Directors
shall comply with all applicable law in administering the Plan.

5. PAYMENT OF ANNUAL RETAINER IN OPTIONS. As soon as practicable after the
first day of each Term Year (as defined below), in lieu of an annual cash
retainer, each Outside Director shall be granted an option to purchase
shares of Common Stock (an "Annual Option"). The terms of each Annual
Option shall be as follows:

5.1 TERM. The term of the Annual Option shall be ten (10) years.

5.2 EXERCISE. Except as provided in subsection 6.2 below, the Annual
Option shall be exercisable only while the Outside Director
remains a Director of the Company.

5.3 OPTION PRICE. The exercise price per share of Common Stock (the
"Option Price") shall equal the Fair Market Value of a share of
Common Stock determined on the date the Annual Option is granted.

5.4 VESTING. Subject to subsection 6.2 below, the Annual Option
shall become exercisable as to all of the shares subject to the
option on the last day of the Term Year in which the Annual
Option is granted.

5.5 NUMBER OF SHARES. Each Annual Option shall be to purchase
10,000 shares of Common Stock; provided, that in the case of
a Term Year which is other than 12 months in duration, the
Annual Option shall be to purchase that number of shares of
Common Stock which is equal to 10,000 multiplied by a
fraction the numerator of which is the number of months in
the Term Year and the denominator of which is 12.

For purposes of this Section 5, a "Term Year" shall mean the period
beginning on the first day following the annual meeting of the Company's
stockholders, or if later, the first day a person first serves as an
Outside Director, and ending on the day of the succeeding annual meeting;
provided, that with respect to the Outside Directors serving on the
effective date of the Plan, the first Term Year for such Outside Directors
shall mean the period beginning October 1, 1996 and ending on the day of
the annual meeting of the Company's stockholders occurring in 1998.

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<PAGE>

6. OPTION EXERCISES.

6.1 MANNER AND EFFECT OF EXERCISE. An Annual Option may be exercised
by notice to the Company specifying the number of shares of
Common Stock to be purchased and shall be accompanied by payment
of the option price by check or by the delivery of shares of
Common Stock then owned by the Outside Director or certification
of such ownership. Payment may also be made by delivering a
properly-executed exercise notice to the Company, together with a
copy of irrevocable instructions to a broker to deliver promptly
to the Company the amount of sale or loan proceeds to pay the
exercise price. The exercise notice shall include such other
documentation as the Company or broker or transfer agent, if
applicable, shall require to effect an exercise of the Annual
Option and delivery to the Company of the sale or loan proceeds
required to pay the exercise price. An Annual Option may not be
exercised for a fraction of a share. A share certificate for the
number of shares of Common Stock acquired shall be issued to the
Outside Director as soon as practicable after exercise of an
Annual Option. No adjustment shall be made for a dividend or
other right for which the record date is prior to the date the
stock certificate is issued, except as provided in Section 2. An
exercise of an Annual Option in any manner shall result in a
decrease in the number of shares of Common Stock which thereafter
may be available, both for purposes of the Plan and for sale
under the Annual Option, by the number of shares of Common Stock
as to which the Annual Option is exercised.

6.2 TERMINATION OF OUTSIDE DIRECTOR. In the event an Outside
Director's status as a Director terminates for any reason, all of
the Outside Director's Annual Options shall become fully
exercisable and all such Annual Options shall remain exercisable
for a period of twelve (12) months following the date the Outside
Director's status as a Director terminates (but in no event later
than the expiration of the ten (10) year term of any Annual
Option). To the extent that the terminating Outside Director
does not exercise any Annual Option within the time specified
herein, the Annual Option shall terminate.

7. GENERAL

7.1 EFFECTIVE DATE. The Plan will become effective upon its approval by
Baxter International, Inc., the Company's sole stockholder.

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<PAGE>

7.2 DURATION. The Plan shall remain in effect until all Annual Options
granted under the Plan have been satisfied by the issuance of shares
of Common Stock, or have been terminated in accordance with the terms
of the Plan. No option may be granted under the Plan after the tenth
anniversary of its effective date.

7.3 NON-TRANSFERABILITY OF OPTION. No Annual Option granted under the
Plan may be transferred, pledged, or assigned by an Outside Director
except by will or the laws of descent and distribution in the event of
death, and the Company shall not be required to recognize any
attempted assignment of such rights by any Outside Director. During
an Outside Director's lifetime, options may be exercised only by the
Outside Director or by the Outside Director's guardian or legal
representative. Notwithstanding the foregoing, an Outside Director
may transfer an Annual Option to members of the Director's immediate
family or trusts or family partnerships for the benefit of such
persons, subject to such terms and conditions as may be established by
the Board of Directors.

7.4 COMPLIANCE WITH APPLICABLE LAW. The award of any Annual Option under
the Plan may also be made subject to such other provisions as may be
appropriate to comply with federal and state securities laws or stock
exchange requirements. If, at any time, the Company determines that
the listing, registration, or qualification of any Annual Option, or
the shares of Common Stock issuable pursuant thereto, is necessary on
any securities exchange or under any federal or state securities or
blue sky law, or that the consent or approval of any governmental
regulatory body is necessary or desirable, the issuance of shares of
Common Stock pursuant to any Annual Option, or the removal of any
restrictions imposed on shares subject to an Annual Option, may be
delayed until such listing, registration, qualification, consent, or
approval is effected.

7.5 NO CONTINUED RETAINER. Participation in the Plan will not give any
Outside Director the right to be retained as a Director of the Company
or any right or claim to any benefit under the Plan unless such right
or claim has specifically accrued under the terms of the Plan.

7.6 TREATMENT AS A STOCKHOLDER. No Annual Option granted to an Outside
Director under the Plan shall create any rights in such Outside
Director as a stockholder of the Company until shares of Common Stock
are registered in the name of the Outside Director.

7.7 AMENDMENT OR DISCONTINUATION OF THE PROGRAM. The Board of Directors
may amend, suspend or discontinue the Plan at any time; provided,
however, that no amendment, suspension or discontinuance shall
adversely affect any outstanding Annual Option and if any law,
agreement or exchange on which

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<PAGE>

the Company's Common Stock is traded
requires stockholder approval for an amendment to become effective, no
such amendment shall become effective unless approved by vote of the
Company's stockholders.

7.8 FAIR MARKET VALUE. Except as otherwise determined by the Board of
Directors, the Fair Market Value of a share of Common Stock as of any
date shall be equal to the closing sale price of a share of Common
Stock on that date as reported on the New York Stock Exchange
Composite Reporting Tape.

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<PAGE>

ALLEGIANCE CORPORATION
1996 INCENTIVE COMPENSATION PROGRAM

1. PURPOSE. The purpose of the Allegiance Corporation 1996 Incentive
Compensation Program ("Program") is to increase stockholder value and to
advance the interests of Allegiance Corporation ("Allegiance") and its
subsidiaries (collectively, the "Company") by providing a variety of
economic incentives designed to attract, retain, and motivate officers and
other key employees and by strengthening the mutuality of interest between
such employees and the Company's stockholders. As used in this Program,
the term "subsidiary" means any business, whether or not incorporated, in
which Allegiance has a direct or indirect ownership interest.

2. ADMINISTRATION.

2.1 ADMINISTRATION BY COMMITTEE. The Program shall be administered by the
Compensation Committee of the Allegiance Board of Directors
("Committee"), which shall consist of two or more non-employee
directors within the meaning of Rule 16b-3 of the Securities Exchange
Act of 1934, as amended ("Exchange Act") who also qualify as outside
directors within the meaning of Section 162(m) and the related
regulations under the Internal Revenue Code of 1986, as amended. The
Chief Executive Officer of the Company may exercise any or all
authority otherwise delegated to the Committee under the terms of the
Program with respect to the grant or administration of incentives made
to or held by persons who, at the time of the exercise of such
authority, are not subject to Section 16(a) of the Exchange Act.

2.2 AUTHORITY. Subject to the provisions of the Program, the Committee
shall have the authority to (a) interpret the provisions of the
Program, and prescribe, amend, and rescind rules and procedures
relating to the Program, (b) grant incentives under the Program, in
such forms and amounts and subject to such terms and conditions as it
deems appropriate, including, without limitation, incentives which are
made in combination with or in tandem with other incentives (whether
or not contemporaneously granted) or compensation or in lieu of
current or deferred compensation, (c) modify the terms of, cancel and
reissue, or repurchase outstanding incentives, subject to subsection
12.7, and (d) make all other determinations and take all other actions
as it deems necessary or desirable for the administration of the
Program; provided, however, that in no event shall the Committee
cancel any outstanding stock option for the purpose of reissuing an
option to the option holder at a lower exercise price. The
determination of the Committee on matters within its authority shall
be conclusive and binding on the Company and all other

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persons. The Committee shall comply with all applicable law in
administering the Plan.

3. PARTICIPATION. Subject to the terms and conditions of the Program, the
Committee shall designate from time to time the employees of the Company
(including employees who are directors of Allegiance) who shall receive
incentives under the Program ("Participants"). All officers and other
full-time employees of the Company are eligible to receive incentives under
the Program. Participation, the grant of incentives and any related
performance goals for persons subject to Section 16(a) of the Exchange Act
must be determined by the Committee.

4. SHARES SUBJECT TO THE PROGRAM

4.1 NUMBER OF SHARES RESERVED. Subject to adjustment in accordance with
subsections 4.2 and 4.3, the aggregate number of shares of Allegiance
Common Stock ("Common Stock") available for incentives under the
Program shall be 9,683,000 shares. All shares of Common Stock issued
under the Program may be authorized and unissued shares or treasury
shares. All of such shares may, but need not, be issued pursuant to
the exercise of Incentive Stock Options. The maximum number of shares
of Common Stock which may be granted in the form of Restricted Stock
shall be 750,000. The maximum number of shares that may be granted in
the form of a Stock Option or Stock Appreciation Right pursuant to any
award granted in any fiscal year to a Participant shall be 1,000,000
shares.

4.2 REUSAGE OF SHARES.

(a) In the event of the exercise or termination (by reason of
forfeiture, expiration, cancellation, surrender, or otherwise) of
any incentive under the Program, that number of shares of Common
Stock that was subject to the incentive but not delivered shall
be available again for incentives under the Program.

(b) In the event that shares of Common Stock are delivered under the
Program and are thereafter forfeited or reacquired by the Company
pursuant to rights reserved upon the award thereof, such
forfeited or reacquired shares shall be available again for
incentives under the Program.

4.3 ADJUSTMENTS TO SHARES RESERVED. In the event of any merger,
consolidation, reorganization, recapitalization, spinoff, stock
dividend, stock split, reverse stock split, exchange, or other
distribution with respect to shares of Common

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Stock or other change in the corporate structure or
capitalization affecting the Common Stock, the type and number of
shares of stock which are or may be subject to incentives under the
Program and the terms of any outstanding incentives (including the
price at which shares of stock may be issued pursuant to an
outstanding incentive) shall be equitably adjusted by the
Committee, in its sole discretion, to preserve the value of
incentives awarded or to be awarded to Participants under the
Program.

5. STOCK OPTIONS.

5.1 AWARDS. Subject to the terms and conditions of the Program, the
Committee shall designate the employees to whom options to purchase
shares of Common Stock ("Stock Options") are to be awarded under the
Program and shall determine the number, type, and terms of the Stock
Options to be awarded to each of them. Each Stock Option shall expire
not later than 10 years and one day after the date of grant. The
option price per share ("Option Price") for any Stock Option awarded
shall not be less than the Fair Market Value of a share of Common
Stock on the date the Stock Option is granted. Each Stock Option
awarded under the Program shall be a "nonqualified stock option" for
tax purposes unless the Stock Option satisfies all of the requirements
of Section 422 of the Internal Revenue Code of 1986, as amended, and
the Committee designates such Stock Option as an "Incentive Stock
Option".

5.2 MANNER OF EXERCISE. A Stock Option may be exercised by notice to the
Company specifying the number of shares of Common Stock to be
purchased and shall be accompanied by payment of the Option Price by
check or, in the discretion of the Committee, by the delivery of
shares of Common Stock then owned by the Participant or certification
of such ownership. In the discretion of the Committee, payment may
also be made by delivering a properly executed exercise notice to the
Company, together with a copy of irrevocable instructions to a broker
to deliver promptly to the Company the amount of sale or loan proceeds
to pay the exercise price.

5.3 DIVIDEND EQUIVALENTS. The Committee may grant dividend equivalents in
connection with any option granted under this Program. Such dividend
equivalents may be payable in cash or in shares of Common Stock upon
such terms and conditions as the Committee in its sole discretion
deems appropriate.

6. STOCK APPRECIATION RIGHTS.

6.1 GRANT OF SARS. Subject to the terms and conditions of the Program,
the Committee shall designate the employees to whom stock appreciation
rights ("SARs") are to be awarded under the Program and shall
determine the number,

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type and terms of the SARs to be awarded to each of them. An SAR
may be granted in tandem with a stock option granted under the
Program, or the SAR may be granted on a free-standing basis. Tandem
SARs may be granted either at or after the time of grant of a stock
option, provided that, in the case of an Incentive Stock Option a
tandem SAR may be granted only at the time of the grant of such
option. The grant price of a tandem SAR shall equal the option
price of the related option. The grant price of a free-standing
SAR shall be equal to the Fair Market Value of a share of Common
Stock on the date of grant of the SAR.

6.2 EXERCISE OF TANDEM SARS. Tandem SARs may be exercised for all or part
of the shares subject to the related option upon the surrender of the
right to exercise the equivalent portion of the related option. A
tandem SAR shall terminate and no longer be exercisable upon
termination or exercise of the related stock option. A tandem SAR may
be exercised only with respect to the shares for which its related
option is then exercisable.

6.3 EXERCISE OF FREE-STANDING SARS. Free-standing SARs may be exercised
upon such terms and conditions as the Committee, in its sole
discretion, determines.

6.4 TERM OF SARS. The term of an SAR granted under the Program shall be
determined by the Committee in its sole discretion; provided, however,
that such term shall not exceed the option term in the case of a
tandem SAR, or ten years in the case of a free-standing SAR.

6.5 PAYMENT OF SAR AMOUNT. Upon exercise of an SAR, a Participant shall
be entitled to receive payment from the Company in an amount
determined by multiplying:

(a) The excess of the Fair Market Value of a share of Common Stock on
the date of exercise over the grant price of the SAR by

(b) The number of shares with respect to which the SAR is exercised.

At the discretion of the Committee, the payment to be made upon an SAR
exercise may be in cash, in shares of Common Stock of equivalent
value, or in some combination thereof.

7. STOCK AWARDS. Subject to the terms and conditions of the Program, the
Committee shall designate the employees who shall be awarded shares of
Common Stock without restrictions ("Stock Awards"), under the Program and
shall determine the number and terms of the Stock Awards to be awarded to
each of them. No person subject to Section 16(a) of the Exchange Act may
receive a Stock Award, and no

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person eligible to receive a Stock Award may receive a Stock Award
representing more than 2,500 shares of Common Stock in any calendar
year.

8. RESTRICTED STOCK.

8.1 AWARDS. Subject to the terms and conditions of the Program, the
Committee shall designate the employees to whom shares of Common
Stock, subject to restrictions ("Restricted Stock"), shall be awarded
or sold under the Program and determine the number of shares and the
terms and conditions of each such award.

8.2 RESTRICTIONS. All shares of Restricted Stock shall be subject to such
restrictions as the Committee may determine, including, without
limitation, any of the following:

(a) a prohibition against the sale, assignment, transfer, pledge,
hypothecation, or other encumbrance of the shares of Restricted
Stock for a specified period;

(b) a requirement that the holder of shares of Restricted Stock
forfeit (or in the case of shares sold to a Participant, resell
to the Company at his or her cost) such shares in the event of
termination of his or her employment during any period in which
such shares are subject to restrictions; or

(c) a prohibition against employment of the holder by any competitor
of the Company or against such holder's dissemination of any
confidential information belonging to the Company.

All restrictions shall expire at such time as the Committee shall
specify.

8.3 STOCKHOLDER RIGHTS. Shares of Restricted Stock shall be registered in
the name of the Participant. Each Participant who has been awarded
shares of Restricted Stock shall have such rights of a stockholder
with respect to such shares as the Committee may designate at the time
of the award, including the right to vote such shares and the right to
receive dividends paid on such shares. Unless otherwise provided by
the Committee, stock dividends or non-cash dividends and any other
securities distributed with respect to Restricted Stock shall be
subject to the same restrictions and other terms and conditions as the
Restricted Stock to which they are attributable.

8.4 LAPSE OF RESTRICTIONS. Shares of Restricted Stock will be delivered
free of all restrictions to the Participant (or to the Participant's
legal representative,

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beneficiary, or heir) when the shares are no longer subject to
forfeiture or restrictions on transfer.

9. PERFORMANCE SHARES.

9.1 AWARDS. Subject to the terms and conditions of the Program, the
Committee shall designate the employees to whom Performance Shares are
to be awarded and determine the number of shares and the terms and
conditions of each such award. Each Performance Share shall entitle
the Participant to a payment in the form of one share of Common Stock
upon the attainment of performance goals and other terms and
conditions specified by the Committee.

9.2 NO ADJUSTMENTS. Except as otherwise provided by the Committee or in
section 4.3 hereof, no adjustment shall be made in Performance Shares
awarded on account of cash dividends which may be paid or other rights
which may be provided to the holders of Common Stock prior to the end
of any performance period.

9.3 SUBSTITUTION OF CASH. The Committee may, in its sole discretion,
substitute cash equal to the Fair Market Value (determined as of the
date of the issuance) of shares of Common Stock otherwise required to
be issued to a Participant hereunder.

10. OTHER INCENTIVES. In addition to the incentives described in Sections 5
through 9 above and subject to the terms and conditions of the Program, the
Committee may grant other incentives ("Other Incentives"), payable in cash
or in stock, under the Program as it determines to be in the best interest
of the Company.

11. PERFORMANCE GOALS. Awards of Restricted Stock, Performance Shares and
other incentives under the Program may be made subject to the attainment of
performance goals relating to one or more business criteria within the
meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended,
including, but not limited to, stock price, market share, sales, earnings
per share, return on equity, costs and cash flow, as determined by the
Committee from time to time.

12. GENERAL

12.1 EFFECTIVE DATE. The Program will become effective upon its approval
by Baxter International, Inc., Allegiance's sole stockholder.

12.2 DURATION. The Program shall remain in effect until all incentives
granted under the Program have been satisfied by the issuance of
shares of Common Stock, lapse of restrictions or the payment of cash,
or have been terminated in

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accordance with the terms of the Program or the incentive. No
incentive may be granted under the Program after the tenth
anniversary of its effective date.

12.3 NON-TRANSFERABILITY OF INCENTIVES. No incentive granted under the
Program may be transferred, pledged, or assigned by the employee
except by will or the laws of descent and distribution in the event of
death, and the Company shall not be required to recognize any
attempted assignment of such rights by any Participant. During a
Participant's lifetime, awards may be exercised only by the
Participant or by the Participant's guardian or legal representative.
Notwithstanding the foregoing, at the discretion of the Committee, a
grant of an award may permit the transfer of the award by the
Participant solely to members of the Participant's immediate family or
trusts or family partnerships for the benefit of such persons, subject
to such terms and conditions as may be established by the Committee.

12.4 COMPLIANCE WITH APPLICABLE LAW AND WITHHOLDING.

(a) The award of any benefit under the Program may also be made subject to
such other provisions as the Committee determines appropriate,
including, without limitation, provisions to comply with federal and
state securities laws or stock exchange requirements.

(b) If, at any time, the Company, in its sole discretion, determines that
the listing, registration, or qualification of any type of incentive,
or the shares of Common Stock issuable pursuant thereto, is necessary
on any securities exchange or under any federal or state securities or
blue sky law, or that the consent or approval of any governmental
regulatory body is necessary or desirable, the issuance of shares of
Common Stock pursuant to any incentive, or the removal of any
restrictions imposed on shares subject to an incentive, may be delayed
until such listing, registration, qualification, consent, or approval
is effected.

(c) The Company shall have the right to withhold from any award under the
Program or to collect as a condition of any payment under the Program,
as applicable, any taxes required by law to be withheld. To the
extent permitted by the Committee, a Participant may elect to have any
distribution, or a portion thereof, otherwise required to be made
under the Program to be withheld or to surrender to the Company
previously owned shares of Common Stock to fulfill any tax withholding
obligation.

12.5 NO CONTINUED EMPLOYMENT. Participation in the Program will not give
any Participant the right to be retained in the employ of the Company
or any right or claim to any benefit under the Program unless such
right or claim has specifically accrued under the terms of any
incentive under the Program.

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12.6 TREATMENT AS A STOCKHOLDER. No incentive granted to a Participant
under the Program shall create any rights in such Participant as a
stockholder of the Company until shares of Common Stock related to the
incentive are registered in the name of the Participant.

12.7 AMENDMENT OR DISCONTINUATION OF THE PROGRAM. The Board of Directors
may amend, suspend, or discontinue the Program at any time; provided,
however, that no amendment, suspension or discontinuance shall
adversely affect any outstanding benefit and if any law, agreement or
exchange on which Common Stock of Allegiance is traded requires
stockholder approval for an amendment to become effective, no such
amendment shall become effective unless approved by vote of
Allegiance's stockholders.

12.8 ACCELERATION OF INCENTIVES. Notwithstanding any provision in this
Program to the contrary or the normal terms of vesting in any
incentive, (a) the restrictions on all shares of Restricted Stock
shall lapse immediately, (b) all outstanding Stock Options will become
exercisable immediately, and (c) all performance goals shall be deemed
to be met and payment made immediately if a Change in Control occurs.
For purposes of this Program, a "Change in Control" shall have
occurred if:

(1) any "Person", as such term is used in Section 13(d) and 14(d) of
the Exchange Act (other than Allegiance, any corporation owned,
directly or indirectly, by the stockholders of Allegiance in
substantially the same proportions as their ownership of stock of
Allegiance, and any trustee or other fiduciary, holding
securities under an employee benefit plan of Allegiance or such
proportionately owned corporation), is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of Allegiance representing
20% or more of the combined voting power of Allegiance's then
outstanding securities;

(2) during any period of not more than 24 months, individuals who at
the beginning of such period constitute the Board of Directors of
Allegiance, and any new director (other than a director
designated by a Person who has entered into an agreement with
Allegiance to effect a transaction described in paragraph (1),
(3), or (4) of this subsection 13.8) whose election by the board
or nomination for election by Allegiance's stockholders was
approved by a vote of at least two-thirds of the directors then
still in office who either were directors at the beginning of the
period or whose election or nomination for election

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was previously so approved, cease for any reason to constitute
at least a majority thereof;

(3) the stockholders of Allegiance approve a merger or consolidation
of Allegiance with any other corporation, other than (A) a merger
or consolidation which would result in the voting securities of
Allegiance outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) more than 60% of
the combined voting power of the voting securities of Allegiance
or such surviving entity outstanding immediately after such
merger or consolidation, or (B) a merger or consolidation
effected to implement a recapitalization of Allegiance (or
similar transaction) in which no Person acquires more than 20% of
the combined voting power of Allegiance's then outstanding
securities; or

(4) the stockholders of Allegiance approve a plan of complete
liquidation of Allegiance or an agreement for the sale or
disposition by Allegiance of all or substantially all of its
assets (or any transaction having a similar effect).

The Committee may also determine, in its discretion, that a sale of a
substantial portion of Allegiance's assets or one of its businesses
constitutes a "Change of Control" with respect to incentives held by
Participants employed in the affected operation.

12.9 DEFINITION OF FAIR MARKET VALUE. Except as otherwise determined by
the Committee, the Fair Market Value of a share of Common Stock as of
any date shall be equal to the closing sale price of a share of Common
Stock on that date as reported on the New York Stock Exchange
Composite Reporting Tape.

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ALLEGIANCE CHANGE IN CONTROL PLAN

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TABLE OF CONTENTS

PAGE
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SECTION 1 1
Introduction 1
Purpose 1
Effective Date, Plan Year 1
Employers 1
Administration 1

SECTION 2 2
Participation 2

SECTION 3 2
Plan Benefits 2
Benefits Following a Change in Control 2
Non-Solicitation and Non-Competition 2
Change in Control 3
Terminations for Cause and Good Reason 4

SECTION 4 5
Payment of Benefits 5
Agreement Governs 5
Form of Payment 5
Designation of Beneficiary 6

SECTION 5 6
Financing Plan Benefits 6

SECTION 6 6
Other Employment 6

SECTION 7 7
Miscellaneous 7
Information to be Furnished by Participants 7
Claims Review 7
Evidence 8
Fees and Expenses 8
Action by Employer 8
Controlling Laws 8
Interests Not Transferable 8

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PAGE
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Mistake of Fact 8
Severability 8
Withholding 9
Effect on Other Plans or Agreements 9

SECTION 8 9
Amendment and Termination 9
Amendment and Termination 9

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ALLEGIANCE CHANGE IN CONTROL PLAN

SECTION 1

INTRODUCTION

1.1. PURPOSE. Allegiance Corporation ("Allegiance") has established
the Allegiance Change In Control Plan (the "Plan") to enable Allegiance and its
Subsidiaries and Affiliates (collectively, the "Company") to provide severance
benefits to eligible executive or management employees whose employment is
terminated following a Change in Control of the Company. It is the intent of
the Company that the Plan, as set forth herein, constitute an "employee welfare
benefit plan" within the meaning of Section 3(1) of the Employee Retirement
Income Act of 1974 ("ERISA") and comply with the applicable requirements of
ERISA.

1.2. EFFECTIVE DATE, PLAN YEAR. The "Effective Date" of the Plan is
October 1, 1996. A "Plan Year" is the 12-month period beginning on October 1
and ending on the following September 30.

1.3. EMPLOYERS. Any Subsidiary or Affiliate of Allegiance employing
an employee who has been designated as a Participant by the Committee shall be
deemed to have adopted the Plan. A "Subsidiary" of Allegiance is any
corporation more than 50 percent of the voting stock of which is owned, directly
or indirectly, by Allegiance. An "Affiliate" of Allegiance is any corporation
more than 50 percent of the voting stock of which is owned, directly or
indirectly, by the owner or owners of more than 50 percent of the voting stock
of Allegiance.

1.4. ADMINISTRATION. The Plan is administered by the Compensation
Committee of the Board of Directors of Allegiance (the "Committee"). The
Committee, from time to time, may adopt such rules and regulations as may be
necessary or desirable for the proper and efficient administration of the Plan
and as are consistent with the terms of the Plan. The Committee, from time to
time, may also appoint such individuals to act as its representatives as the
Committee considers necessary or desirable for the effective administration of
the Plan. Any notice or document required to be given or filed with the
committee will be properly given or filed if delivered or mailed, by registered
mail, postage prepaid, to the Committee at 1430 Waukegan Road, McGaw Park,
Illinois 60085.

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SECTION 2

PARTICIPATION

The Committee shall designate from time to time those employees of the
Company employed in an executive or management position who shall participate in
the plan (a "Participant"). An employee who has been so designated shall
participate by signing an agreement with the Company ("Agreement") which shall
specify the benefits the Participant is entitled to receive should the
Participant's employment terminate following a Change in Control of the Company
and the terms and conditions under which those benefits will be provided. A
Participant's Agreement implements and forms a part of the Plan as respects the
Participant's participation in the Plan. To the extent there are any
inconsistencies between the Plan document and a Participant's Agreement, the
terms of the Participant's Agreement shall be controlling. No employee other
than those designated by the Committee shall be eligible to participate in the
Plan.

SECTION 3

PLAN BENEFITS

3.1. BENEFITS FOLLOWING A CHANGE IN CONTROL. If a Participant's
employment with the Company terminates within twenty-four (24) months following
a Change in Control, the Participant shall be entitled to the benefits specified
in the Participant's Agreement and such benefits shall be paid at such time, in
such manner and subject to such conditions as are specified in the Agreement. A
Participant's entitlement to benefits as specified in the Participant's
Agreement shall depend upon whether the Participant's termination is voluntary
or involuntary and whether for Cause (as defined below), if involuntary, or for
Good Reason (as defined below), if voluntary.

3.2. NON-SOLICITATION AND NON-COMPETITION. In consideration for the
benefits provided for under a Participant's Agreement, the Participant shall
agree that during the 24-month period following the Participant's date of
termination (the "Separation Period"), the Participant:

(a) will not, without the prior written consent of the Company,
alone or in association with others, solicit on behalf of
the Participant, or any other person, firm, corporation or
entity, any employee of the Company, or any of its operating
divisions, Subsidiaries or

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Affiliates, for employment with a person, firm, corporation or
entity which competes with the Company, or any of its divisions,
Subsidiaries or Affiliates.

(b) will not, without the prior written consent of the Company,
directly or indirectly, engage or invest in, counsel or
advise or be employed by any other person, firm, corporation
or entity engaged in or conducting business which is the
same as, or competing with, the business being conducted by
the Company, or any of its operating divisions, Subsidiaries
or Affiliates, in any area or territory in which the
Company, or such operating divisions, Subsidiaries or
Affiliates, shall be conducting business during the
Separation Period. Notwithstanding the foregoing, the
Participant shall be entitled to passively own not more than
four and nine-tenths percent (4.9%) of any publicly held
entity engaged in any business in which the Company, or any
of its operating divisions, Subsidiaries or Affiliates,
shall be engaged during said period.

If a Participant fails to comply with the non-solicitation and/or non-
competition restrictions of this subsection 3.2 and the Participant's Agreement,
participation in the Plan shall immediately terminate and the Participant shall
forfeit any remaining unpaid benefits.

3.3. CHANGE IN CONTROL. For purposes of the Plan a "Change in
Control" shall have occurred if:

(a) any "Person", as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended
("Exchange Act") other than Allegiance, any corporation
owned, directly or indirectly, by the stockholders of
Allegiance in substantially the same proportions as their
ownership of stock of Allegiance, and any trustee or other
fiduciary holding securities under a Company employee
benefit plan or such proportionately owned corporation,
becomes the "beneficial owner" (as defined in rule 13d-3
under the Exchange Act), directly or indirectly, of
securities of Allegiance representing 20% or more of the
combined voting power of Allegiance's then outstanding
securities;

(b) during any period of not more than twenty-four (24) months,
individuals who at the beginning of such period constitute
the Board of Directors of Allegiance, and any new director
(other than a director designated by a Person who has
entered into an agreement with Allegiance to effect a
transaction described in subparagraph (a), (c), or (d) of
this subsection

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3.3) whose election by the board or nomination for election by
Allegiance's stockholders was approved by a vote of at least two-
thirds of the directors then still in office who either were
directors at the beginning of the period or whose election or
nomination for election was previously so approved, cease for any
reason to constitute at least a majority thereof;

(c) the stockholders of Allegiance approve a merger or
consolidation of Allegiance with any other corporation,
other than (i) a merger or consolidation which would result
in the voting securities of Allegiance outstanding
immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting
securities of the surviving entity) more than 60% of the
combined voting power of the voting securities of Allegiance
or such surviving entity outstanding immediately after such
merger or consolidation, or (ii) a merger or consolidation
effected to implement a recapitalization of Allegiance (or
similar transaction) in which no Person acquires more than
20% of the combined voting power of Allegiance's then
outstanding securities; or

(d) the stockholders of Allegiance approve a plan of complete
liquidation of Allegiance or an agreement for the sale or
disposition by Allegiance of all or substantially all of its
assets (or any transaction having a similar effect).

Allegiance may also determine, in its discretion, that a sale of a substantial
portion of its assets or one of its businesses constitutes a "Change of Control"
with respect to any Participant if the Participant is employed in the affected
operation.

3.4. TERMINATIONS FOR CAUSE AND GOOD REASON. A Participant will be
considered to have been terminated for "Cause" if the termination is by reason
of the Participant willfully engaging in conduct demonstrably and materially
injurious to the Company, the Participant being convicted of or confessing to a
crime involving dishonesty or moral turpitude or the Participant's willful and
continued failure for a significant period of time to perform the Participant's
duties after a demand for substantial performance has been delivered to the
Participant by the Board of Directors of Allegiance which demand specifically
identifies the manner in which the Board believes that the Participant has not
substantially performed his duties. A Participant's termination shall be
considered to have been for "Good Reason" if the Participant's termination is by
reason of the occurrence of any of the following events within twenty-four (24)
months following a Change in Control without the Participant's express written
consent:

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(a) any significant change in the Participant's title,
authorities, responsibilities (including reporting
responsibilities) which, in the Participant's reasonable
judgment, represents an adverse change; the assignment to
the Participant of any significant duties or work
responsibilities which, in his reasonable judgment, are
inconsistent with such title, authorities or
responsibilities; or any removal of the Participant from, or
failure to reappoint or reelect him to any of such
positions, except if any such changes are because of
disability, retirement or Cause;

(b) a reduction in or failure to pay any portion of the
Participant's annual base salary as in effect on the date of
the Change in Control or as the same may be increased from
time to time thereafter;

(c) the failure by the Company to provide the Participant with
compensation and benefits (including, without limitation,
incentive, bonus and other compensation plans and any
vacation, medical, hospitalization, life insurance, dental
or disability benefit plan), or cash compensation in lieu
thereof, which are, in the aggregate, no less favorable than
those provided by the Company to the Participant immediately
prior to the occurrence of the Change in Control;

(d) any breach by the Company of any provision of a
Participant's Agreement; and

(e) the failure of the Company to obtain a satisfactory
agreement from any successor or assign of the Company to
assume and agree to perform the Participant's Agreement.

SECTION 4

PAYMENT OF BENEFITS

4.1. AGREEMENT GOVERNS. Any benefits under the Plan shall be payable
at such time, and pursuant to the terms and conditions of each Participant's
Agreement.

4.2. FORM OF PAYMENT. Subject to the terms of a Participant's
Agreement, benefits shall be paid in equal installments according to the
Company's normal payroll schedule. In the event of a Participant's death before
the Participant receives all benefits

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<PAGE>

to which he otherwise would be entitled under the Plan, payment shall be made to
the Participant's beneficiary in installments or a lump sum, as determined by
the Committee.

4.3. DESIGNATION OF BENEFICIARY. By signing a form furnished by the
Committee, each Participant may designate any person or persons to whom his
benefits are to be paid if he dies before he receives all of his benefits. A
beneficiary designation form will be effective only when the form is filed with
the Committee while the Participant is still alive and will cancel all
beneficiary designation forms previously filed by the Participant with respect
to this Plan. If a deceased Participant has failed to designate a beneficiary
as provided above, or if the designated beneficiary predeceases the participant,
payment of the Participant's benefits shall be made to the Participant's estate.
If a designated beneficiary dies before complete payment of any benefits
attributable to a Participant, remaining benefits shall be paid to the
beneficiary's estate.

SECTION 5

FINANCING PLAN BENEFITS

All benefits payable under the Plan shall be paid directly by the
Company out of general assets. The Company shall not be required to segregate
on its books or otherwise any amount to be used for the payment of benefits
under the Plan.

SECTION 6

OTHER EMPLOYMENT

A Participant shall not be required to mitigate the amount of any
payment or benefit provided for under the Plan by seeking other employment or
otherwise nor shall the amount of any payment or benefit provided for under the
Plan be reduced by any compensation earned by the Participant as a result of
other employment.

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<PAGE>

SECTION 7

MISCELLANEOUS

7.1. INFORMATION TO BE FURNISHED BY PARTICIPANTS. Each Participant
must furnish to the Committee such documents, evidence, data or other
information as the Committee consider necessary or desirable for the purpose of
administering the Plan. Benefits under the Plan for each Participant are
provided on the condition that he/she furnish full, true and complete data,
evidence or other information, and that he/she will promptly sign any document
related to the Plan, requested by the Committee.

7.2. CLAIMS REVIEW. Any claim for benefits under the Plan or a
Participant's Agreement by a Participant shall be made in writing and delivered
to the Committee. If a Participant, or any beneficiary following the
Participant's death (collectively, the "Claimant"), believes he has been denied
any benefits or payments under the Plan or Agreement, either in total or in an
amount less than the full benefit or payment to which the Claimant would
normally be entitled, the Committee shall advise the Claimant in writing of the
amount of the benefit, or payment, if any, and the specific reasons for the
denial. The Committee shall also furnish the Claimant at that time with a
written notice containing:

(a) A specific reference to pertinent provisions of the Plan or
the Participant's Agreement;

(b) A description of any additional material or information
necessary for the Claimant to perfect the claim if possible,
and an explanation of why such material or information is
needed; and

Within 60 days of receipt of the information described above, a Claimant shall,
if further review is desired, file a written request for reconsideration with
the Committee. So long as the Claimant's request for review is pending
(including such 60-day period), Claimant or his duly authorized representative
may review pertinent documents and may submit issues and comments in writing to
the Committee. A final and binding decision shall be made by the Committee
within 60 days of the filing by the Claimant of the request for reconsideration;
provided, however, that if the Committee, in its discretion, feels that a
hearing with the Claimant or his representative present is necessary or
desirable, this period shall be extended an additional 60 days. The decision by
the Committee shall be conveyed to the Claimant in writing and shall include
specific reasons for the decision, written in a manner calculated to be
understood by the Claimant, which specifically references to the pertinent
provisions of the Plan or the Participant's Agreement on which the decision is

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<PAGE>

based. The Committee shall use ordinary care and diligence in the performance
of its duties.

7.3. EVIDENCE. Evidence required of anyone under the Plan may be by
certificate, affidavit, document or other information which the person relying
thereon considers pertinent and reliable, and signed, made or presented by the
proper party or parties.

7.4. FEES AND EXPENSES. The Company shall pay all reasonable legal
fees and related expenses (including the reasonable costs of experts, evidence
and counsel), when and as incurred by a Participant, as a result of contesting
or disputing any termination of employment of the Participant following a Change
in Control whether or not such contest or dispute is resolved in the
Participant's favor but only if the Participant was seeking in good faith to
obtain or enforce any right or benefit provided by the Plan or the Participant's
Agreement or by any other plan or arrangement maintained by the Employers under
which the Participant is or may be entitled to receive benefits.

7.5. ACTION BY EMPLOYER. Any action required of or permitted by
Allegiance under the Plan shall be by resolution of its Board of Directors, by
resolution of a duly authorized committee of its Board of Directors, or by a
person or persons authorized by resolutions of its Board of Directors or such
committee.

7.6. CONTROLLING LAWS. Except to the extent superseded by laws of
the United States, the laws of Illinois shall be controlling in all matters
relating to the Plan.

7.7. INTERESTS NOT TRANSFERABLE. The interests of persons entitled
to benefits under the Plan are not subject to their debts or other obligations
and, except as may be required by the tax withholding provisions of the Internal
Revenue Code or any state's income tax act, or pursuant to an agreement between
a Participant and the Employers, may not be voluntarily sold, transferred,
alienated, assigned or encumbered.

7.8. MISTAKE OF FACT. Any mistake of fact or misstatement of fact
shall be corrected when it becomes known and proper adjustment made by reason
thereof.

7.9. SEVERABILITY. In the event any provision of the Plan or an
Agreement shall be held to be illegal or invalid for any reason, such illegality
or invalidity shall not affect

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<PAGE>

the remaining parts of the Plan or Agreement, and the Plan or Agreement shall be
construed and enforced as if such illegal or invalid provisions had never been
contained in the Plan or Agreement.

7.10. WITHHOLDING. The Company will withhold from any amounts
payable under the Plan all federal, state, city and local taxes as shall be
legally required and any applicable insurance premiums, as well as any other
amounts authorized or required by Company policy including, but not limited to,
withholding for garnishments and judgments or other court orders.

7.11. EFFECT ON OTHER PLANS OR AGREEMENTS. Payments or benefits
provided to a Participant under any Company stock, deferred compensation,
savings, retirement or other employee benefit plan are governed solely by the
terms of such plan. Any obligations or duties of a Participant pursuant to any
non-competition or other agreement with the Company shall not be affected by the
receipt of benefits under this Plan.

SECTION 8

AMENDMENT AND TERMINATION

8.1. AMENDMENT AND TERMINATION. Allegiance reserves the right to
amend the Plan at any time or to terminate the Plan at any time provided that no
such amendment or termination of the Plan shall affect the provisions of any
Participant's Agreement then in force under the Plan.

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<PAGE>

AGREEMENT
UNDER
ALLEGIANCE CHANGE IN CONTROL PLAN
(3X BASE, GROSS-UP)

THIS AGREEMENT is made as of October 1, 1996 by and between Allegiance
Corporation, a Delaware corporation (the "Company") and _______________ (the
"Employee") under the Allegiance Change in Control Plan (the "Plan").

WHEREAS, Company considers the maintenance of a vital management group
to be essential to protecting and enhancing the best interests of Company and
its stockholders and to that end Company has established the Plan to provide
benefits to certain management employees in the event their employment is
terminated following a Change in Control of Company, participation in which Plan
is evidenced by an individual agreement between Company and each participating
employee; and

WHEREAS, Employee is a member of Company's management group and
Company has determined that to reinforce and encourage the continued attention
and dedication of Employee to his duties free from distractions which could
arise in anticipation of or subsequent to a Change in Control of Company, it
should extend participation in the Plan to Employee;

NOW, THEREFORE, in consideration of the mutual covenants contained
herein, Company and Employee agree that Employee shall become a Participant in
the Plan subject to the following terms which form a part of the Plan with
respect to Employee's participation therein.

1. TERM AND NATURE OF AGREEMENT. This Agreement and Employee's
participation in the Plan shall commence as of the date hereof and shall
continue in effect until October 1, 1999. As of October 1, 1999 and each third
October 1 occurring thereafter, this Agreement shall be automatically renewed
for a term of three (3) years unless Company gives written notice to Employee at
least 90 days prior to the renewal date that this Agreement will not be
extended. Notwithstanding the foregoing, if a Change in Control (as hereinafter
defined) occurs during the last two (2) years of any term of this Agreement, the
term of this Agreement and Employee's Plan participation shall automatically be
extended for a period of twenty-four (24) months after the end of the month in
which the Change in Control occurs. If Employee's employment with Company
terminates prior to a Change in Control, this Agreement and Employee's
participation in the Plan shall automatically expire. Furthermore, Employee may
terminate this Agreement and his participation in the Plan at any time by giving
Company 30 days' advance written notice. This Agreement which evidences
Employee's participation in the Plan shall be construed and enforced under the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") as an
unfunded welfare

<PAGE>

benefit plan. The Plan and the Agreement shall be administered by the
Compensation Committee of the Board of Directors of the Company (the
"Committee").

2. SEVERANCE BENEFITS FOLLOWING A CHANGE IN CONTROL. If Employee's
employment with Company is terminated within twenty-four (24) months following a
Change in Control, Employee shall be entitled to the following severance
benefits (in addition to any non-severance compensation and benefits provided
for under any of Company's employee benefit plans, policies and practices or
under the terms of any other contracts, but in lieu of any severance pay under
any Company employee benefit plan, policy and practice or under the terms of any
other contract including any employment contract):

(a) If Employee's employment is terminated by reason of Employee's
disability, retirement or death or by Employee other than for Good Reason,
the Company shall pay Employee his full base salary through the Date of
Termination at the rate in effect at the time of termination (or the date
of death in the case of Employee's death), plus any bonus or incentive
compensation award which, pursuant to the terms of any compensation or
incentive plan, Employee is entitled to receive but which has not yet been
paid.

(b) If Employee's employment is terminated for Cause, Company shall
pay Employee his full base salary through the Date of Termination at the
rate in effect at the time Notice of Termination is given plus any bonus or
incentive compensation award which, pursuant to the terms of any
compensation or incentive plan, Employee is entitled to receive but which
has not yet been paid.

(i) Within five (5) days after the Date of Termination, Company
shall pay Employee his full base salary through the Date of
Termination at the greater of the rate in effect at the time the
Change in Control occurred or the rate in effect when the Notice of
Termination was given plus an amount equal to 100% of Employee's
Target Annual Bonus (as defined below).

(ii) Company shall pay Employee a gross severance benefit equal
to the product of three (3) times the sum of (A) Employee's Annual
Base Salary at the greater of the rate in effect at the time the
Change in Control occurred or the rate in effect when Notice of
Termination was given and (B) Employee's Target Annual Bonus. The
severance benefit shall be paid during the ensuing 36-month period in
equal installments according to Company's normal payroll schedule
beginning with the first payroll period in which Employee's Date of
Termination occurs. Employee's "Annual Base Salary" shall mean the
yearly salary rate established from time to time by Company as
Employee's regular

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<PAGE>

salary for the next succeeding twelve (12) month period, payable
pursuant to the Company's payroll on a periodic basis and Employee's
"Target Annual Bonus" shall mean the maximum bonus Employee could earn
under Company's Short Term Incentive Plan for the year in which his
Date of Termination occurs.

(iii) Any outstanding options to purchase stock of Company held
by Employee shall immediately vest and become exercisable in full in
accordance with their terms and the provisions of Company's omnibus
incentive plan.

(iv) Company shall ensure that Employee is paid in cash within 30
days after the Date of Termination Employee's benefit under the
Allegiance Excess Benefit Plan or any successor thereto.

(v) Company shall pay the costs of a reasonable outplacement
service until Employee is employed on a full time basis.

3. EXCISE TAX 280G GROSS UP. In the event that any payment or benefit
received or to be received by Employee in connection with a Change in Control or
the termination of Employee's employment (whether pursuant to the terms of this
Agreement or any other plan, arrangement or agreement with Company, with any
person whose actions result in a Change in Control of Company or with any person
affiliated with Company or such person) (all such payments and benefits,
including the payments and benefits provided herein, being hereinafter called
"Total Payments") would be subject to the excise tax imposed by Section 4999 of
the Internal Revenue Code of 1986 ("Code"), or any interest or penalties are
incurred by Employee with respect to such excise tax (such excise tax, together
with any such interest and penalties, hereinafter collectively referred to as
the "Excise Tax"), Employee shall be entitled to receive an additional payment
(a "Gross-Up Payment") in an amount such that after payment by Employee of all
taxes (including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and the Excise Tax imposed upon the Gross-Up
Payment, Employee retains an amount of the Gross-Up Payment equal to the Excise
Tax imposed upon the Total Payments. Payment of the Gross-Up Payment shall be
subject to the following:

(a) Subject to paragraph 3(b) below, the determination of whether and
when a Gross-Up Payment is required and the amount of such Gross-Up Payment
shall be made by a nationally recognized certified public accounting firm
designated by Employee (the "Accounting Firm"). The Accounting Firm shall
provide detailed supporting calculations to Company and Employee within
fifteen (15) business days of being requested by Employee to make a Gross-
Up Payment determination. If the Accounting Firm determines that a Gross-
Up Payment is required, the Gross-Up Payment so determined shall be paid
within five (5) days after the receipt of the Accounting Firm's
determination. If the Accounting Firm determines that no Excise

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<PAGE>

Tax is payable by Employee, it shall so advise Employee in writing. The
Accounting Firm's determinations shall be binding upon Company and
Employee. If, following the exhaustion of Company's remedies under
paragraphs (b) and (c) below, Employee is required to pay an Excise Tax,
the Accounting Firm shall make a determination of the amount of any
underpayment in any previous Gross-Up Payment and any underpayment shall be
paid promptly by Company to Employee.

(b) Employee shall notify Company in writing of any claim by the
Internal Revenue Service that, if successful, would require Company to make
a Gross-Up Payment. Such notification shall be given as soon as
practicable but no later than ten (10) business days after Employee is
informed in writing of such claim and shall apprise Company of the nature
of such claim and the date on which such claim is requested to be paid.
Employee shall not pay such claim prior to the expiration of the thirty
(30) day period following the date on which it gives such notice to Company
(or such shorter period ending on the date that any payment of taxes with
respect to such claim is due). If Company notifies Employee in writing
prior to the expiration of such period that it desires to contest such
claim, Employee shall (i) give Company any information reasonably
requested by Company relating to such claim, (ii) take such action in
connection with contesting such claim as Company shall reasonably request
in writing, including, without limitation, accepting legal representation
with respect to such claim by an attorney reasonably selected by Company,
(iii) cooperate with Company in good faith in order to effectively contest
such claim and (iv) permit Company to participate in any proceedings
relating to such claim; provided, however, that Company shall bear and pay
directly all costs and expenses (including additional interest and
penalties) incurred in connection with such contest and shall indemnify and
hold Employee harmless, on an after-tax basis, for any Excise Tax or income
tax (including interest and penalties with respect thereto) imposed as a
result of such representation and payment of costs and expenses.

(c) Without limitation on the foregoing provisions of this Section 3,
Company shall control all proceedings taken in connection with contesting a
claim by the Internal Revenue Service and, at its sole option, may pursue
or forego any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim and may, at
its sole option either direct Employee to pay the tax claimed and sue for a
refund or contest the claim in any permissible manner, and Employee agrees
to prosecute such contest to a determination before any administrative
tribunal, in a court of initial jurisdiction and in one or more appellate
courts, as Company shall determine; provided, however, that if Company
directs Employee to pay such claim and sue for a refund, Company shall
advance the amount of such payment to Employee on an interest-free basis,
and shall indemnify and hold Employee harmless, on an after-tax basis, from
any Excise Tax or income tax (including interest or penalties with respect
thereto) imposed with respect to such advance or with respect to any
imputed income with respect to such advance; and

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<PAGE>

provided, further that if Employee is required to extend the statute of
limitations to enable Company to contest such claim, Employee may limit
this extension solely to such contested amount. Company's control of the
contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and Employee shall be entitled to settle or
contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.

(d) If, after the receipt by Employee of an amount advanced by
Company pursuant to paragraph 3(c) above, Employee becomes entitled to
receive any refund with respect to such claim, Employee shall (subject to
Company's complying with the requirements of paragraphs 3(b) and (c))
promptly pay to Company the amount of such refund (together with any
interest paid or credited thereon after taxes applicable thereto).

(e) If, after the receipt by Employee of an amount advanced by
Company under this paragraph 3(c), a determination is made that Employee
shall not be entitled to any refund with respect to such claim and Company
does not notify Employee in writing of its intent to contest such denial of
refund prior to the expiration of thirty (30) days after such
determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall offset, to the
extent thereof, the amount of Gross-Up Payment required to be paid.

(f) No Gross-Up Payment shall be required under this Section 3 if the
Total Payments are reduced pursuant to Section 4 below.

4. SECTION 280G LIMITATIONS. In the event that the Total Payments would
not be deductible (in whole or in part) as a result of Section 280G of the Code
then the payments and benefits required under this Agreement shall be reduced to
the extent necessary to eliminate the disallowance of the deduction under Code
Section 280G (after taking into account any reduction in the Total Payments
required by such other plans, arrangements or agreements because of Code Section
280G) unless such reduction would result in Employee receiving less than ninety-
five percent (95%) of the Total Payments that would have been paid had such
Total Payments not been reduced. If the reduction provided for herein would
result in Employee receiving less than ninety-five percent (95%) of the Total
Payments before taking into account such reduction, then no reduction under this
Section 4 shall be made and Employee shall be entitled to full amount of
payments and benefits otherwise provided in this Agreement. For purposes of
this limitation there shall not be taken into account any payment or benefit
which in the opinion of tax counsel selected by Company does not constitute a
"parachute payment" within the meaning of Code Section 280G(b)(2). The value of
any non-cash benefit or any deferred payment or benefit included in the Total
Payments shall be determined by Company's independent auditors in accordance
with the principles of Sections 280G(d)(3) and (4) of the Code. If the Total
Payments are reduced as provided in this Section 4 and it is established
pursuant to a final determination of a court or an Internal

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<PAGE>

Revenue Service proceeding that, notwithstanding the good faith of Employee and
Company in applying the terms of this Section 4, any portion of the Total
Payments are not deductible by reason of Code Section 280G, Employee shall have
an obligation to pay Company upon demand an amount equal to the excess of the
Total Payments provided to Employee over the payments and benefits that can
provide to Employee on a fully deductible basis.

5. NON-SOLICITATION AND NON-COMPETITION. In consideration for the
severance benefits called for under paragraph 2(c) and Section 3 above, Employee
agrees that during the 24-month period following his Date of Termination (the
"Severance Period"), Employee:

(a) will not, without the prior written consent of Company, alone or
in association with others, solicit on behalf of Employee, or any other
person, firm, corporation or entity, any employee of Company, or any of its
operating divisions, subsidiaries or affiliates, for employment with a
person, firm, corporation or entity which competes with Company, or any of
its divisions, subsidiaries or affiliates.

(b) will not, without the prior written consent of Company, directly
or indirectly, engage or invest in, counsel or advise or be employed by any
other person, firm, corporation or entity engaged in or conducting business
which is the same as, or competing with, the business being conducted by
Company, or any of its operating divisions, subsidiaries or affiliates, in
any area or territory in which Company, or such operating divisions,
subsidiaries or affiliates, shall be conducting business during the
Severance Period. Notwithstanding the foregoing, Employee shall be
entitled to passively own not more than four and nine-tenths percent (4.9%)
of any publicly held entity engaged in any business in which Company, or
any of its operating divisions, subsidiaries or affiliates, shall be
engaged during said period.

Should Employee fail to comply with the non-solicitation and/or non-competition
restrictions contained in this Section 5, this Agreement shall immediately
terminate and Employee shall forfeit any remaining unpaid benefits under this
Agreement.

6. OTHER EMPLOYMENT. Employee shall not be required to mitigate the
amount of any payment or benefit provided for under this Agreement by seeking
other employment or otherwise nor shall the amount of any payment or benefit
provided for in this Agreement be reduced by any compensation earned by Employee
as a result of other employment. Payment to Employee pursuant to this Agreement
shall constitute the entire obligation of Company for severance pay and full
settlement of any claim for severance pay under law or in equity that Employee
might otherwise assert against Company or any of its employees, officers or
directors on account of Employee's termination.

7. CHANGE IN CONTROL. For purposes of this Agreement a "Change in
Control" shall have occurred if:

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<PAGE>

(a) any "Person" (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended
("Exchange Act") other than Company, any corporation owned,
directly or indirectly, by the stockholders of Company in
substantially the same proportions as their ownership of
stock of Company, and any trustee or other fiduciary holding
securities under a Company employee benefit plan or such
proportionately owned corporation, becomes the "beneficial
owner" (as defined in rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of Company
representing 20% or more of the combined voting power of
Company's then outstanding securities;

(b) during any period of not more than 24 months, individuals
who at the beginning of such period constitute the Board of
Directors of Company, and any new director (other than a
director designated by a Person who has entered into an
agreement with Company to effect a transaction described in
paragraph (a), (c), or (d) of this Section 7) whose election
by the board or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds
of the directors then still in office who either were
directors at the beginning of the period or whose election
or nomination for election was previously so approved, cease
for any reason to constitute at least a majority thereof;

(c) the stockholders of Company approve a merger or
consolidation of Company with any other corporation, other
than (i) a merger or consolidation which would result in the
voting securities of Company outstanding immediately prior
thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of
the surviving entity) more than 60% of the combined voting
power of the voting securities of Company or such surviving
entity outstanding immediately after such merger or
consolidation, or (ii) a merger or consolidation effected to
implement a recapitalization of Company (or similar
transaction) in which no Person acquires more than 20% of
the combined voting power of Company's then outstanding
securities; or

(d) the stockholders of Company approve a plan of complete
liquidation of Company or an agreement for the sale or
disposition by Company of all or substantially all of its
assets (or any transaction having a similar effect).

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<PAGE>

Company may also determine, in its discretion, that a sale of a substantial
portion of its assets or one of its businesses constitutes a "Change of Control"
with respect to Employee if Employee is employed in the affected operation.

8. TERMINATIONS FOR CAUSE AND GOOD REASON. Employee will be considered
to have been terminated for "Cause" if the termination is by reason of Employee
willfully engaging in conduct demonstrably and materially injurious to the
Company, Employee being convicted of or confessing to a crime involving
dishonesty or moral turpitude or Employee's willful and continued failure for a
significant period of time to perform Employee's duties after a demand for
substantial performance has been delivered to Employee by the Board of Directors
of Company which demand specifically identifies the manner in which the Board
believes that Employee has not substantially performed his duties. Employee's
termination shall be considered to have been for "Good Reason" if Employee's
termination is by reason of the occurrence of any of the following events within
24 months following a Change in Control without Employee's express written
consent:

(a) any significant change in Employee's title, authorities,
responsibilities (including reporting responsibilities) which, in
Employee's reasonable judgment, represents an adverse change; the
assignment to Employee of any significant duties or work responsibilities
which, in his reasonable judgment, are inconsistent with such title,
authorities or responsibilities; or any removal of Employee from, or
failure to reappoint or reelect him to any of such positions, except if any
such changes are because of disability, retirement or Cause;

(b) a reduction in or failure to pay any portion of Employee's Annual
Base Salary as in effect on the date of the Change in Control or as the
same may be increased from time to time thereafter;

(c) the failure by Company to provide Employee with compensation and
benefits (including, without limitation, incentive, bonus and other
compensation plans and any vacation, medical, hospitalization, life
insurance, dental or disability benefit plan), or cash compensation in lieu
thereof, which are, in the aggregate, no less favorable than those provided
by Company to Employee immediately prior to the occurrence of the Change in
Control;

(d) any breach by Company of any provision of this Agreement; and

(e) the failure of Company to obtain a satisfactory agreement from
any successor or assign of Company to assume and agree to perform this
Agreement, as required in Section 10 of this Agreement.

Employee's continued employment after the expiration of 60 days from any action
which would constitute Good Reason under paragraph 8(a) above shall constitute a
waiver of rights

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<PAGE>

with respect to such action constituting Good Reason under this Agreement.

9. NOTICE OF TERMINATION. Any purported termination of employment by
Company or by Employee shall be communicated by a written Notice of Termination
to the other party which notice is given in accordance with Section 12 of this
Agreement. No purported termination shall be effective without such a Notice of
Termination. The Notice of Termination shall set forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination of Employee's
employment and shall specify the Date of Termination. The "Date of Termination"
shall mean the date specified in the Notice of Termination provided that in no
case shall the date be less than thirty (30) days or more than sixty (60) days
after the date the Notice of Termination is given. If within thirty (30) days
after any Notice of Termination is given the party receiving such Notice of
Termination notifies the other party that a dispute exists concerning the
termination, the Date of Termination shall be the date on which the dispute is
finally determined either by mutual written agreement of the parties, or by the
final judgment, order or decree of a court of competent jurisdiction (the time
for appeal therefrom having expired and no appeal having been taken).

10. SUCCESSORS. Company will require any successor or assign
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent Company would be required to perform if no such succession or assignment
had taken place. As used in this Agreement, "Company" shall include any
successor or assign to its business and/or assets which assumes and agrees to
perform this Agreement by operation of law, or otherwise. This Agreement shall
inure to the benefit of and be enforceable by Employee's personal and legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If Employee should die while any amounts would still be
payable to him hereunder if he had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to Employee's named beneficiary and if there is no such named
beneficiary, to Employee's estate in a lump sum.

11. FEES AND EXPENSES. Company shall pay all reasonable legal fees and
related expenses (including the reasonable costs of experts, evidence and
counsel), when and as incurred by Employee, as a result of contesting or
disputing any termination of employment of Employee following a Change in
Control whether or not such contest or dispute is resolved in Employee's favor
but only if Employee was seeking in good faith to obtain or enforce any right or
benefit provided by this Agreement or by any other plan or arrangement
maintained by the Company under which Employee is or may be entitled to receive
benefits.

12. NOTICE. Any notice or other communication provided for or required by
this Agreement shall be in writing and shall be deemed to have been duly given
when personally delivered or sent by certified mail, return receipt requested,
postage prepaid, addressed to the respective addresses last given by each party
to the other or to such other address as either

-9-
<PAGE>

party may have furnished to the other in writing.

13. MODIFICATIONS, WAIVERS AND SURVIVAL OF OBLIGATIONS. No provision of
this Agreement may be modified, waived or discharged unless such modification,
waiver or discharge is agreed to in writing and signed by Employee and Company.
A waiver of any condition or provision of this Agreement shall be limited to the
terms and conditions of such waiver and shall be not be construed as a waiver of
any similar or dissimilar provisions or condition at any time. The obligations
of Company under Sections 2 and 3 shall survive the expiration of the term of
this Agreement.

14. CLAIMS PROCEDURE. Any claim for benefits under this Agreement by
Employee shall be made in writing pursuant to the claim procedures stated in the
Plan.

15. GOVERNING LAW. The laws of Illinois shall be controlling in all
matters relating to this Agreement and the Plan to the extent not preempted by
ERISA.

16. SEVERABILITY. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.

17. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto and supersedes all prior agreements, understandings
and arrangements, oral or written, between the parties hereto with respect to
the subject matter hereof.

18. ACTION BY COMPANY. Any action required of or permitted by Company
under this Agreement shall be by resolution of its Board of Directors, by
resolution of a duly authorized committee of its Board of Directors, or by a
person or persons authorized by resolutions of its Board of Directors or such
committee.

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

20. NON-EXCLUSIVELY OF RIGHTS. Nothing in this Agreement shall prevent or
limit Employee's continuing or future participation in any benefit, bonus,
incentive or other plan or program provided by Company and for which Employee
may qualify, nor shall anything herein limit or reduce such rights as Employee
may have under any other agreements with Company. Amounts which are vested
benefits or which Employee is otherwise entitled to

-10-
<PAGE>

receive under any plan or program of Company shall be payable in accordance with
such plan or program, except as explicitly modified by this Agreement.

ALLEGIANCE CORPORATION

By:
--------------------------------------------
Its:
----------------------------------------

------------------------------------------------
Employee

SSN:
--------------------------------------------

-11-

<PAGE>

AGREEMENT
UNDER
ALLEGIANCE CHANGE IN CONTROL PLAN
(1X BASE)

THIS AGREEMENT is made as of October 1, 1996 by and between
Allegiance Corporation, a Delaware corporation (the "Company") and ____________
(the "Employee") under the Allegiance Change in Control Plan (the "Plan").

WHEREAS, Company considers the maintenance of a vital management
group to be essential to protecting and enhancing the best interests of
Company and its stockholders and to that end Company has established the Plan
to provide benefits to certain management employees in the event their
employment is terminated following a Change in Control of Company,
participation in which Plan is evidenced by an individual agreement between
Company and each participating employee; and

WHEREAS, Employee is a member of Company's management group and
Company has determined that to reinforce and encourage the continued
attention and dedication of Employee to his duties free from distractions
which could arise in anticipation of or subsequent to a Change in Control of
Company, it should extend participation in the Plan to Employee;

NOW, THEREFORE, in consideration of the mutual covenants contained
herein, Company and Employee agree that Employee shall become a Participant
in the Plan subject to the following terms which form a part of the Plan with
respect to Employee's participation therein.

1. TERM AND NATURE OF AGREEMENT. This Agreement and Employee's
participation in the Plan shall commence as of the date hereof and shall
continue in effect until October 1, 1999. As of October 1, 1999 and each
third October 1 occurring thereafter, this Agreement shall be automatically
renewed for a term of three (3) years unless Company gives written notice to
Employee at least 90 days prior to the renewal date that this Agreement will
not be extended. Notwithstanding the foregoing, if a Change in Control (as
hereinafter defined) occurs during the last two (2) years of any term of this
Agreement, the term of this Agreement and Employee's Plan participation shall
automatically be extended for a period of twenty-four (24) months after the
end of the month in which the Change in Control occurs. If Employee's
employment with Company terminates prior to a Change in Control, this
Agreement and Employee's participation in the Plan shall automatically
expire. Furthermore, Employee may terminate this Agreement and his
participation in the Plan at any time by giving Company 30 days' advance
written notice. This Agreement which evidences Employee's participation in
the Plan shall be construed and enforced under the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") as an unfunded welfare

<PAGE>

benefit plan. The Plan and the Agreement shall be administered by the
Compensation Committee of the Board of Directors of the Company (the
"Committee").

2. SEVERANCE BENEFITS FOLLOWING A CHANGE IN CONTROL. If Employee's
employment with Company is terminated within twenty-four (24) months
following a Change in Control, Employee shall be entitled to the following
severance benefits (in addition to any non-severance compensation and
benefits provided for under any of Company's employee benefit plans, policies
and practices or under the terms of any other contracts, but in lieu of any
severance pay under any Company employee benefit plan, policy and practice or
under the terms of any other contract including any employment contract):

(b) If Employee's employment is terminated for Cause, Company shall
pay Employee his full base salary through the Date of Termination at the
rate in effect at the time Notice of Termination is given plus any bonus
or incentive compensation award which, pursuant to the terms of any
compensation or incentive plan, Employee is entitled to receive but which
has not yet been paid.

(i) Within five (5) days after the Date of Termination,
Company shall pay Employee his full base salary through the Date of
Termination at the greater of the rate in effect at the time the
Change in Control occurred or the rate in effect when the Notice of
Termination was given plus an amount equal to 100% of Employee's
Target Annual Bonus (as defined below).

(ii) Company shall pay Employee a gross severance benefit equal
to the product of one (1) times the sum of (A) Employee's Annual Base
Salary at the greater of the rate in effect at the time the Change in
Control occurred or the rate in effect when Notice of Termination was
given and (B) Employee's Target Annual Bonus. The severance benefit
shall be paid during the ensuing 12-month period in equal installments
according to Company's normal payroll schedule beginning with the
first payroll period in which Employee's Date of Termination occurs.
Employee's "Annual Base Salary" shall mean the yearly salary rate
established from time to time by Company as Employee's regular

-2-

<PAGE>

salary for the next succeeding twelve (12) month period, payable
pursuant to Company's payroll on a periodic basis and Employee's
"Target Annual Bonus" shall mean the maximum bonus Employee could
earn under Company's Short Term Incentive Plan for the year in which
his Date of Termination occurs.

(iv) Company shall ensure that Employee is paid in cash within
30 days after the Date of Termination Employee's benefit under the
Allegiance Excess Benefit Plan or any successor thereto.

(v) Company shall pay the costs of a reasonable outplacement
service until Employee is employed on a full time basis.

3. SECTION 280G LIMITATIONS. Notwithstanding any other provisions of
this Agreement, in the event that any payment or benefit received or to be
received by Employee in connection with a Change in Control or the
termination of Employee's employment (whether pursuant to the terms of this
Agreement or any other plan, arrangement or agreement with Company, with any
person whose actions result in a Change in Control of Company or with any
person affiliated with Company or such person) (all such payments and
benefits, including the severnace payments and benefits provided herein,
being hereinafter called "Total Payments") would not be deductible (in whole
or in part) as a result of Section 280G of the Internal Revenue Code of 1986,
as amended (the "Code"), then the payments and benefits required under this
Agreement shall be reduced to the extent necessary to eliminate the
disallowance of the deduction under Code Section 280G after taking into
account any reduction in the Total Payments required by such other plans,
arrangements or agreements because of Code Section 280G if the Net After-Tax
Amount of the Total Payments after taking into account the reduction
described herein would be greater than the Net After-Tax Amount of the Total
Payments before any such reduction. The Net After-Tax Amount of the Total
Payments shall mean the gross amount of the Total Payments reduced by any
federal, state and local income tax, medicare payroll tax and excise tax
under Section 4999 of the Code assuming for this purpose tax at the highest
marginal applicable rates and net of the maximum reduction in federal income
taxes which could be obtained from the deduction of any state and local
taxes. If the Net After-Tax Amount of the Total Payments after taking into
account the reduction would not be greater than the Net After-Tax Amount of
the Total Payments before taking into account any reduction, then no
reduction under this Section 3 shall be made and Employee shall be entitled
to the full amount of payments and benefits otherwise provided for in this
Agreement. For purposes of this limitation there shall not be taken into
account any payment or benefit which in the opinion of tax counsel selected
by Company does not constitute a "parachute payment" within the meaning of
Code Section 280G(b)(2). The value of any non-cash benefit or any deferred
payment or benefit included

-3-

<PAGE>

in the Total Payments shall be determined by Company's independent auditors
in accordance with the principles of Sections 280G(d)(3) and (4) of the Code.
If the Total Payments are reduced as provided herein and it is established
pursuant to a final determination of a court or an Internal Revenue Service
proceeding that, notwithstanding the good faith of Employee and Company in
applying the terms of this Section 3, any portion of the Total Payments are
not deductible by reason of Code Section 280G, Employee shall have an
obligation to pay Company upon demand an amount equal to the excess of the
Total Payments provided to Employee over the payments and benefits that can
provide to Employee on a fully deductible basis.

4. NON-SOLICITATION AND NON-COMPETITION. In consideration for the
severance benefits called for under paragraph 2(c) above, Employee agrees
that during the 24-month period following his Date of Termination (the
"Severance Period"), Employee:

(a) will not, without the prior written consent of Company, alone or
in association with others, solicit on behalf of Employee, or any other
person, firm, corporation or entity, any employee of Company, or any of
its operating divisions, subsidiaries or affiliates, for employment with a
person, firm, corporation or entity which competes with Company, or any of
its divisions, subsidiaries or affiliates.

(b) will not, without the prior written consent of Company, directly
or indirectly, engage or invest in, counsel or advise or be employed by
any other person, firm, corporation or entity engaged in or conducting
business which is the same as, or competing with, the business being
conducted by Company, or any of its operating divisions, subsidiaries or
affiliates, in any area or territory in which Company, or such operating
divisions, subsidiaries or affiliates, shall be conducting business during
the Severance Period. Notwithstanding the foregoing, Employee shall be
entitled to passively own not more than four and nine-tenths percent
(4.9%)of any publicly held entity engaged in any business in which
Company, or any of its operating divisions, subsidiaries or affiliates,
shall be engaged during said period.

Should Employee fail to comply with the non-solicitation and/or
non-competition restrictions contained in this Section 4, this Agreement
shall immediately terminate and Employee shall forfeit any remaining unpaid
benefits under this Agreement.

5. OTHER EMPLOYMENT. Employee shall not be required to mitigate the
amount of any payment or benefit provided for under this Agreement by seeking
other employment or otherwise nor shall the amount of any payment or benefit
provided for in this Agreement be reduced by any compensation earned by
Employee as a result of other employment. Payment to Employee pursuant to
this Agreement shall constitute the entire obligation of Company for
severance pay and full settlement of any claim for severance pay under law or
in equity that Employee might otherwise assert against Company or any of its
employees, officers or directors on account of Employee's termination.

-4-
<PAGE>

6. CHANGE IN CONTROL. For purposes of this Agreement a "Change in
Control" shall have occurred if:

(b) during any period of not more than 24 months, individuals
who at the beginning of such period constitute the Board of
Directors of Company, and any new director (other than a
director designated by a Person who has entered into an
agreement with Company to effect a transaction described in
paragraph (a), (c), or (d) of this Section 6) whose election
by the board or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds
of the directors then still in office who either were
directors at the beginning of the period or whose election
or nomination for election was previously so approved, cease
for any reason to constitute at least a majority thereof;

-5-
<PAGE>

Company may also determine, in its discretion, that a sale of a substantial
portion of its assets or one of its businesses constitutes a "Change of
Control" with respect to Employee if Employee is employed in the affected
operation.

7. TERMINATIONS FOR CAUSE AND GOOD REASON. Employee will be
considered to have been terminated for "Cause" if the termination is by
reason of Employee willfully engaging in conduct demonstrably and materially
injurious to the Company, Employee being convicted of or confessing to a
crime involving dishonesty or moral turpitude or Employee's willful and
continued failure for a significant period of time to perform Employee's
duties after a demand for substantial performance has been delivered to
Employee by the Board of Directors of Company which demand specifically
identifies the manner in which the Board believes that Employee has not
substantially performed his duties. Employee's termination shall be
considered to have been for "Good Reason" if Employee's termination is by
reason of the occurrence of any of the following events within 24 months
following a Change in Control without Employee's express written consent:

(a) any significant change in Employee's title, authorities,
responsibilities (including reporting responsibilities) which, in
Employee's reasonable judgment, represents an adverse change; the
assignment to Employee of any significant duties or work responsibilities
which, in his reasonable judgment, are inconsistent with such title,
authorities or responsibilities; or any removal of Employee from, or
failure to reappoint or reelect him to any of such positions, except if
any such changes are because of disability, retirement or Cause;

(b) a reduction in or failure to pay any portion of Employee's
Annual Base Salary as in effect on the date of the Change in Control or as
the same may be increased from time to time thereafter;

(c) the failure by Company to provide Employee with compensation and
benefits (including, without limitation, incentive, bonus and other
compensation plans and any vacation, medical, hospitalization, life
insurance, dental or disability benefit plan), or cash compensation in
lieu thereof, which are, in the aggregate, no less favorable than those
provided by Company to Employee immediately prior to the occurrence of the
Change in Control;

(d) any breach by Company of any provision of this Agreement; and

-6-
<PAGE>

(e) the failure of Company to obtain a satisfactory agreement from
any successor or assign of Company to assume and agree to perform this
Agreement, as required in Section 9 of this Agreement.

Employee's continued employment after the expiration of 60 days from any
action which would constitute Good Reason under paragraph 7(a) above shall
constitute a waiver of rights with respect to such action constituting Good
Reason under this Agreement.

8. NOTICE OF TERMINATION. Any purported termination of employment by
Company or by Employee shall be communicated by a written Notice of
Termination to the other party which notice is given in accordance with
Section 11 of this Agreement. No purported termination shall be effective
without such a Notice of Termination. The Notice of Termination shall set
forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of Employee's employment and shall specify the Date of
Termination. The "Date of Termination" shall mean the date specified in the
Notice of Termination provided that in no case shall the date be less than
thirty (30) days or more than sixty (60) days after the date the Notice of
Termination is given. If within thirty (30) days after any Notice of
Termination is given the party receiving such Notice of Termination notifies
the other party that a dispute exists concerning the termination, the Date of
Termination shall be the date on which the dispute is finally determined
either by mutual written agreement of the parties, or by the final judgment,
order or decree of a court of competent jurisdiction (the time for appeal
therefrom having expired and no appeal having been taken).

9. SUCCESSORS. Company will require any successor or assign (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all
or substantially all of the business and/or assets of Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent Company would be required to perform if no such succession or
assignment had taken place. As used in this Agreement, "Company" shall
include any successor or assign to its business and/or assets which assumes
and agrees to perform this Agreement by operation of law, or otherwise. This
Agreement shall inure to the benefit of and be enforceable by Employee's
personal and legal representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees. If Employee should die while any
amounts would still be payable to him hereunder if he had continued to live,
all such amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to Employee's named beneficiary
and if there is no such named beneficiary, to Employee's estate in a lump sum.

10. FEES AND EXPENSES. Company shall pay all reasonable legal fees and
related expenses (including the reasonable costs of experts, evidence and
counsel), when and as incurred by Employee, as a result of contesting or
disputing any termination of employment of Employee following a Change in
Control whether or not such contest or dispute is resolved in Employee's
favor but only if Employee was seeking in good faith to obtain or enforce any

-7-

<PAGE>

right or benefit provided by this Agreement or by any other plan or
arrangement maintained by the Company under which Employee is or may be
entitled to receive benefits.

11. NOTICE. Any notice or other communication provided for or required
by this Agreement shall be in writing and shall be deemed to have been duly
given when personally delivered or sent by certified mail, return receipt
requested, postage prepaid, addressed to the respective addresses last given
by each party to the other or to such other address as either party may have
furnished to the other in writing.

12. MODIFICATIONS, WAIVERS AND SURVIVAL OF OBLIGATIONS. No provision
of this Agreement may be modified, waived or discharged unless such
modification, waiver or discharge is agreed to in writing and signed by
Employee and Company. A waiver of any condition or provision of this
Agreement shall be limited to the terms and conditions of such waiver and
shall be not be construed as a waiver of any similar or dissimilar provisions
or condition at any time. The obligations of Company under Sections 2 and 3
shall survive the expiration of the term of this Agreement.

13. CLAIMS PROCEDURE. Any claim for benefits under this Agreement by
Employee shall be made in writing pursuant to the claim procedures stated in
the Plan.

14. GOVERNING LAW. The laws of Illinois shall be controlling in all
matters relating to this Agreement and the Plan to the extent not preempted
by ERISA.

15. SEVERABILITY. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.

16. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto and supersedes all prior agreements,
understandings and arrangements, oral or written, between the parties hereto
with respect to the subject matter hereof.

17. ACTION BY COMPANY. Any action required of or permitted by Company
under this Agreement shall be by resolution of its Board of Directors, by
resolution of a duly authorized committee of its Board of Directors, or by a
person or persons authorized by resolutions of its Board of Directors or such
committee.

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

19. NON-EXCLUSIVELY OF RIGHTS. Nothing in this Agreement shall prevent
or limit Employee's continuing or future participation in any benefit, bonus,
incentive or other plan or program provided by Company and for which Employee
may qualify, nor shall anything

-8-

<PAGE>

herein limit or reduce such rights as Employee may have under any other
agreements with Company. Amounts which are vested benefits or which Employee
is otherwise entitled to receive under any plan or program of Company shall
be payable in accordance with such plan or program, except as explicitly
modified by this Agreement.

ALLEGIANCE CORPORATION

By:____________________________________
Its:________________________________

_______________________________________
Employee

SSN:___________________________________

-9-

<PAGE>

[LETTERHEAD]

November 27, 1995

Gail Gaumer

Dear Gail:

As you know, Baxter has announced that it will create two companies from its
current structure, a Global medical technology company and a health cost
management company. As a key manager of what will become a health cost
management company, you are very important to the success of this transition and
to its future.

Over the next several months, it is critical that we continue through you and
your people, to keep focused on the strategies that we have put in place over
the past two years. We need you to focus on customer requirements, operational
effectiveness and maintain the values we have shared to assure that this new
company is successful, and the transition is as smooth as possible. Results for
1996, that we have committed to, are important both to Baxter and our new
company.

Because you are important to this transition and helping to create a new
company, we want to put in place a special incentive for you, equal to your base
salary in effect on November 28, 1995. This amount will be paid to you, three
months following the official separation of the new company from Baxter, as long
as you have not voluntarily resigned, been terminated for cause, or accepted a
position with a unit that will be a part of the new Baxter company.

Joe Damico and I hope we can count on your support and commitment to the
exciting new opportunity ahead of us. If you accept this offer and challenge,
please sign below and return a copy of this letter to me.

/s/ Lester B. Knight

Lester B. Knight

Signature: /s/ Gail Gaumer
--------------------
Date: November 28,1995
--------------------

<PAGE>

[LETTERHEAD]

November 27, 1995

Bob Zollars

Dear Bob:

/s/ Lester B. Knight

Lester B. Knight

Signature: /s/ Robert J. Zollars
-----------------------
Date: 11-28-95
-----------------------

<PAGE>

S & A D R A F T -- AUGUST 19, 1996
------------------------------------
I.V. SYSTEMS

CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH RULE
406 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. OMITTED
INFORMATION HAS BEEN REPLACED WITH ASTERISKS.

AGENCY, SERVICES, AND DISTRIBUTION AGREEMENT

by and between

BAXTER HEALTHCARE CORPORATION
as Baxter

and

ALLEGIANCE HEALTHCARE CORPORATION
as Allegiance

<PAGE>

TABLE OF CONTENTS
Page
----

1. Definitions; Rules of Construction........................................1

2. Appointment and Commitment................................................6

3. Agency Model, Distributor Model, and BCS Kit Model........................7

4. Exclusivity...............................................................9

5. Term.....................................................................11

6. Prices and Fees..........................................................12

7. The Council..............................................................20

8. Invoicing and Payments...................................................21

9. Allegiance's Duties......................................................23

10. Baxter's Duties..........................................................23

11. Standard of Care.........................................................23

12. Alternative Acute Care Distribution......................................24

13. Transfer of Title and Risk of Loss.......................................24

14. Warranties...............................................................25

15. Trademarks...............................................................25

16. Termination..............................................................26

17. Indemnity................................................................30

18. Insurance................................................................34

19. Compliance with Laws.....................................................34

20. Force Majeure............................................................36

21. Confidentiality..........................................................37

22. Limitation of Liability and Remedy.......................................38

23. Miscellaneous Provisions.................................................40

<PAGE>

24. Dispute Resolution and Arbitration.......................................42

25. Assignment...............................................................43

26. Authority................................................................44

LIST OF EXHIBITS

Exhibit A I.V. Products
Exhibit B Nutrition Products
Exhibit C Allegiance's Duties
Exhibit D Baxter's Duties
Exhibit E Supplier Scoreboard
Exhibit F Interim Distributor Model

<PAGE>

AGENCY, SERVICES, AND DISTRIBUTION AGREEMENT

This AGENCY, SERVICES, AND DISTRIBUTION AGREEMENT (this "Agreement"),
dated as of October 1, 1996, by and between BAXTER HEALTHCARE CORPORATION, a
Delaware corporation with its principal offices at One Baxter Parkway,
Deerfield, Illinois 60015 (hereinafter called "Baxter") and ALLEGIANCE
HEALTHCARE CORPORATION, a Delaware corporation with its principal offices at
1430 Waukegan Road, McGaw Park, Illinois 60085 (hereinafter called
"Allegiance").

RECITALS

Baxter and its parent corporation, Baxter International Inc. ("Baxter
International"), have spun-off various businesses by transferring those
businesses to Allegiance Corporation ("Allegiance Corporation") (or its
subsidiaries) and distributing all of the stock of Allegiance Corporation to the
stockholders of Baxter International as a dividend. As a result of the
distribution of that dividend, Baxter International and Allegiance Corporation,
and their respective subsidiaries, are separate and independent corporations.

As a consequence of the foregoing actions, Allegiance will acquire,
INTER ALIA, certain business units, including the U.S. Distribution business,
that have previously provided various sales and distribution services to
business units owned by Baxter.

Baxter and Allegiance recognize that it is advisable for Allegiance to
continue providing physical distribution and sales support and related services
to Baxter.

AGREEMENT

In consideration of the mutual undertakings contained herein, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Baxter and Allegiance agree as follows:

1. DEFINITIONS; RULES OF CONSTRUCTION.

1.1 DEFINITIONS. As used in this Agreement:

1.1.1 "Affiliate" shall mean any Person controlling, controlled by
or under direct or indirect common control with a party hereto. For the purpose
of this definition,

<PAGE>

the term "control" means the power to direct the management of an entity,
directly or indirectly, whether solely through the ownership of voting
securities (as in the case of a subsidiary), by contract, or otherwise; and the
term "controlled" has a meaning correlative to the foregoing. Allegiance
Corporation and Baxter International shall not be deemed to be Affiliates of
each other.

1.1.2 "Agreement" shall mean this Agency, Services, and Distribution
Agreement dated as of October 1, 1996, including all Exhibits and Schedules
attached hereto.

1.1.3 "Base Business Products" shall mean all I.V. Products on
Exhibit A that are not designated as Premium Products, as defined herein.

1.1.4 "Best Value Products" shall mean a select offering of
Allegiance-distributed and Allegiance-manufactured products * * *. Best Value
Products are specially promoted externally to Allegiance customers and
internally to Allegiance sales personnel through financial incentives. All Best
Value Products are required to meet the following specific criteria: * * *.
Notwithstanding the foregoing criteria, the Premium Products listed on Exhibit A
from time to time pursuant to Section 4.3 will be deemed Best Value Products;
provided, however, that * * * identified on Exhibit A will not be considered to
be Best Value Products solely on account of their being identified as Premium
Products.

1.1.5 "Competitor" shall mean (a) with respect to Baxter, any
Person (including an affiliate of such Person) that during its most recently
completed fiscal year has annual net revenues from sales of products competitive
with the Products greater than 20% of the total annual net revenues of Baxter
from Products during its most recently completed fiscal year; and (b) in the
case of Allegiance, any Person (including an affiliate of such Person) that
during its most recently completed fiscal year has annual net revenues from the
distribution of medical, surgical and laboratory products greater than 20% of
the total annual net revenues of Allegiance during its most recently completed
fiscal year.

1.1.6 "Cost Management" shall mean the dedication of resources by
Allegiance or its Affiliates to deliver cost improvement services to customers.
Cost Management services shall focus on activities including, without
limitation, reducing product consumption, improving utilization of assets,
improving logistics, and reducing or eliminating operating costs. Cost
Management transactions shall be those transactions performed by

- ---------------
* * * CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN
ACCORDANCE WITH RULE 406 PROMULGATED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.

-2-

<PAGE>

Allegiance pursuant to any comprehensive Cost Management contract which permits
Allegiance to share with a customer the risk and reward of cost savings
generated by Cost Management as well as obligating the customer to purchase a
specified percentage of Best Value Products. As part of such Cost Management
transactions, Allegiance may also provide some or all of the following services:
(a) ValueLink (as defined herein); (b) PBDS (as defined herein); (c) consulting
services; (d) on-site clinical resources; (e) contract materials management; and
(f) consolidated service centers.

1.1.7 "Internal Use Sales" shall mean (a) Products transferred to
Baxter's Affiliates for internal use (including provision of perfusion
services); and (b) Products transferred to another Baxter Division for resale
under a distribution agreement with Allegiance.

1.1.8 "I.V. Products" shall mean the products and accessories
manufactured by or on behalf of Baxter and listed in Exhibit A hereto together
with the parts and components necessary for the repair and replacement thereof.

1.1.9 "Kit" shall mean an aggregation by Allegiance of Baxter,
Allegiance, and/or third-party products packaged together or repackaged for
specific uses and procedures including, without limitation, such aggregations
for programs known prior to the effective date of this Agreement as Baxter
Custom Sterile ("BCS"), Baxter Custom Products ("BCP"), and Procedure-Based
Delivery Systems ("PBDS").

1.1.10 "Line of Products" shall mean any specifically identified
group of related Products set forth in Exhibits A and B to this Agreement.

1.1.11 Net Sales.

1.1.11.1 "Agency Net Sales" shall mean Baxter's aggregate sales
of Products at the Agency Prices (or direct shipment prices) for such
Products less all applicable divisional and corporate bonuses and
discounts, returns, allowances, discounts available at time of purchase,
group purchasing organization fees, drug buy-back premiums, and amortized
contract procurement costs provided or recognized by Baxter. Agency Net
Sales includes all sales of the Products by Baxter in the Territory except
Distributor Net Sales, sales to Allegiance of Products, Internal Use Sales,
VWR Purchases, Drug Purchases, capital equipment lease extensions and re-
signs, or sales and leases of hardware and

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related software and disposables to nonhealth-care retailers serving end-
user customers.

1.1.11.2 "Contract Net Sales" shall mean the sum of Agency Net
Sales and Distributor Net Sales. Contract Net Sales amounts shall be
recognized for calculation purposes in a manner consistent with Baxter's
historical revenue recognition policies and generally accepted accounting
principles.

1.1.11.3 "Distributor Net Sales" shall mean a calculation of net
sales for all transactions hereunder pursuant to the Distributor Model or
the Interim Distributor Model. Distributor Net Sales shall be based upon
the volumes of Products sold by Allegiance to customers and calculated as
if Baxter had sold such volumes to such customers at the Suggested Sales
Prices less all applicable corporate and divisional bonuses and discounts,
returns, allowances, discounts available at time of purchase, group
purchasing organization fees, drug buy-back premiums, and amortized
contract procurement costs provided or recognized by Baxter. Distributor
Net Sales shall not include sales to Allegiance of Products for use as
components of BCS Kits or sales of BCS Kits to customers.

1.1.12 "Notice" shall mean notice given in accordance with Section
23.1.

1.1.13 "Nutrition Products" shall mean the products and accessories
manufactured by or on behalf of Baxter and listed in Exhibit B hereto together
with the parts and components necessary for the repair and replacement thereof.

1.1.14 "Person" shall mean an individual, corporation, partnership,
limited liability company, unincorporated syndicate, unincorporated
organization, trust, trustee, executor, administrator or other legal
representative, governmental authority or agency, or any group of Persons acting
in concert.

1.1.15 "Premium Products" shall mean all I.V. Products on Exhibit A
that are designated as Premium Products.

1.1.16 "Products" shall mean all I.V. Products and all Nutrition
Products.

1.1.17 "Term" shall mean the period of time provided in Section 5
hereof, including any and all extensions thereof.

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1.1.18 "Territory" shall mean the District of Columbia and the
fifty states comprising the United States of America.

1.1.19 "Transfer" shall mean any assignment, transfer, sale or
other disposition to a Person that is not an Affiliate of the Transferor,
including any Transfer by way of merger or consolidation or otherwise by
operation of law.

1.1.20 "ValueLink" shall mean the just-in-time inventory management
service known as ValueLink-Registered Trademark-.

1.2 OTHER TERMS. Terms defined in other Sections of this Agreement will
have the meanings therein provided.

1.3 RULES OF CONSTRUCTION.

1.3.1 In this Agreement, unless a clear contrary intention
appears:

1.3.1.1 the singular number includes the plural number and vice
versa;

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

1.3.1.3 reference to any gender includes the other gender;

1.3.1.4 reference to any Section or Exhibit means such Section
of this Agreement or such Exhibit to this Agreement, as the case may be,
and references in any Section or definition to any clause means such clause
of such Section or definition;

1.3.1.5 "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 or thereof;

1.3.1.6 "including" (and with correlative meaning "include")
means including without limiting the generality of any description
preceding such term;

1.3.1.7 "distribute" and "distribution" shall be used
interchangeably to refer to Allegiance's duties under the Agency Model, the
Distributor Model, the Interim

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Distributor Model, or the BCS Kit Model and shall not alone imply a legal
distributor relationship;

1.3.1.8 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";

1.3.1.9 reference to any law (including statutes and
ordinances) means such law as amended, modified, codified or reenacted, in
whole or in part, and in effect from time to time, including rules and
regulations promulgated thereunder;

1.3.1.10 accounting terms used herein shall have the meanings
historically attributed to them by Baxter and its subsidiaries based upon
Baxter's internal financial policies and procedures in effect prior to the
spin-off described in the recitals above;

1.3.1.11 in the event of any conflict between the provisions of
the body of this Agreement and the Exhibits hereto, the provisions of the
body of this Agreement shall control; and

1.3.1.12 the headings contained in this Agreement (except for
the Exhibits) have been inserted for convenience of reference only, and are
not to be used in construing this Agreement.

1.3.2 This Agreement was negotiated by the parties with the
benefit of legal representation, and any rule of construction or interpretation
otherwise requiring this Agreement to be construed or interpreted against either
party shall not apply to any construction or interpretation hereof.

2. APPOINTMENT AND COMMITMENT.

2.1 APPOINTMENT OF LIMITED AGENCY. Baxter hereby appoints Allegiance, and
Allegiance hereby accepts such appointment, as Baxter's exclusive limited agent
to provide under the Agency Model (as defined herein), (1) physical distribution
services and sales support services with respect to the Products sold by Baxter
to Baxter's customers in the Territory, and (2) sales representative services
for sales to surgery centers not affiliated with acute care hospitals (such
acute care hospitals as set forth in the then-current AMERICAN HOSPITAL
ASSOCIATION GUIDE), subject to the terms and conditions stated herein. Subject
to the terms of Section 4.2, Baxter, in its sole and

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absolute discretion, shall select the customers to whom Allegiance distributes
as Baxter's agent under the Agency Model. Subject to the terms of Section 3,
all Products shall be sold under the Agency Model except for (a) Kits, and/or
(b) Cost Management, ValueLink, and other transactions in which the customer
demands that Allegiance issue an Allegiance invoice for Products and, in some
instances, Allegiance products; provided that Allegiance shall nevertheless
provide sales, sales support, customer service, and physical distribution
services for the transactions specified in clauses (a) and (b) of this Section
under the Distributor Model or BCS Kit Model, each as defined herein.

2.2 GRANT OF DISTRIBUTION RIGHTS. With respect to the transactions
specified in clauses (a) and (b) in Section 2.1, Baxter hereby grants to
Allegiance and Allegiance hereby accepts the right, which shall be exclusive
except as set forth in Section 4.2, to provide sales, sales support, customer
service, and physical distribution services, as specified in Section 9, to
customers in the Territory under the Distributor Model, the Interim Distributor
Model, and the BCS Kit Model, provided that Allegiance shall notify Baxter in
advance of the identity of each such customer.

2.3 EXCEPTIONS AND LIMITATIONS. Baxter reserves all rights not expressly
granted to Allegiance hereunder. Except as expressly provided herein with
respect to Subdistributors, Allegiance shall not grant to any subagents or
subdistributors any of its rights or obligations hereunder.

3. AGENCY MODEL, DISTRIBUTOR MODEL, AND BCS KIT MODEL.

3.1 GENERAL. The Products may be distributed pursuant to the Agency
Model, the Distributor Model, or the BCS Kit Model. Section 2.1 shall apply to
Products distributed pursuant to the Agency Model, and Section 2.2 shall apply
to Products distributed pursuant to the Distributor Model or the BCS Kit Model.
For the period beginning with the effective date of this Agreement and ending
upon the earlier of (a) mutual agreement of the parties or (b) September 30,
1997 (the "Interim Period"), all transactions that would otherwise be treated as
Distributor Model transactions under this Agreement will follow the Interim
Distributor Model as provided in Exhibit F. Based upon the parties' business
prior to the effective date of this Agreement, the parties believe that a
significant majority of Baxter's distribution of the Products shall be made by
Allegiance under the Agency Model.

3.2 AGENCY MODEL. Under the Agency Model, Baxter shall maintain the
principal contractual relationship with the customer

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and shall be responsible for sales, sales support, customer invoicing, accounts
receivable, and customer service in connection with the sales of the Products,
and Allegiance shall act as Baxter's agent to facilitate physical distribution
of the Products from Baxter to the customer. Baxter shall have the sole right
and responsibility for negotiating and contracting with each customer the
delivered price from Baxter of the Products (the "Agency Price"). As provided
in Section 6, Baxter shall pay Allegiance a percentage of the Agency Net Sales
of the Products as a fee for Allegiance's services as set forth in Section 9.

3.3 DISTRIBUTOR MODEL. Under the Distributor Model, Allegiance shall
maintain the principal contractual relationship with the customer for sales,
sales support, customer invoicing, accounts receivable, and customer service in
connection with the supply of the Products in connection with the provision by
Allegiance of Kits and Cost Management, ValueLink, and other services
consolidated on an Allegiance invoice for Products and, in some instances,
Allegiance products (as required by the customer). Baxter shall use reasonable
efforts to cooperate with Allegiance and to facilitate Allegiance's fulfillment
of its obligations hereunder. Baxter shall provide to Allegiance a suggested
direct sale price including Standard Delivery (the "Suggested Sales Price") and
an effective Distributor Net Sales price applicable to each such Product in
connection with each Distributor Model transaction; provided, however, that
Allegiance shall have the sole right and responsibility for negotiating and
contracting with each customer the delivered price of the Products. If the
customer has a then-current contract with Baxter for such Products, the
Suggested Sales Price shall be the then-current contract price. If Baxter has
an agreement with any customer for Baxter's provision of Products to such
customer and such customer subsequently requests (a) Kits, and/or (b) Cost
Management, ValueLink, and other services consolidated on an Allegiance invoice
for such Products and, in some instances, Allegiance products, then all such
Distributor Model sales of Products to such customer shall apply to any minimum
purchase commitments or quantity discounts contained in Baxter's agreement with
such customer.

3.4 BCS KIT MODEL. Under the BCS Kit Model, Allegiance shall maintain the
principal contractual relationship with the customer for sales, sales support,
customer invoicing, accounts receivable, and customer service in connection with
the provision by Allegiance of BCS Kits. Baxter shall provide to Allegiance a
price for each Product that Allegiance orders from Baxter for use as a component
for a BCS Kit, and such price shall be Baxter's Agency Net Sales price for
Products from the * * * contract in effect on January 1 of the calendar year in
which the BCS Kit

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component sale takes place (the "BCS Component Price"). Allegiance shall have
the sole right and responsibility for negotiating and contracting with each
customer the delivered price of the BCS Kits. If Baxter has an agreement with
any customer for Baxter's provision of Products to such customer and such
customer subsequently requests BCS Kits, all such BCS Kit Model sales of
Products to such customer shall apply to any minimum purchase commitments or
quantity discounts contained in Baxter's agreement with such customer.

4. EXCLUSIVITY.

4.1 RESTRICTIONS ON ALLEGIANCE.

4.1.1 Unless specifically required by the end-user customer or as
permitted below for certain competitive Best Value Products, Allegiance, its
Affiliates, and any other Person acting on its or their behalf, shall not,
directly or indirectly, market or promote any product or solicit orders through
agents or otherwise, to or from any customer or any Affiliate of any customer
for any product that competes in the Territory with any Product or Products.
The taking by Allegiance of orders not solicited by Allegiance shall not be
deemed to be a breach of this Section. Without limiting the generality of the
foregoing and at all times subject to availability of the Products, Allegiance,
its Affiliates, and any other Person acting on its or their behalf, shall not,
directly or indirectly, market or promote any product that competes with any
Product or Products as Allegiance's (a) Best Value Product that competes with
the Products, (b) first-line substitute or for competitive comparison, or (c) as
a substitute for any other product competitive with any Product or Products;
except that Allegiance may market and promote as Best Value Products
endotracheal tubes, temperature probes, and heat and moisture exchangers
(whether with or without filters) and that such competitive Best Value Products
shall not be subject to clauses (b) and (c) of this sentence. Allegiance, its
Affiliates, and any other Person acting on its or their behalf, shall promote
the Premium Products [except for endotracheal tubes, temperature probes, and
heat and moisture exchangers (whether with or without filters)]. This Section
4.1.1 shall not apply if the applicable Products are unavailable, and such
unavailability is due substantially to Baxter's acts or omissions.

4.1.2 Allegiance, its Affiliates, and any other Person acting on
its or their behalf, shall not, directly or indirectly, develop or manufacture
any product that competes in the Territory with any Product or Products.

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4.1.3 Allegiance, its Affiliates, and any other Person acting on
its or their behalf, shall not, directly or indirectly, market to or solicit
orders from, or distribute any Product through distributors, agents, or
otherwise, to or from any customer or any Affiliate of any customer located
outside of the Territory.

4.2 RESTRICTIONS ON BAXTER. Baxter, its Affiliates, and any other Person
acting on its or their behalf, shall not, directly or indirectly, provide or
engage any Person other than Allegiance to provide physical distribution
services or to act as agent or distributor for Baxter in the Territory with
respect to the sales and distribution of the Products, provided that Baxter
shall have the right to:

4.2.1 distribute the Products in the Territory directly to
customers from Baxter manufacturing facilities and/or Baxter's replenishment
centers in order to facilitate cost reduction plans;

4.2.2 distribute any Product to any customer in the Territory to
the extent necessitated by Baxter's inability to assign to Allegiance any
contract or agreement whether pursuant to the Restructuring Agreements or at a
later date in connection with a future acquisition;

4.2.3 distribute the Products directly to Baxter's Affiliates or
directly to other Baxter Divisions, where such distribution is made in
connection with Internal Use Sales;

4.2.4 continue to sell and distribute Products directly to VWR
Corporation for resale to industrial customers (all such Products actually sold
and distributed to VWR Corporation to be referred to herein as "VWR Purchases");

4.2.5 continue to distribute directly from Baxter manufacturing
facilities any Product sold directly to drug manufacturers (all such Products
actually sold and distributed to drug manufacturers to be referred to herein as
"Drug Purchases");

4.2.6 distribute Products to customers within the Territory other
than through Allegiance (and Baxter shall be relieved of its obligation to pay
fees pursuant to Section 6.3) if and to the extent Allegiance is unable to so
distribute the Products due to (a) regulatory requirements; (b) Allegiance's
material failure to meet agreed-upon performance standards; or (c) Allegiance
being otherwise prohibited or prevented from selling and/or distributing the
Products or refusing or being

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unable to sell and/or distribute the Products to any customer or class of
customers other than by customer decision;

4.2.7 direct Allegiance to distribute the Products to third-party
distributors ("Subdistributors"), provided that Baxter shall not have the right
to direct Allegiance to distribute the Products to acute care hospitals (such
acute care hospitals as set forth in the then-current AMERICAN HOSPITAL
ASSOCIATION GUIDE) through Subdistributors unless specifically required by the
end-user customer;

4.2.8 sell and distribute products which are not Products, as
defined herein, through relationships that do not include Allegiance; and

4.2.9 distribute, sell and lease hardware and related software and
disposables to nonhealth-care retailers serving end-user customers.

This Agreement shall in no way limit the right of Baxter and its Affiliates to
market, sell, or otherwise distribute the Products outside the Territory.

4.3 PRODUCT EXCLUSIVITY. Baxter shall: (a) add Products to Exhibits A
and B which are new products (including all modifications of, improvements of,
substitutes for, and line extensions of the Products) developed or acquired by
Baxter that are of the same type and have similar distribution characteristics
as the Products set forth in Exhibits A and B as of the effective date of this
Agreement; and (b) delete from Exhibits A and B and this Agreement any Product,
the manufacture and sale of which has been generally discontinued by Baxter.
Exhibits A and B shall be deemed to be amended to reflect any such Product
additions and deletions without any further act by any party hereto.
Notwithstanding clause (a) above, Baxter shall have the right, but not the
obligation, to add newly developed or acquired products to Exhibits A and B
pursuant to clause (a) above if such products are part of a new product line or
a new line of business, subject to agreement by Allegiance. Baxter shall use
commercially reasonable efforts to provide at least 30 days prior written notice
to Allegiance of each such addition or deletion. Exhibits A and B, as amended
and supplemented from time to time, are incorporated by reference herein and
form part of this Agreement.

5. TERM. The initial Term of this Agreement shall begin on the effective date
of this Agreement and, except as otherwise provided in this Agreement, end at
the end of the day on December 31, 2001. The Term may be extended for
successive additional

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periods, subject to the parties agreeing upon the terms and conditions of such
an extension. Beginning no later than July 1, 2000, the parties shall negotiate
in good faith regarding the terms and conditions of an extension of this
Agreement beyond its expiration on December 31, 2001. Each party may in its
absolute discretion determine whether or not the terms of any such proposed
extension are acceptable and may refuse to agree to any such extension for any
reason whatsoever.

6. PRICES AND FEES. Allegiance and Baxter will keep confidential all amounts
paid by either party to the other.

6.1 DISTRIBUTOR MODEL. Baxter shall pay to Allegiance a service fee equal
to the applicable percentages (pursuant to Section 6.4) of the Distributor Net
Sales of such Products.

6.2 BCS KIT MODEL. Allegiance shall pay to Baxter as the purchase price
of the Products purchased by Allegiance pursuant to the BCS Kit Model an amount
equal to the aggregate BCS Component Prices of all such Products.

6.3 AGENCY MODEL, DIRECT SALES AND OTHER. Baxter shall pay to Allegiance
an agency services fee equal to the applicable percentages (pursuant to Section
6.4) of the Agency Net Sales of all Products sold by Baxter to customers.
However, sales to Allegiance of Products, Internal Use Sales, VWR Purchases,
Drug Purchases, capital equipment lease extensions and re-signs, and sales and
leases of hardware and related software and disposables to nonhealth-care
retailers serving end-user customers are excluded from Agency Net Sales.

6.4 APPLICABLE PERCENTAGES.

6.4.1 For all transactions under Sections 6.1 and 6.3 during the
period beginning October 1, 1996, and continuing through December 31, 1996, the
applicable percentage shall be * * * and shall be calculated in the same manner
as the internal profit split between Baxter's business units was calculated from
January 1, 1996, through September 30, 1996.

6.4.2 The following percentages shall apply to Agency Net Sales
and Distributor Net Sales during calendar year 1997 and thereafter unless
otherwise agreed to by the parties in accordance with Section 6.4.2.3:

6.4.2.1 * * * during such calendar year for all Nutrition
Products and Base Business Products and Premium Products which are excluded
from Best Value Products except for sales of such I.V. Products within the
scope of Section

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6.4.2.2, and * * * during such calendar year for all Premium Products
(except Premium Products which are excluded from Best Value Products);

6.4.2.2 Notwithstanding the above, the percentage applicable to
Agency Net Sales and Distributor Net Sales of I.V. Products shall be * * *
for sales by Allegiance of such I.V. Products (i) in connection with the
provision of cost management services in which Allegiance shares the risk
and reward of achieving customer cost savings through shared risk and
shared savings agreements which obligate the customer to purchase a
specified percentage of Best Value Products or comprehensive cost
management agreements which require Allegiance to provide clinical and
operational services that reduce the customer's operational costs and which
obligate the customer to (A) purchase a specified percentage of Best Value
Products, and (B) share the operating cost reductions achieved through
specified fees and/or shared savings paid to Allegiance, and the customer
has switched to the Base Business Products under a long-term agreement with
Baxter on or after the date of the Allegiance/customer agreement and such
switch is not as a result of a requirement of a contract between Baxter and
a third party; or (ii) when Baxter has agreed that Allegiance's efforts in
promoting the I.V. Products warrants the higher percentage. This
percentage shall apply for the period ending upon the earliest termination
or expiration of the following: (a) this Agreement; (b) the Allegiance/
customer agreement; and (c) the Baxter/customer agreement.

6.4.2.3 Following the completion of Baxter's sales plan for and
prior to January 1 of an upcoming calendar year, Baxter will calculate an
amount equal to * * * of Baxter's aggregate sales plan for Contract Net
Sales of I.V. Products. Baxter will then apportion this amount between
proposed base business products and proposed premium products and will then
develop a proposed base percentage and a proposed premium percentage such
that the sum of the proposed percentages when multiplied by the respective
sales plan targets for proposed base business products and proposed premium
products will produce an amount equal to * * * of Baxter's aggregate sales
plan for Contract Net Sales of I.V. Products. Baxter and Allegiance will
then negotiate and mutually agree to any changes in Base Business Products,
Premium Products, and the applicable percentages with an expectation, but
with no commitment, that achievement of Baxter's sales plan as to both Base
Business Products and Premium Products will yield Allegiance an amount of
earned

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fees which will aggregate to * * * of Baxter's sales plan for Contract Net
Sales of I.V. Products.

6.4.2.4 If the parties' business information systems and/or
data processing systems are unable to accommodate the applicable
percentages set forth in this Section 6.4.2, the parties shall agree upon a
procedure for monthly payment with a quarterly adjustment to achieve the
effects of the percentage fees set forth herein based upon the then-current
percentages as applied to Agency Net Sales and Distributor Net Sales for
each Product category.

6.5 MINIMUM FEE TO ALLEGIANCE FOR CALENDAR YEAR 1997. For calendar year
1997, Baxter shall pay to Allegiance a minimum dollar amount (the "Minimum Fee")
calculated by multiplying the actual Contract Net Sales of I.V. Products in
calendar year 1996 by * * *. If (a) the agency services fees paid by Baxter to
Allegiance in calendar year 1997 pursuant to Section 6.3 for I.V. Products, plus
(b) the service fees paid by Baxter to Allegiance pursuant to Section 6.1 in
connection with its sales of I.V. Products, is less than (c) the Minimum Fee,
then Baxter shall pay the difference to Allegiance on or before January 30,
1998. This Section 6.5 shall not apply if prior to December 31, 1997, Baxter
fails to retain, replace, or renew Baxter's contract with any of the following
national group purchasing organizations for the purchase of Base Business
Products by such organization's members: * * *.

6.6 ADJUSTMENTS FOR ALTERNATE SITE DISTRIBUTORS.

6.6.1 ALTERNATE SITE DISTRIBUTION FEE. Baxter shall pay to Allegiance
a minimum dollar amount (the "Alternate Site Distribution Fee") calculated by
multiplying * * * by the actual Contract Net Sales to resellers and
subdistributors of I.V. Products reselling to entities other than acute care
hospitals (such acute care hospitals as set forth in the then-current AMERICAN
HOSPITAL ASSOCIATION GUIDE) (such resellers and subdistributors collectively
referred to as "Alternate Site Distributors"). If for any calendar year, the
sum of (a) the agency services fees paid by Baxter to Allegiance pursuant to
Section 6.3 for sales of I.V. Products to Alternate Site Distributors, plus (b)
the service fees paid by Baxter to Allegiance pursuant to Section 6.1 for sales
of I.V. Products to Alternate Site Distributors, is less than (c) the Alternate
Site Distribution Fee, then Baxter shall pay the shortfall to Allegiance on or
before January 30 of the subsequent calendar year.

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6.6.2 ALTERNATE SITE DISTRIBUTOR BONUS PROGRAMS. If Allegiance wishes
(1) to provide financial incentives to its Alternate Site Distributors to reward
such Alternate Site Distributors for achievement of growth in purchases of
Products above a predetermined amount, and (2) for Baxter to fund such
incentives by payments to Allegiance for such Alternate Site Distributors in
addition to those payments otherwise specified in this Agreement, then Baxter
must approve the amount of such funding, the purchase requirements applicable to
such Alternate Site Distributors, payment criteria to be used by Allegiance, and
applicable reporting requirements. During the Term of this Agreement,
Allegiance may continue its existing premier bonus program for Alternate Site
Distributors with respect to Products, subject to Baxter's right to approve in
advance the purchase requirements applicable to such Alternate Site
Distributors, payment criteria to be used by Allegiance, and applicable
reporting requirements. For each calendar year beginning on or after January 1,
1997, during the Term of this Agreement, in addition to those payments otherwise
specified in this Agreement, Baxter will reimburse Allegiance for amounts
incurred under such premier bonus program, up to a maximum of * * *. Baxter's
reimbursement obligation under this Section 6.6.2 shall be calculated with
respect to total sales (rather than incremental sales) by Allegiance to
Alternate Site Distributors participating in the premier bonus program.

6.7 DRUG WHOLESALER SUPPORT. Allegiance shall supply the equivalent of
one full-time employee who shall possess the requisite level of skill,
experience, and/or training to perform drug wholesaler support services as
directed by Baxter. Baxter shall pay to Allegiance * * * per month in advance
for such services, provided that Baxter may terminate such services at any time
upon 30 days advance written notice without any further liability whatsoever to
Allegiance in connection therewith.

6.8 TELEPHONE SALES. Allegiance shall supply the equivalent of one full-
time employee who shall possess the requisite level of skill, experience, and/or
training to perform telephone sales services to doctors and clinics as directed
by Baxter. Baxter shall pay to Allegiance * * * per month in advance for such
services, provided that Baxter may terminate such services at any time upon 30
days advance written notice without any further liability whatsoever to
Allegiance in connection therewith.

6.9 INBOUND FREIGHT.

6.9.1 INBOUND FREIGHT EXPENSES. Within thirty days after receipt
by Baxter of a monthly invoice from Allegiance

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detailing Allegiance's expenses, Baxter shall reimburse Allegiance for its
actual out-of-pocket expenses incurred in connection with freight expenses for
Products (a) received by Allegiance at its Ontario, California replenishment
center and its distribution centers from Baxter manufacturing plants; and (b)
received by Allegiance at its distribution centers from Baxter's or Allegiance's
replenishment centers.

6.9.2 ALLEGIANCE INBOUND FREIGHT ADMINISTRATIVE SERVICES. Baxter
will pay Allegiance a fee for continuing inbound freight administrative services
provided in accordance with the first two sentences of Section 1.5.2 of Exhibit
C. Baxter will also pay Allegiance any additional fees agreed upon for any
additional inbound freight administrative services provided pursuant to the last
sentence of Section 1.5.2 of Exhibit C.

6.10 EXPENSES OF REBALANCING INVENTORY. Beginning January 1, 1997, and
continuing for the remainder of the Term, Baxter shall reimburse Allegiance for
its actual out-of-pocket expenses incurred in connection with moving Products at
Baxter's request between distribution centers for purposes of re-balancing
stocks, to the extent that such rebalancing expenses exceeded the actual costs
so incurred in calendar year 1996. Baxter shall reimburse Allegiance for such
rebalancing expenses within 30 days after receipt by Baxter of a monthly invoice
from Allegiance detailing its expenses during the preceding month. During the
first calendar quarter following the close of each calendar year during the
Term, the parties will determine the actual amounts due under this Section 6.10
for the such calendar year and settle any amounts owed.

6.11 OUTBOUND FREIGHT.

6.11.1 GENERAL RULE. Allegiance is responsible for all costs
incurred in delivering Products from Allegiance facilities to customers, subject
to the following provisions regarding sharing of costs and savings for Standard
Delivery and Premium Delivery.

6.11.2 SHARING OF COSTS AND SAVINGS FOR STANDARD DELIVERY. For
1998 and each subsequent calendar year during the Term, the parties will agree
in the Council prior to such calendar year upon a target range for costs that
are expected to be incurred by Allegiance in providing Standard Delivery (as
that term is defined in Section 2.4.1.1 of Exhibit C) for the Products during
such calendar year. If during any such calendar year, the actual costs so
incurred by Allegiance fall outside such target range (using a consistent
methodology for such comparison), then

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Baxter and Allegiance will share the excess costs or savings on an equal basis.

6.11.3 SHARING OF COSTS AND SAVINGS FOR UNCOLLECTED PREMIUM
DELIVERY.

6.11.3.1 For 1997 and each subsequent calendar year during the
Term, the parties will agree in the Council prior to such calendar year
upon a target range for costs that are expected (1) to be incurred by
Allegiance in providing Premium Delivery (as that term is defined in
Section 2.4.1.2 of Exhibit C) of Products and (2) not to be collected from
customers. (Hereinafter, such costs are referred to as "Uncollected Premium
Delivery Costs"). If during any such calendar year, the actual Uncollected
Premium Delivery Costs for Products fall outside such target range (using a
consistent methodology for such comparison), the parties will share such
excess costs or savings as follows: Baxter will reimburse Allegiance * * *
of any excess costs; and Allegiance shall pay Baxter * * * of any savings.

6.11.3.2 For 1997, the target range shall be the actual amount of
Uncollected Premium Delivery Costs for Products incurred by Baxter in 1995,
plus and minus * * *. For all subsequent years, the target range shall be
determined by the parties by mutual agreement in the Council, taking into
account the percentage change in Agency Net Sales since 1995.

6.11.3.3 Allegiance will report its actual Uncollected Premium
Delivery Costs to Baxter on a quarterly basis. During the first calendar
quarter following the close of each calendar year during the Term, the
parties will determine the actual amounts due under this Section 6.11.3 for
such calendar year and settle any amounts owed.

6.11.4 INCREMENTAL DELIVERIES. Baxter will pay Allegiance any
amounts agreed upon in respect of Incremental Deliveries pursuant to Section
2.4.1 of Exhibit C.

6.11.5 ALLEGIANCE OUTBOUND FREIGHT ADMINISTRATIVE SERVICES. Baxter
will pay Allegiance any additional fees agreed upon for any additional outbound
freight administrative services provided pursuant to the last sentence of
Section 2.4.3 of Exhibit C.

6.12 CUSTOMER SERVICE REIMBURSEMENT. Beginning January 1, 1997, and
continuing for the Term, Allegiance will pay to Baxter

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monthly the sum of * * *, in order to compensate Baxter for Baxter's increased
customer service costs during such period. For the fourth calendar quarter of
1996, Allegiance will pay to Baxter an amount equal to * * * per person per
month, for all activated Baxter customer service personnel providing customer
service relating to the Products during that month or any preceding month during
such calendar quarter. For purposes of this Section 6.12, Baxter customer
service personnel are activated when they have received appropriate customer
service training relating to the Products and actually begin providing customer
service relating to the Products on a full-time basis. Baxter shall bill
Allegiance monthly for any amounts due under this Section and Allegiance shall
pay any such invoice net 15 days from the end of the applicable month.

6.13 BCS KIT FUNDING.

6.13.1 PAYMENT OBLIGATION. Beginning on the effective date of this
Agreement and continuing for the Term, for all Products sold under the BCS Kit
Model, Baxter will pay Allegiance an amount equal to the excess of the BCS
Component Prices over the transfer prices that the applicable Baxter business
units charged each other for such Products prior to the effective date of this
Agreement. Notwithstanding the immediately preceding sentence, Baxter's total
payment obligation to Allegiance under this Section shall not exceed * * * for
any calendar year during the Term and shall not exceed * * * for calendar year
1996.

6.13.2 SETTLEMENT PROCEDURE. The parties will settle any amounts owed
under Section 6.13.1 as follows: For each month during the Term, Baxter will
make payments to Allegiance in the estimated amount of * * * per month, net
fifteen days from the end of the applicable month. During the first calendar
quarter following the close of each calendar year during the Term, the parties
will determine the actual amounts due under Section 6.13.1 for such calendar
year and settle any amounts owed within 15 days of such determination. The
settlement for the fourth calendar quarter of 1996 will take place during the
first calendar quarter of 1997.

6.14 ADJUSTMENTS FOR CHANGES IN APPLICABLE STORAGE REQUIREMENTS.

6.14.1 BAXTER CHANGES IN APPLICABLE STORAGE REQUIREMENTS. The fees
set forth in Sections 6.1 and 6.3 are subject to renegotiation if Baxter
redefines applicable storage requirements in a way that has a material adverse
impact on Allegiance's costs.

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6.14.2 LEGAL CHANGES IN APPLICABLE STORAGE REQUIREMENTS. If
applicable storage requirements change as a result of changes in laws,
regulations, or interpretations or enforcement actions by governmental
authorities with jurisdiction over the Products or the subject matter of this
Agreement, the otherwise applicable fees set forth in Sections 6.1 and 6.3 may
be adjusted, if appropriate, pursuant to the process described in Section 19.3
of this Agreement.

6.15 DEALER MANAGEMENT GROUP FUNDING. If changes in Baxter's business
requirements (including, without limitation, increased sales volumes through
Allegiance's dealer management group or increased complexity in the sales and/or
distribution process through Allegiance's dealer management group) directly
cause significant increases in Allegiance's dealer management group operational
headcount, Baxter shall pay Allegiance for such increases in Allegiance's
operational headcount. The parties shall meet at least twice per year to review
the status of Allegiance's dealer management group operations and shall agree
upon Allegiance's need, if any, for increases in operational headcount, the
cause of such need, and Baxter's payment, if any, for any increases in
operational headcount.

6.16 FCA FEES AND EXPENSES.

6.16.1 In addition to the other fees and charges set forth in this
Section 6, in 1997 and subsequent years Baxter will pay Allegiance an annual fee
equal to (a) * * * times (b) the total number of Product lines affected by FCAs
in such year in excess of * * * (the total number of Product lines affected by
FCAs in 1995). For purposes of this Section, any FCAs caused by Allegiance's
negligence shall be excluded. In addition, for each catalog number affected by
an FCA, the total "lines" shall be an amount equal to the sum of (a) the number
of notification processing responses completed by Allegiance facilities for that
FCA, plus (b) the number of dispositions completed by Allegiance facilities for
that FCA. Baxter shall not owe Allegiance any FCA fee under this Section, nor
shall Baxter be entitled to any fee or credit from Allegiance, if in 1997 or any
subsequent year, the total number of lines affected by FCAs does not exceed
* * *. For 1996, the FCA fee will be computed based on the excess of total
Product lines affected by FCAs in the last three months of 1996 over the
average quarterly total of Product lines affected by FCAs in calendar year 1995.

6.16.2 ADDITIONAL FCA SERVICES. Baxter shall pay Allegiance the
fees agreed upon for any additional FCA services requested and approved by
Baxter and provided by Allegiance pursuant to Section 1.7.2 of Exhibit C.

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6.16.3 THIRD-PARTY INVOICES. Baxter shall reimburse Allegiance for
all third-party invoices relating to additional FCA services requested and
approved by Baxter and actually paid by Allegiance, pursuant to Section 1.7.2 of
Exhibit C.

6.17 PACKAGING FAILURE. Baxter shall reimburse Allegiance for Allegiance's
actual expenses incurred in respect of failure of shipping cartons for Products
(including, without limitation, repackaging and return of Product). Such
reimbursement shall be paid quarterly and shall be due within 30 days after
receipt of Allegiance's invoice therefor together with full supporting
documentation.

6.18 COMPENSATION FOR PRODUCT DAMAGE, THEFT OR LOSS. If any Products
are damaged, lost or stolen while in an Allegiance-owned replenishment center or
distribution center, and Allegiance is responsible under this Agreement for such
damage, theft or loss, Allegiance shall compensate Baxter. In addition, if
Allegiance is unable to furnish proof of delivery with respect to Products
shipped on Allegiance's private fleet, Allegiance shall compensate Baxter for
such undelivered Products. For purposes of this Section 6.18, the basis for
compensation shall be an amount equal to Baxter's standard costs for such
Products as stated in Baxter's inventory valuation reports together with all
amounts owed by Baxter to third parties in respect of such Products. Payment
shall be due within 30 days after Baxter's request for compensation hereunder.
During the Interim Period, in the event of any conflicts between the provisions
of this Section 6.18 and the provisions of Exhibit F of this Agreement with
respect to transactions under Interim Distributor Model, the provisions of
Exhibit F shall control.

7. THE COUNCIL.

7.1 A Baxter/Allegiance Distribution/Materials Management/Transportation
Council (the "Council") will be formed to ensure open communication between
Allegiance and each of the Baxter divisions, and to provide problem/dispute
identification and resolution in the areas of materials management,
distribution, and transportation and logistics. Without limitation to the
foregoing, the Council will provide a forum for the parties (1) to review
jointly their performance in relation to their responsibilities identified in
Appendices C and D of this Agreement, (2) to agree upon eligible carriers for
Product shipments and to review jointly freight charges and transportation
modes, (3) to agree upon target ranges and compensation for Standard Delivery,
Premium Delivery and Incremental Deliveries under Section 6.11, and (4) to
develop joint recommendations for the parties' respective business

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executives regarding the management of freight costs and other issues arising
under this Agreement.

7.2 Baxter and Allegiance will agree upon the membership of the Council
and its procedures.

7.3 The Council will meet at least once per calendar quarter during the
Term of this Agreement. Baxter and Allegiance may identify a Steering Committee
consisting of fewer than all of the Council members with authority to address
issues requiring resolution prior to such quarterly meetings.

8. INVOICING AND PAYMENTS.

8.1 GENERAL.

8.1.1 On or before the fifth business day of each calendar month
during the Term, Baxter shall report to Allegiance its Agency Net Sales for the
previous calendar month, and shall also provide to Allegiance a service fee
report in a format to be agreed upon, showing the service fees payable for
Products sold under the Agency Model. Each business day during the Term,
Allegiance shall report to Baxter its aggregate sales and returns of Products
for the previous business day by code and by customer for Distributor Model and
BCS Kit Model transactions, and such reports shall also include, with respect to
Distributor Model transactions, the Suggested Sales Price and Allegiance's
actual purchase price of the Products.

8.1.2 Allegiance shall make payment to Baxter for its aggregate
purchases of Products sold by Allegiance under the Distributor Model, net 30
days from the date of shipment of the Product by Allegiance to the customer.
Baxter shall make payment to Allegiance of applicable service fees in connection
with sales of Products under the Distributor Model, net 30 days from the date of
shipment of the Product by Allegiance to the customer.

8.1.3 For sales other than those made under the Distributor Model,
Allegiance shall bill Baxter for any fees due hereunder. Baxter shall pay any
such invoice net 15 days from the end of the applicable month.

8.1.4 For sales to Allegiance of Products for use as components of
BCS Kits, Baxter shall bill Allegiance for the BCS Component Prices for the
Products. Allegiance shall pay any such invoice net 60 days from the date of
such invoice.

8.1.5 If any amounts due hereunder have not been received by the
due date, such overdue amounts shall bear

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interest from the due date at the rate of * * * per month, or portion thereof,
until received. If payment is delayed because a report required by Section
8.1.1 has not been received, interest will not accrue until 30 days after
receipt of such report.

8.2 ADDITIONAL SERVICES. Allegiance may provide services ("Additional
Services") to customers in connection with Agency Model transactions over and
above Allegiance's duties set forth in Exhibit C, provided that such Additional
Services are not Cost Management services. Allegiance shall have the right to
bill customers directly for the Additional Services. Upon Allegiance's written
request, Baxter shall cooperate with Allegiance by performing billing and
collection services for Allegiance in connection with the Additional Services as
directed by Allegiance. Within 30 days after receipt from the customers, Baxter
shall forward to Allegiance any payments received from customers in connection
with the Additional Services.

8.3 DISPUTED PAYMENTS. Either party shall have the right to withhold any
amounts due hereunder if such party in good faith disputes the amount claimed by
the other party to be due hereunder and such party notifies the other party of
such dispute within 60 days after the date of each applicable statement from the
other party hereunder. The foregoing right to withhold payment of disputed
amounts shall be limited to the amounts disputed in good faith, and interest
will accrue and be payable on the net amount determined to be payable.

8.4 SUSPENSION OF SERVICE. In addition to any other rights available to
it at law or in equity, upon ten days Notice to Baxter, Allegiance may suspend
the provision of any services for which an undisputed statement for provision of
services hereunder from Allegiance (or one of its Affiliates) has not been
satisfied within 30 days of its due date until such statement has been
satisfied.

8.5 AUDIT. Allegiance may audit Baxter's books and records and Baxter may
audit Allegiance's books and records for the purpose of determining compliance
with the terms of this Agreement. The party requesting the audit may use
independent auditors, who may participate fully in such audit. In the event
that an audit is proposed with respect to information which the party to be
audited wishes not to disclose to the other party ("Restricted Information"),
then on the written demand of the party to be audited, the individuals
conducting the audit with respect to Restricted Information will be limited to
the independent auditors of the party requesting the audit. In such event, the
party to be audited shall pay the costs of the independent auditors conducting
such audit, but only with respect

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to that portion of the audit relating to the Restricted Information. Such
independent auditors shall enter into an agreement with the parties hereto, on
terms that are agreeable to both parties hereto, under which such independent
auditors shall agree to maintain the confidentiality of the information obtained
during the course of such audit and establishing what information such auditors
will be permitted to disclose to report the results of any audit of Restricted
Information to the party requesting the audit. Any such audit shall be
conducted during regular business hours, in a manner that does not interfere
unreasonably with the operations of the party being audited. Such audits shall
be conducted not more than once in any one year period unless the next preceding
audit disclosed a failure to conform to the terms of this Agreement. Subject to
the foregoing limitations, any such audit shall be conducted when requested by
Notice given not less than 30 days prior to the commencement of the audit.

8.6 RIGHT OF OFFSET. At any time during the Term or after termination or
expiration of this Agreement, either party may offset any and all amounts which
the other party owes it hereunder against any and all amounts which it owes the
other party hereunder.

8.7 INTERIM PERIOD. During the Interim Period, in the event of any
conflicts between the provisions of this Section 8 and the provisions of Exhibit
F of this Agreement with respect to transactions under Interim Distributor
Model, the provisions of Exhibit F shall control.

9. ALLEGIANCE'S DUTIES. During the Term, Allegiance shall maintain the
facilities and personnel necessary to provide the physical distribution services
and related services in connection with its appointment and grant hereunder
including, without limitation, the facilities and personnel necessary to fulfill
Allegiance's duties as set forth in Exhibit C attached hereto and made a part
hereof. Allegiance will use all reasonable efforts to meet the levels of
service specified in Exhibit C.

10. BAXTER'S DUTIES. During the Term, Baxter shall maintain the facilities and
personnel necessary to manufacture and distribute the Products as provided for
hereunder including, without limitation, the facilities and personnel necessary
to fulfill Baxter's duties as set forth in Exhibit D attached hereto and made a
part hereof. Baxter will use all reasonable efforts to meet the commitments
specified in Exhibit C.

11. STANDARD OF CARE. Each party will use (and will cause its Affiliates to
use) commercially reasonable efforts in the

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performance of its obligations and will do so with the same degree of care,
skill and prudence customarily exercised when engaged in similar activities for
itself and its Affiliates. Subject to the provisions of Section 22, if a
party's performance is inaccurate, incomplete or untimely, such party shall, if
practical, promptly perform or reperform such obligations. In performing its
responsibilities hereunder, each party shall accord the other party and its
Affiliates the same priority as it provides itself and its Affiliates under
comparable circumstances. Without limiting the generality of the foregoing, in
the provision of services under comparable circumstances, a party will not
discriminate against the other party or any of its Affiliates solely because the
other party or one of its Affiliates is the recipient of such services. The
parties agree to consult with each other with respect to performance of their
obligations hereunder. Each party shall give due consideration to any
suggestion by the other to improve performance.

11.1 UNIFORM COMMERCIAL CODE. The parties agree that the provisions of
Section 2-306(2) of the Uniform Commercial Code ("U.C.C.") shall not apply to
services or any other activities or obligations of either of the parties
hereunder.

12. ALTERNATIVE ACUTE CARE DISTRIBUTION. If, for any calendar year during the
Term of this Agreement after 1996, Agency Net Sales of Products to nonacute care
customers for delivery to acute care hospitals (such acute care hospitals as set
forth in the then-current AMERICAN HOSPITAL ASSOCIATION GUIDE) ("Alternative
Acute Care Distributors") * * *. If, for any calendar year, Agency Net Sales of
Products to Alternative Acute Care * * *. Notwithstanding the preceding
provisions of this Section, * * *. If in any calendar year, Agency Net Sales of
Products to * * *. * * * the parties will negotiate this Section. * * *.

13. TRANSFER OF TITLE AND RISK OF LOSS.

13.1 GENERAL. Title and risk of loss with respect to Products sold
pursuant to the Agency Model shall pass from Baxter directly to the customer or
Subdistributor when such customer or Subdistributor receives the Products from
Allegiance whether delivered by Allegiance or a third-party carrier. Prior to
such time, title and risk of loss shall remain with Baxter regardless of whether
or not Allegiance shall have physical possession and/or control of such
Products. Title and risk of loss with respect to Products sold pursuant to the
Distributor Model shall pass from Baxter to Allegiance and immediately on to the
customer at the time of Allegiance's shipment of the Products to the customer.
Title and risk of loss with respect to Products sold to Allegiance for use as
components of BCS Kits shall pass from

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Baxter to Allegiance at the time that Allegiance receives such Products from
Baxter. Notwithstanding the foregoing, Allegiance shall be solely responsible
for any damage to the Products arising from Allegiance's mishandling of such
Products or theft or shrinkage while in Allegiance's possession.

13.2 INTERIM PERIOD. During the Interim Period, in the event of any
conflicts between the provisions of this Section 13 and the provisions of
Exhibit F of this Agreement with respect to transactions under Interim
Distributor Model, the provisions of Exhibit F shall control.

14. WARRANTIES.

14.1 PRODUCT WARRANTY. Baxter warrants to Allegiance that, at the time of
delivery to Allegiance: (a) the Products shall not be adulterated or misbranded
within the meaning of the Federal Food, Drug and Cosmetic Act, as amended and
the regulations issued thereunder, or products that may not under the provisions
of Sections 404, 505, 514 or 515 of said Act be introduced into interstate
commerce, or banned devices under Section 516 of said Act; and (b) Baxter shall
have good and marketable title to all such Products free and clear of all liens
or encumbrances (other than any created by Allegiance).

14.2 DISCLAIMER. THE FOREGOING WARRANTY IS EXCLUSIVE AND IN LIEU OF ALL
OTHER WARRANTIES OF ANY KIND, WHETHER STATUTORY, WRITTEN, ORAL, EXPRESS OR
IMPLIED, INCLUDING ANY WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE AND
MERCHANTABILITY. IN NO EVENT, WHETHER AS A RESULT OF BREACH OF CONTRACT, TORT
LIABILITY (INCLUDING NEGLIGENCE) OR OTHERWISE, SHALL BAXTER BE LIABLE TO
ALLEGIANCE FOR ANY SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES.

14.3 LIMITATION OF LIABILITY. ANY LIABILITY OF BAXTER TO ALLEGIANCE UNDER
THE WARRANTY CONTAINED IN THIS SECTION 14 SHALL BE LIMITED TO THE TOTAL PRICE
PAID BY ALLEGIANCE FOR THE PRODUCTS WHICH ARE THE SUBJECT OF SUCH LIABILITY PLUS
ALL COSTS FOR TRANSPORTATION AND OTHER DIRECT EXPENSES INCURRED BY ALLEGIANCE
WITH RESPECT TO SUCH PRODUCTS.

15. TRADEMARKS.

15.1 OWNERSHIP. Allegiance acknowledges that Baxter is the owner or
licensee of the trademarks and trade names which Baxter uses in the promotion
and sale of the Products hereunder, and that Allegiance has no right or interest
in such trademarks or trade names. Before commencing any use of the trademarks
or trade names connoting Baxter in connection with any catalog,

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promotional, packaging, or other materials, which use has not been previously
approved in writing by Baxter, Allegiance agrees to provide Baxter with proposed
specimens of use of such trademarks or trade names and to obtain Baxter's
written approval of such proposed use.

15.2 INFRINGEMENT. Allegiance shall notify Baxter promptly of any and all
infringements or improper use by any third party of the trademarks and trade
names connoting Baxter should Allegiance discover reasonable cause for believing
that such infringement or improper use is taking place and shall provide to
Baxter all information which Allegiance has available thereon. Baxter shall
have sole discretion and control with regard to any proceedings relating to
infringement or improper use of its trademarks and trade names. Allegiance may
choose to be represented by its own counsel in any such proceedings but such
representation shall be solely at Allegiance's expense.

15.3 EQUITABLE REMEDIES. Allegiance acknowledges that Baxter would not
have any adequate remedy at law for the breach by the other party of any one or
more of the covenants contained in this Section 15 and agrees that, in the event
of such breach, Baxter may, in addition to the other remedies which may be
available to it, file a suit in equity to enjoin Allegiance from any further
breach of any of the terms of this Section 15.

16. TERMINATION.

16.1 CHANGE IN CONTROL.

16.1.1 GENERAL. In the event of a Change in Control of either party
hereto or any Affiliate thereof to which any of the rights or obligations
hereunder have been assigned as permitted by Section 25, the party (the
"Affected Party") with respect to which the Change in Control has occurred,
either directly or with respect to one of its Affiliates shall give Notice to
the other party (the "Non-Affected Party") within 30 days of the occurrence of
such Change in Control. The Non-Affected Party may terminate this Agreement, in
whole but not in part, in the event of any such Change in Control with respect
to the Affected Party by giving Notice of such termination to the Affected Party
as provided below. In the event of a Change in Control of an Affiliate of the
Affected Party to which any of the rights or obligations hereunder have been
assigned as permitted by Section 25, the Non-Affected Party may terminate this
Agreement with respect to such Affiliate by giving Notice to the Affected Party
as provided below. The Non-Affected Party may exercise the rights of
termination described in the two preceding sentences by giving a notice of
termination, specifying the date

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of termination, to the Affected Party at any time prior to the end of the 60th
day following the receipt by the Non-Affected Party of the applicable Notice of
Change in Control given by the Affected Party pursuant to the first sentence of
this Section. In the event that the applicable Change in Control involves a
Competitor of the Non-Affected Party, the date of termination specified by the
Non-Affected Party in the notice of termination shall be the last day of a
calendar month which is not earlier than the sixth full calendar month following
the date of the Notice of termination and not later than the twelfth full
calendar month following the date of the Notice of Termination. In the event
that the applicable Change in Control does not involve a Competitor of the Non-
Affected Party, the date of termination specified by the Non-Affected Party in
the notice of termination shall be the later of (i) the last day of the twelfth
full calendar month following the date of the notice of termination and (ii)
December 31, 1998.

16.1.2 DEFINITIONS. For purposes hereof, "Change in Control" shall
mean (i) the acquisition, directly or indirectly, by any Person or Persons of
more than 30% of the voting stock of either party to this Agreement or any
Affiliate thereof, (ii) any merger or consolidation involving the Affected Party
or any Affiliate of the Affected Party that requires a vote of the stockholders
of the Ultimate Parent of the Affected Party, (iii) the acquisition by the
Affected Party or any Affiliate of the Affected Party of any Person that (a) is
a Rival of the Non-Affected Party and (b) after such acquisition, constitutes a
"significant subsidiary" of the Affected Party within the meaning of Rule
1-02(w) of Regulation S-X of the Regulations of the Securities and Exchange
Commission, substituting * * * for 10 percent in the tests used therein to
determine significant subsidiary, and (iv) only in the case of an Affiliate of
the Affected Party, the Transfer of all or substantially all of the business and
assets of such Affiliate. For the purposes hereof, "Rival" shall mean (a) with
respect to Baxter, any Person (including an Affiliate of such Person) that
during its most recently completed fiscal year has annual net revenues greater
than * * * of the total annual net revenues of Baxter International during its
most recently completed fiscal year; and (b) with respect to Allegiance, any
Person (including an Affiliate of such Person) that during its most recently
completed fiscal year has annual net revenues greater than * * * of the total
annual net revenues of Allegiance Corporation during the most recently completed
fiscal year. For the purposes hereof, "Ultimate Parent" means Baxter
International in the case of Baxter and Allegiance Corporation in the case of
Allegiance.

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16.1.3 TRANSFERS BY BAXTER. In the event that Baxter or any of its
Affiliates shall Transfer all or substantially all of the business and assets
relating to any Line of Products as permitted by Section 25, Allegiance may
terminate this Agreement with respect to such Line of Products in the same
manner as provided in Section 16.1.1. In the event that Baxter or any of its
Affiliates shall Transfer all or substantially all of the business and assets
relating to the Products as permitted by Section 25, Allegiance may terminate
this Agreement in its entirety in the same manner as provided in Section 16.1.1.

16.1.4 TRANSFERS BY ALLEGIANCE. In the event that Allegiance or any
of its Affiliates shall Transfer any portion of its business and assets
relating to Allegiance's distribution network as permitted by Section 25,
which portion accounted for net sales during the most recently completed
fiscal year in excess of $250 million, Baxter may terminate this Agreement
with respect to the Transferred portion of the distribution network in the
same manner as provided in Section 16.1.1.

16.1.5 OBLIGATION TO NEGOTIATE. If demanded in writing by the Non-
Affected Party, the Affected Party shall be obligated, during the period
following a Notice of termination from the Non-Affected Party, to negotiate in
good faith to establish terms and conditions that are acceptable to the Non-
Affected Party for an extension of the Term beyond the date of termination
specified in the Notice of termination in light of the Change in Control,
provided, however, the Non-Affected Party may in its absolute discretion
determine whether any proposed terms and conditions are acceptable and may
refuse to agree to any such terms and conditions for any reason whatsoever.

16.1.6 CONFIDENTIAL INFORMATION During the period commencing with any
such Change in Control and continuing through the end of the Term (and
thereafter, if appropriate), the Affected Party shall take any and all action
reasonably requested by the Non-Affected Party to protect any confidential
information of the Non-Affected Party from disclosure to or use by any Affiliate
of the Affected Party other than a Person that, immediately prior to the
occurrence of the Change in Control, was an Affiliate of the Affected Party that
regularly accessed such confidential information for a reasonable business
purpose.

16.2 OTHER TERMINATIONS. Each Party shall have the right to terminate this
Agreement effective upon delivery of Notice to the other party if the other
party: (a) makes an assignment for the benefit of creditors, or becomes
bankrupt or insolvent, or is petitioned into bankruptcy, or takes advantage of
any state, federal or foreign bankruptcy or insolvency act, or if a receiver

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or receiver/manager is appointed for all or any substantial part of its property
and business and such receiver or receiver/manager remains undischarged for a
period of 30 days, (b) has its corporate existence terminated by voluntary or
involuntary dissolution; or (c) materially defaults in the performance of any of
its covenants or obligations contained in this Agreement and such default is not
remedied to the nondefaulting party's reasonable satisfaction within 30 days
after Notice to the defaulting party of such default, or if such default is not
capable of rectification within 30 days, if the defaulting party has not
promptly commenced to rectify the default within such 30 day period and is not
proceeding diligently to rectify the default.

16.3 PROCEDURES ON TERMINATION. In the event of any termination of this
Agreement and if and when requested by Allegiance, Baxter will promptly remove
all inventory of Products owned by Baxter from facilities of Allegiance or any
of its Affiliates. Such removal will be effected during normal business hours
after reasonable advance Notice to Allegiance and will be done in a manner that
will not unreasonably disrupt the normal business operations of Allegiance or
Baxter.

Except as otherwise required pursuant to Sections 21 and 23.9, each party
shall destroy or return to the other party all records made or obtained in the
course of performance hereunder containing information regarding the other party
or its customers that is protected from disclosure under Section 21. In the
event that any party shall elect to destroy any records as permitted above, such
party shall provide the other party with written confirmation of any such
destruction.

16.4 CONTINUED SERVICE. In the event that this Agreement is terminated
pursuant to this Section 16, Baxter and Allegiance shall comply fully with this
Agreement and use reasonable efforts to service adequately existing customers of
the Products until such termination becomes effective.

16.5 PENDING ORDERS. On the expiration or termination of this Agreement
for any reason, Allegiance shall continue to honor customer's orders for
Products placed up to the date of expiration or termination, and Baxter shall
pay the fees due to Allegiance on the terms and conditions set forth in this
Agreement. Any consideration due hereunder that is calculated based upon a
specified time period shall be prorated for any partial period of time between
the end of the last such period and the date of expiration or termination. In
the event that Allegiance has elected to terminate this Agreement because of the
failure of Baxter to pay amounts due hereunder, Allegiance shall be obligated to
perform under the first sentence of this Section

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16.5 only after Baxter shall have paid all amounts due and owing to Allegiance
hereunder.

16.6 SELL-OFF. Notwithstanding any provision of this Agreement or any
other agreement between Baxter, Allegiance, and/or their respective Affiliates,
the parties acknowledge that Allegiance and its Affiliates shall be entitled to
continue to sell or otherwise dispose of the Products within the Territory from
and after the effective date of the expiration or termination of this Agreement
if such Products were owned by Allegiance on the date of termination.

16.7 TRUE-UP. No later than 12 months after expiration or termination of
this Agreement, Baxter shall report to Allegiance all discounts and bonuses
accrued but not earned and/or earned but not accrued on sales made hereunder,
and Baxter shall submit either a payment or an invoice for the net of such
amounts.

17. INDEMNITY.

17.1 BAXTER'S OBLIGATION. Baxter agrees to indemnify and hold Allegiance
and the Allegiance Indemnified Parties harmless from and against, and in respect
of, any and all claims by, and liabilities to, third parties ("Third-Party
Claims") asserted against or incurred by, and any and all expenses (including
all fees and expenses of counsel, travel costs and other out-of-pocket costs) in
connection with pending or threatened litigation or other proceedings regarding
such Third-Party Claims ("Expenses") incurred by, Allegiance or any of the
Allegiance Indemnified Parties (as hereinafter defined) which arise out of or
relate to:

17.1.1 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 Products pursuant to this Agreement;

17.1.2 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 Baxter (or its employees or agents) in
the course of its performance of this Agreement;

17.1.3 defects in Products;

17.1.4 any actual or alleged breach of warranty or obligation, if
any, accompanying the Product or Products, subject to the limitations in Section
14 to the extent provided therein; and

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17.1.5 any claim for personal injury, wrongful death or property
damage arising out of the use of a Product;

PROVIDED that this Section 17.1 shall not apply to any Third-Party Claim or
Expense to the extent that the parties agree, or it is finally determined
pursuant to Section 17.4 that the Third-Party Claim or Expense is within the
scope of Allegiance's indemnity obligation set forth in Sections 17.2.1 and
17.2.2 below.

The Allegiance Indemnified Parties shall mean and include (A) Allegiance's
Affiliates (B) the respective directors, officers, agents and employees of and
counsel to Allegiance and its Affiliates, (C) each other person, if any,
controlling Allegiance or any of its Affiliates, and (D) the successors,
assigns, heirs and personal representatives of any of the foregoing. Expenses
shall be reimbursed or advanced when and as incurred promptly upon submission by
Allegiance or any Allegiance Indemnified Party of statements to Baxter.

17.2 ALLEGIANCE'S OBLIGATION. Allegiance agrees to indemnify and hold
Baxter and the Baxter Indemnified Parties harmless from and against, and in
respect of, any and all Third-Party Claims asserted against or incurred by, and
any and all Expenses incurred by, Baxter or any of the Baxter Indemnified
Parties (as hereinafter defined) which arise out of or relate to:

17.2.1 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 Allegiance (or its employees or other
agents) in the course of its performance of this Agreement including, but not
limited to, any Third-Party Claims or Expenses 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 inclusion in
Kits; and

17.2.2 any actual or alleged patent, copyright or trademark
infringement, or violation of any other proprietary right, arising out of any
act or omission of Allegiance or any of its Affiliates in connection with the
sale of Kits or relating to any intellectual property owned by Allegiance or any
of its Affiliates and used in connection with the sale of Kits.

The Baxter Indemnified Parties shall mean and include (A) Baxter's Affiliates,
(B) the respective directors, officers, agents and employees of and counsel to
Baxter and its Affiliates, (C) each other person, if any, controlling Baxter or
any of its

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Affiliates, and (D) the successors, assigns, heirs and personal representatives
of any of the foregoing. Expenses shall be reimbursed or advanced when and as
incurred promptly upon submission by Baxter or any Baxter Indemnified Party of
statements to Allegiance.

17.3 THIRD-PARTY CLAIMS. If any third party shall make any claim or
commence any arbitration proceeding or suit against any one or more of the
Baxter Indemnified Parties or the Allegiance Indemnified Parties (hereafter,
"Indemnified Persons") with respect to which an Indemnified Person intends to
make any claim for indemnification against Allegiance under Section 17.2 or
against Baxter under Section 17.1 (as the case may be, the "Indemnifying
Party"), such Indemnified Persons shall promptly give written notice to the
Indemnifying Party of such third party claim, arbitration proceeding or suit and
the following provisions shall apply.

17.4 CONTROL OF PROCEEDINGS.

17.4.1 The Indemnifying Party shall have 20 business days after
receipt of the notice referred to in Section 17.3 to notify the Indemnified
Party that it elects to conduct and control the defense of such claim,
proceeding or suit. If the Indemnifying Party does not give the foregoing
notice, the Indemnified Party shall have the right to defend, contest, settle or
compromise such claim, proceeding or suit in the exercise of its exclusive
discretion subject to the provisions of Section 17.5, and the Indemnifying Party
shall, upon request from any of the Indemnified Persons, promptly pay to such
Indemnified Persons in accordance with the other terms of this Section the
amount of any Third-Party Claim resulting from their liability to the third
party claimant and all related Expense.

17.4.2 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 claim, proceeding or suit, 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 Person; (ii) the Indemnifying Party shall not thereby permit any
injunction against any Indemnified Person; (iii) the Indemnifying Party shall
permit the Indemnified Person and counsel chosen by the Indemnified Person and
reasonably acceptable to the Indemnifying Party to monitor such conduct or
settlement and shall provide the Indemnified Person and such counsel with such
information

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regarding such claim, proceeding or suit as either of them may reasonably
request (which request may be general or specific), but the fees and expenses of
such counsel shall be borne by the Indemnified Person unless (1) the
Indemnifying Party and the Indemnified Person shall have mutually agreed to the
retention of such counsel or (2) the named parties to any such claim, proceeding
or suit include the Indemnified Person and the Indemnifying Party and in the
reasonable opinion of counsel to the Indemnified Person 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 Person shall be reimbursed by
the Indemnifying Party to the Indemnified Person; and (iv) the Indemnifying
Party shall agree promptly to reimburse to the extent required under this
Section the Indemnified Person for the full amount of any Third-Party Claim
resulting from such claim, proceeding or suit and all related Expense incurred
by the Indemnified Person.

17.4.3 In no event shall the Indemnifying Party without the prior
written consent of the Indemnified Person, settle or comprise 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
Person a release from all liability in respect of such claim.

17.4.4 If the Indemnifying Party shall not have undertaken the conduct
and control of the defense of any claim, suit or proceeding as provided above,
the Indemnifying Party shall nevertheless be entitled through counsel chosen by
the Indemnifying Party and reasonably acceptable to the Indemnified Person to
monitor the conduct or settlement of such claim by the Indemnified Person, and
the Indemnified Person shall provide the Indemnifying Party and such counsel
with such information regarding such action or suit 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.

17.5 SETTLEMENT OF THIRD-PARTY CLAIMS BY THE INDEMNIFIED PERSON. So long
as the Indemnifying Party is contesting any such claim, suit or proceeding in
good faith, the Indemnified Person shall not pay or settle any such claim,
proceeding or suit. Notwithstanding the foregoing, the Indemnified Person shall
have the right to pay or settle any such claim, proceeding or suit, provided
that in such event the Indemnified Person shall waive any right to indemnity
therefor by the Indemnifying Party, and no amount in respect thereof shall be
claimed as Third-Party Claim or Expense under this Section 17.

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If the Indemnifying Party shall not have undertaken the conduct and control
of the defense of any claim, suit or proceeding as provided above, the
Indemnified Person, on not less than 30 days' prior written Notice to the
Indemnifying Party, may make settlement (including payment in full) of such
claim and such settlement shall be binding upon the parties hereto for the
purposes hereof, unless within said 30-day period the Indemnifying Party shall
have requested the Indemnified Person to contest such claim at the expense of
the Indemnifying Party. In such event, the Indemnified Person 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
of the conditions of Section 17.4. Anything in this Section 17 to the contrary
notwithstanding, if the Indemnified Person advises the Indemnifying Party that
it has determined to make settlement of a claim, the Indemnified Person 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 17 for indemnification by the
Indemnifying Party.

18. INSURANCE.

Each party is responsible for carrying any insurance desired by it in its
sole discretion, including comprehensive general liability insurance, insurance
to cover its facilities, products liability insurance and business interruption
insurance.

19. COMPLIANCE WITH LAWS.

19.1 ALLEGIANCE COMPLIANCE. Allegiance shall, to the extent material to
Allegiance and its Affiliates taken as a whole, comply (or cause compliance)
with all existing and future federal, state and other laws and regulations in
the Territory applicable to the conduct of Allegiance's business or the
possession of Products pursuant to this Agreement including, without limitation,
the following:

19.1.1 giving prompt written notice to Baxter if Allegiance should
become aware of any actual defect or condition which may alter the quality of
the Products in any material respect or may render any of the Products in
violation of any applicable law or regulation of the Territory including,
without limitation, any violation which could require any alteration of the
specifications of any Product, affect the sale of any Product, cause revocation
of any regulatory approval with respect to any Product or its sale hereunder, or
give rise to a claim against Baxter by any person, and Allegiance shall promptly

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notify Baxter upon becoming aware of any changes in any laws or regulations in
the Territory applicable to the manufacture, sale, packaging, labeling,
possession or use of the Products;

19.1.2 keeping appropriate records of all lot coded and serial
numbered Products shipped to customers; and

19.1.3 making prompt return of any and all Products affected by
holds or recalls if so requested by Baxter.

To the extent applicable to the subject matter of this Agreement, and pursuant
to the requirements of 42 CFR 420.300 et. seq., Allegiance hereby agrees to make
available to the Secretary of Health and Human Services ("HHS"), the Comptroller
of the General Accounting Office ("GAO"), or their authorized representatives,
all contracts, books, documents and records relating to the nature and extent of
costs hereunder for a period of four (4) years after the furnishing of services
hereunder. In addition, if any part of any service is to be provided by
subcontract, Allegiance hereby agrees to require by contract that such
subcontractor make available to the HHS and GAO, or their authorized
representatives, all contracts, books, documents and records relating to the
nature and costs thereunder for a period of four (4) years after the furnishing
of services thereunder.

19.2 BAXTER COMPLIANCE. Baxter shall, to the extent material to Baxter and
its Affiliates taken as a whole, comply (or cause compliance) with all existing
and future laws and regulations in the Territory applicable to the conduct of
Baxter's business or the manufacture, packaging, labeling and sale to Allegiance
of Products pursuant to this Agreement, including, without limitation, the
following:

19.2.1 giving prompt written notice to Allegiance if Baxter should
become aware of any actual defect or condition which may alter the quality of
the Products in any material respect or may render any of the Products in
violation of any applicable law or regulation of the Territory, including,
without limitation, any violation which could require any alteration of the
specifications of any Product, affect the sale of any Product, cause revocation
of any federal, state or other regulatory approval with respect to any Product
or its sale hereunder or give rise to a claim against Allegiance by any person;
and

19.2.2 giving prompt written notice to Allegiance of any and all
Products affected by holds or recalls and, if Baxter requests Allegiance to
return any of such Products to Baxter, promptly reimburse Allegiance for the
price of such returned

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Products paid by Allegiance under this Agreement and the direct cost of
returning such Products to Baxter.

The services provided hereunder will not be provided in violation of any
applicable Equal Employment Opportunity requirements including those set forth
in Section 202 of Executive Order 11246, as amended.

19.3 CONSULTATION. If applicable storage requirements change during the
Term of this Agreement as a result of changes in laws, regulations, or
interpretations or enforcement actions by governmental authorities with
jurisdiction over the Products or the subject matter of this Agreement, the
parties will confer regarding the need for and funding of any such changes, in
accordance with the following process. The need for any change in storage
requirements will be reviewed by senior executives of the parties who are
directly responsible for regulatory compliance, who will forward their
recommendation for specific change(s) to the Council. The Council will develop a
proposal for resolution that will include scope, funding needed, alternatives
and its recommendation. The Council will then forward its proposal to a working
group of business executives designated by Baxter and Allegiance that will have
the authority: (a) to adopt or modify the proposal; (b) to determine the funding
method; and (c) if appropriate, to allocate the costs of such resolution between
the Parties.

20. FORCE MAJEURE. The obligations of either party to perform under this
Agreement shall be excused during each period of delay caused by matters (not
including lack of funds or other financial causes) such as strikes, supplier
delays, shortages of raw materials, government orders or acts of God, which are
reasonably beyond the control of the party obligated to perform; provided that
nothing contained in this Agreement shall affect either party's ability or
discretion with respect to any strike or other employee dispute or disturbance
and all such strikes, disputes or disturbances shall be deemed to be beyond the
control of such party. A condition of force majeure shall be deemed to continue
only so long as the affected party shall be taking all reasonable actions
necessary to overcome such condition. In the event that either party hereto
shall be affected by a condition of force majeure, such party shall give the
other party prompt Notice thereof, which Notice shall contain the affected
party's estimate of the duration of such condition and a description of the
steps being taken or proposed to be taken to overcome such condition of force
majeure. Any delay occasioned by any such cause shall not constitute a default
under this Agreement, and the obligations of the parties shall be suspended
during the period of delay so occasioned. During any period of force majeure,
the party that

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is not directly affected by such condition of force majeure shall be entitled to
take any reasonable action necessary to mitigate the effects of such condition
of force majeure, and the provisions of Section 4 shall be suspended to the
extent necessary to permit any such action.

21. CONFIDENTIALITY.

21.1 ALLEGIANCE INFORMATION. Baxter agrees to hold, and to use reasonable
efforts to cause its employees and representatives to hold, in confidence all
marketing and pricing information of a confidential nature pertaining to the
Territory, and all information relating to Allegiance's standard costs,
received by Baxter from Allegiance after the Effective Date or obtained from
Allegiance in the course of an audit pursuant to Section 8.5, in a manner
consistent with Baxter's treatment of its own confidential information. Baxter
shall not use such information for any purpose other than as contemplated under
this Agreement or verifying compliance with this Agreement, without Allegiance's
prior written consent.

21.2 BAXTER INFORMATION. Allegiance agrees to hold, and to use reasonable
efforts to cause its employees and representatives to hold, in confidence all
information of a confidential nature concerning Baxter or its customers
(including all marketing and pricing information relating to Baxter and all
standard cost information relating to the Products) in the possession of
Allegiance as of the Effective Date or furnished to or obtained by Allegiance
after the Effective Date, in a manner consistent with Allegiance's treatment of
its own confidential information. Allegiance shall not use such information for
any purpose other than as contemplated under this Agreement, without Baxter's
prior written consent.

21.3 GENERAL. The obligations of confidentiality and non-disclosure
imposed under this Section 21 shall not apply to data and information that the
recipient can demonstrate:

21.3.1 is published or is or otherwise becomes available to the
general public as part of the public domain without breach of this Agreement;

21.3.2 has been furnished or made known to the recipient without
any obligation to keep it confidential by a third party under circumstances
which are not known to the recipient to involve a breach of the third party's
obligations to a party hereto;

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21.3.3 was developed independently of information furnished to the
recipient under this Agreement; or

21.3.4 was known to the recipient at the time of receipt thereof
from the other party, is not otherwise subject to (a) the confidentiality
restrictions contained in the Reorganization Agreement dated as of September 30,
1996 between Baxter International and Allegiance Corporation, or (b) any other
obligation to keep it confidential and was not obtained from a third party under
circumstances which were known to the recipient to involve a breach of the third
party's obligations to a party hereto.

21.4 EQUITABLE RELIEF. Each party (the "first party") acknowledges that
the other party would not have an adequate remedy at law for the breach by the
first party of any one or more of the covenants contained in this Section 21 and
agrees that, in the event of such breach, the other party may, in addition to
the other remedies which may be available to it, apply to a court for an
injunction to prevent breaches of this Section 21 and to enforce specifically
the terms and provisions of this Section.

21.5 REQUIRED DISCLOSURES. The provisions of this Section shall not
preclude disclosures required by law; provided, however, that each party will
use reasonable efforts to notify the other, prior to making any such disclosure,
and permit the other to take such steps as it deems appropriate, including
obtaining a protective order, consistent with applicable law, to minimize any
loss of confidentiality.

21.6 SECURITY. Each party shall be responsible for preventing unauthorized
remote access by such party's own agents and employees to data transferred to or
otherwise made available to the other party under this Agreement.

22. LIMITATION OF LIABILITY AND REMEDY.

22.1 DAMAGES. In no event, whether based on contract, indemnity, warranty,
tort (including negligence), strict liability or otherwise, shall either party
or any of its directors, officers, employees or agents, be liable for special,
exemplary, or punitive damages. The foregoing limitation and disclaimer shall
apply irrespective of whether the possibility of such special, exemplary, or
punitive damages had been disclosed in advance or could have reasonably been
foreseen.

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The limitations and disclaimers of obligations and liabilities contained in
this Section 22 are intended to apply to the fullest extent permitted by law;
provided that such limitations and disclaimers shall not limit amounts payable
with respect to any express indemnity provided for in this Agreement.

22.2 EXCLUSIVE REMEDIES.

22.2.1 BAXTER'S EXCLUSIVE REMEDIES. Except in the case of the gross
negligence or willful misconduct of Allegiance or its Affiliates, Baxter's
exclusive remedies against Allegiance for any breach of, or other act or
omission arising out of or relating to, this Agreement shall be:

22.2.1.1 the right to receive payment of amounts owed under
Sections 6 and 8 hereof;

22.2.1.2 the right to require reperformance of any service to
the extent required pursuant to Section 11;

22.2.1.3 the right to indemnification as provided in Section 17;

22.2.1.4 the right to injunction, specific performance or other
equitable non-monetary relief when available under applicable law;

22.2.1.5 the right to terminate this Agreement for material
breach as set forth in Section 16; and

22.2.1.6 the right to actual damages for breach of Section 21.

22.2.2 ALLEGIANCE'S EXCLUSIVE REMEDIES. Except in the case of the
gross negligence or willful misconduct of Baxter or its Affiliates, Allegiance's
exclusive remedies against Baxter for any breach of, or other act or omission
arising out of or relating to, this Agreement shall be:

22.2.2.1 the right to receive payment of amounts owed under
Sections 6 and 8 hereof;

22.2.2.2 with respect to Interim Distributor Model transactions
only, the right to require Baxter to repair or replace (at Baxter's option
and expense) any Product that proves not to be in conformity with
applicable labeling or specifications, and Baxter shall pay the
transportation and other costs incurred by Allegiance with respect to any
Products returned to Baxter for repair or

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replacement under this Section 22.2.2.2, or at Baxter's option, reimburse
Allegiance for any such costs;

22.2.2.3 the right to indemnification as provided in Section 17;

22.2.2.4 the right to injunction, specific performance or other
equitable non-monetary relief when available under applicable law;

22.2.2.5 the right to terminate this Agreement for material
breach as set forth in Section 16; and

22.2.2.6 the right to actual damages for breach of Section 21.

23. MISCELLANEOUS PROVISIONS.

23.1 NOTICES. All notices and other communications required under this
Agreement shall be in writing and shall be deemed to have been given if
delivered by hand, or sent by courier or facsimile transmission (provided that
in the case of facsimile transmission, a confirmation copy of the notice shall
be delivered by hand or sent by courier within 2 days of transmission),
addressed:

To Baxter:

Baxter Healthcare Corporation
One Baxter Parkway
Deerfield, Illinois 60015
Attention: General Counsel

with copies to:

Baxter Healthcare Corporation
Route 120 and Wilson Road
Round Lake, Illinois 60073
Attention: President--I.V. Systems Division

if to Allegiance to:

Allegiance Healthcare Corporation
McGaw Park Building A/B
1620 Waukegan Road
McGaw Park, Illinois 60085
Attention: General Counsel

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with a copy to:

Allegiance Healthcare Corporation
McGaw Park Building A/B
1620 Waukegan Road
McGaw Park, Illinois 60085
Attention: President--Distribution

until notice of a change in address or addressee is given as provided in this
Section. All notices given in accordance with this Section shall be effective,
if delivered by hand or by courier, at the time of delivery, and, if
communicated by facsimile transmission, at the time of transmission.

23.2 ENTIRE AGREEMENT. This Agreement is the entire agreement between the
parties hereto with respect to the subject matter hereof, there being no prior
written or oral promises or representations not incorporated herein.

23.3 CHOICE OF LAW. This Agreement shall be governed by and construed and
enforced in accordance with the laws 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. Any lawsuit arising from or
related to this Agreement shall only be brought in the United States District
Court for the Northern District of Illinois or the Circuit Court of Lake County,
Illinois. 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 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.

23.4 AMENDMENT; WAIVER. No amendment or modification of the terms of this
Agreement shall be binding on either party unless reduced to writing and signed
by an authorized representative of the party to be bound. The waiver by either
party of any particular default by the other party shall not affect or impair
the rights of the party so waiving with respect to any subsequent default of the
same or a different kind; nor shall any delay or omission by either party to
exercise any right arising from any default by the other affect or impair any
rights which the nondefaulting party may have with respect to the same or any
future default.

23.5 SEVERABILITY. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall be

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ineffective in such jurisdiction to the extent of such prohibition or
unenforceability without affecting, impairing or invalidating the remaining
provisions or the enforceability of this Agreement.

23.6 RELATIONSHIP OF THE PARTIES. By virtue of this Agreement, neither
party constitutes the other as its agent (except as otherwise expressly
provided), partner, joint venturer, or legal representative and neither party
has express or implied authority to bind the other in any manner whatsoever.

23.7 SURVIVAL. The rights and obligations of the parties under Sections
8.5, 8.6, 11, 13.1, 14, 16.3, 16.4, 16.5, 16.6, 16.7, 17, 19.1, 19.2, 20, 21,
22, 23, and 24 as well as all rights and obligations with respect to any amounts
that remain unpaid under Sections 6 and 8 hereof as of the date of termination,
shall survive any termination of this Agreement.

23.8 COUNTERPARTS. For convenience of the parties hereto, this Agreement
may be executed in one or more counterparts, each of which shall be deemed an
original for all purposes.

23.9 RECORDS RETENTION. Each party will retain all information obtained or
created in the course of performance hereunder in accordance with the records
retention policy of the other party existing from time to time. Each party has
advised the other of its respective policy as in effect on the Effective Date
and will advise the other party of any subsequent changes therein.

23.10 BENEFICIARIES. Except for the provisions of Section 17 hereof,
which are also for the benefit of the other Persons indemnified, this Agreement
is solely for the benefit of the parties hereto and their respective Affiliates,
successors and permitted assigns and shall not confer upon any other Person any
remedy, claim, liability, reimbursement or other right in excess of those
existing without reference to this Agreement.

24. DISPUTE RESOLUTION AND ARBITRATION.

24.1 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 business executives
with authority to resolve the controversy. Prior to taking action as provided
in Section 24.2, the parties shall first submit such claim or controversy to the
appropriate Divisional Presidents of each party for resolution, and if such
Divisional Presidents are unable to resolve such claim or controversy, either
party may request that

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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 describing the particular
claim or controversy.

24.2 ARBITRATION. Any dispute that is not resolved by negotiations
pursuant to Section 24.1 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 County, Illinois. The arbitration will be governed by
the United States Arbitration Act, 9 U.S.C. Sections 1-16 and the Patent
Arbitration Act, 35 U.S.C. Section 294. 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 except as expressly provided otherwise.

24.3 INJUNCTIVE RELIEF. Nothing contained in this Section 24 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.

25. ASSIGNMENT.

25.1 GENERAL. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns, provided, however, that, except as provided below, neither party may
Transfer its interest in the Agreement, including Transfers by operation of law
such as by way of merger or consolidation, without the prior written consent of
the other party, which consent may not be unreasonably withheld.
Notwithstanding the foregoing sentence, either party may Transfer its rights and
obligations under this Agreement to any

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corporation or other entity that shall acquire all or substantially all of such
party's business and assets and assume in writing all of such party's
obligations hereunder and deliver a signed copy of such assumption instrument to
the other party; and, upon the other party's receipt of such assumption
instrument, the assigning party shall be fully released and discharged from its
obligations under this Agreement. In the event of such a Transfer, the Non-
Affected Party shall have the right to terminate this Agreement as provided in
Section 16.1.

25.2 CERTAIN OTHER TRANSFERS BY BAXTER. Notwithstanding the foregoing
provisions of this Section, to the extent that (a) any Person that is not a
Competitor of Allegiance shall acquire all or substantially all of Baxter's
business and assets relating to any Line of Products, or (b) any Person shall
acquire all or substantially all of Baxter's business and assets relating to the
Products; then Baxter may Transfer the portion of its rights hereunder relating
to such Line of Products or all of its rights hereunder, respectively, to such
acquiring Person, provided that any such acquiring Person shall assume in
writing all of Baxter's obligations hereunder which correspond to the portion of
rights Transferred, and shall deliver a signed copy of such assumption
instrument to Allegiance. Baxter shall remain liable for all of the obligations
under this Agreement notwithstanding any such Transfer. In the event of any
Transfer described in this paragraph, Allegiance shall have the right to
terminate the portion of this Agreement relating to such Line of Products as
provided in Section 16.1.

25.3 CERTAIN OTHER TRANSFERS BY ALLEGIANCE. Notwithstanding the foregoing
provisions of this Section, to the extent that any Person shall acquire all or
any portion of Allegiance's business and assets relating to the Allegiance's
distribution network, Allegiance may Transfer the portion of its rights
hereunder relating to such portion of its distribution network to such acquiring
Person, provided that any such acquiring Person shall assume in writing the
portion of Allegiance's obligations hereunder relating to the portion of the
distribution network so Transferred, and shall deliver a signed copy of such
assumption instrument to Baxter. Allegiance shall remain liable for all of the
obligations under this Agreement notwithstanding any such Transfer. In the event
of any Transfer described in this paragraph, Baxter shall have the right to
terminate this Agreement as provided in Section 16.1.

26. AUTHORITY. Each party represents and warrants that, as of the effective
date of this Agreement, the terms of this Agreement do not violate any existing
obligations or contracts of, or any law, rule, regulation, judgment or order
binding on, such party.

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Each party shall indemnify and hold harmless the other party from and against
any and all liabilities, damages, losses and expenses (including reasonable
attorney's fees) resulting from any third party claim, arbitration proceeding or
suit which is hereafter made or brought against the other party and which
alleges any such violation, all as provided in Section 17 herein with respect to
the indemnification provided in Section 17.1 and Section 17.2.

* * * * * *

IN WITNESS WHEREOF, the parties have by their duly authorized officers
executed this Agreement as of the date first above written.

BAXTER: ALLEGIANCE:

BAXTER HEALTHCARE CORPORATION ALLEGIANCE HEALTHCARE CORPORATION

By: By:
---------------------------- -----------------------------
Name: Name:
Title: Title:

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AGENCY, SERVICES, AND DISTRIBUTION AGREEMENT

EXHIBIT A

I.V. PRODUCTS

[PREMIUM PRODUCTS SHALL NOT INCLUDE * * *.]

A-1

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AGENCY, SERVICES, AND DISTRIBUTION AGREEMENT

EXHIBIT B

NUTRITION PRODUCTS

B-1

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AGENCY, SERVICES, AND DISTRIBUTION AGREEMENT

EXHIBIT C

ALLEGIANCE'S DUTIES

1. GENERAL DUTIES UNDER AGENCY MODEL, DISTRIBUTOR MODEL AND BCS KITS MODEL.

1.1 CORPORATE AGREEMENT BONUS PROGRAM. Allegiance shall participate in
the corporate agreement bonus program for the Products as follows:

1.1.1 EXISTING AGREEMENTS.

1.1.1.1 The "Existing Corporate Agreements" shall mean Baxter's
agreements with stand-alone hospitals and regional and national health
systems with effective dates prior to September 30, 1996, which provide for
annual bonus or discount payments based upon the quantity of Baxter-
manufactured products purchased by the customer.

1.1.1.2 Allegiance will accept assignment of the Existing
Corporate Agreements and will administer the Existing Corporate Agreements
on behalf of itself and Baxter.

1.1.1.3 Allegiance shall honor and administer each Existing
Corporate Agreement through its expiration or earlier termination pursuant
to its terms.

1.1.1.4 The corporate agreement bonus funding process will be
the same as prior to October 1, 1996, i.e., the corporate agreement bonuses
will be funded by Baxter and Allegiance, the allocation will be made based
on the estimated total year-end payout and actual May year-to-date sales
and gross profit recognized from the applicable customers, the bonus
allocation will be invoiced by Allegiance to Baxter on a monthly basis
(terms of payment will be net 30 days), and on or before May 31 of each
year, any over-accrual or under-accrual will be allocated to Allegiance or
Baxter based upon the foregoing allocation for the applicable year.

1.1.1.5 Allegiance shall prepare and present the corporate
agreement bonus payments to the customers, and Baxter shall have the right
to have Baxter representatives present.

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1.1.2 FUTURE AGREEMENTS. For any corporate bonus agreements
entered into on or after the effective date of this Agreement with stand-alone
hospitals and regional and national health systems, Allegiance shall meet in
advance with each Baxter business unit to determine whether such Baxter business
unit desires to participate in any such agreements.

1.2 SALES SUPPORT. Allegiance shall use commercially reasonable efforts
to support sales of the Products in accordance with the following and such
efforts are in lieu of any standard of performance implied by Section 2-306(2)
of the U.C.C.:

1.2.1 Allegiance field service representatives (customer service
representatives in the field) or other Allegiance customer service
representatives shall direct customer inquiries regarding the Products to
Baxter's customer service support organization for resolution.

1.2.2 If Allegiance receives a request for proposal or request for
bid relating to the Products, Allegiance will advise Baxter of such receipt, and
will also advise Baxter whether the customer appears interested in purchasing
the Products under the Agency Model or the Distributor Model.

1.2.3 Allegiance account managers shall: (a) provide Baxter with
access to the customer decision-makers; (b) generate sales interest in the
Products; (c) actively support the joint customer satisfaction strategy between
Allegiance and Baxter; and (d) work with Baxter (in a manner similar to that
prior to the effective date of this Agreement) relative to account segmentation
rating of Baxter customers. Allegiance segmentation of customers for the
Products shall not affect Allegiance's obligations under the Agency Model.

1.2.4 Allegiance will use commercially reasonable efforts to
monitor critical business indicators in the areas of customer service, materials
management, distribution services, pricing/billing, and compliance with all
specific service requirements set forth in this Exhibit C. Without limitation
to the foregoing sentence, Allegiance will use commercially reasonable efforts
to measure and assess customer satisfaction for Allegiance sales processes and
sales representatives, to the extent Allegiance provides such sales-related
functions under this Agreement.

1.2.5 Allegiance shall participate with Baxter in a semi-annual
review of regional account segmentation, performance to critical business
indicators, and regional sales to be conducted between the leaders of their
respective regional sales

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organizations. Allegiance and Baxter will work together in good faith to develop
action plans to improve customer satisfaction in areas that are mutually
identified as key factors for customer growth and retention, or areas where
Baxter's performance is significantly (statistically defined) below that of its
competitors.

1.2.6 Allegiance's sales generalist sales force shall continue to
promote sales of the Products in the same manner as prior to the effective date
of this Agreement.

1.2.7 Allegiance will provide telephone sales services for
deployment purposes or strategic account management, at Baxter's request, for an
additional fee to be agreed upon.

1.2.8 Allegiance shall make available to Baxter its electronic
catalog listing each party's products.

1.2.9 Upon termination or expiration of any pre-existing customer
contract with a third-party supplier for products that compete with any Product
or Products, except for permitted competitive Best Value Products, Allegiance
shall encourage and facilitate use of the Products (rather than any product
competing with any Product or Products) through appropriate means including, but
not limited to, use of Best Value Product incentives, Allegiance customer
contract provisions, and/or sales representative incentives.

1.2.10 TRANSITION. During the period beginning with the effective
date of this Agreement and ending on December 31, 1996, Allegiance will continue
to use reasonable business efforts to provide substantially the same level of
customer service relating to the Products through substantially the same
personnel as Baxter's U.S. Distribution business provided as of July 1, 1996.
Allegiance's responsibilities under the preceding sentence shall end as and to
the extent that Baxter customer service personnel are activated. Baxter will
use reasonable efforts to meet the agreed-upon transition schedule.

1.3 MARKETING SUPPORT. Allegiance shall use commercially reasonable
efforts to support marketing of the Products in accordance with the following,
and such efforts are in lieu of any standard of performance implied by Section
2-306(2) of the U.C.C.:

1.3.1 Allegiance shall provide marketing services (other than
product management services which will be provided by Baxter) to Surgery Centers
and to Alternate Site Distributors.

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1.3.2 Allegiance shall maintain its own communications resources
and shall coordinate the communications messages with Baxter when appropriate.

1.3.3 Allegiance shall attempt whenever possible to share with
Baxter expenses for convention fees, industry organizations, and industry
databases when and where appropriate.

1.3.4 Prior to publication, Allegiance shall submit to Baxter for
Baxter's approval all Allegiance promotional/communication endeavors
specifically referencing the Products or any Baxter services.

1.3.5 Either as part of the promotion of Best Value Products or as
part of a general promotion, Allegiance shall represent the Products fully and
prominently in Allegiance's product and service literature or any other media,
including field sales support tools.

1.3.6 Allegiance shall include Baxter sales volume by Product
category on Allegiance's sales reports in a similar format as provided by
Allegiance prior to the effective date of this Agreement.

1.3.7 For a fee to be agreed upon from time to time, Allegiance
shall provide literature distribution services to Baxter.

1.4 NATIONAL SAMPLE CENTER. From the effective date of this Agreement
through the period ending December 31, 1997, Allegiance shall provide the
following services in connection with the National Sample Center:

1.4.1 Allegiance shall maintain the Sample Center for the
Products.

1.4.2 Allegiance shall order the Products to be stocked in the
Sample Center which shall remain owned by Baxter.

1.4.3 Allegiance shall maintain the MAS90 system for the Sample
Center inventory.

1.4.4 Allegiance shall provide to Baxter a monthly spreadsheet
with the Product-related activity for the month, I.E., rep name, cost center,
product ordered, and service charge.

1.4.5 Allegiance shall charge Baxter a handling charge of
* * */order to cover the overhead associated with receiving, storing, and
shipping the Products.

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1.4.6 Allegiance shall apply special handling charges to priority
shipments as follows: (a) next day shipments will be charged an additional * *
*; and (b) second day air shipments will be charged an additional * * *.

1.4.7 Allegiance shall bill Baxter monthly for applicable charges.

1.4.8 Allegiance shall conduct an annual inventory and/or routine
cycle counting to maintain inventory integrity in the National Sample Center.

1.4.9 Allegiance shall continue to provide the same customer
service functions to the sales representatives as was provided prior to the
effective date of this Agreement.

1.4.10 Allegiance shall continue to check expiration dates on all
Sample Center Products.

1.4.11 Allegiance shall maintain contact with Baxter's finance
personnel regarding inventory status and financial transactions.

1.4.12 Allegiance shall send monthly reports to Baxter providing
inventory levels.

1.5 MATERIALS MANAGEMENT. Allegiance and Baxter shall use commercially
reasonable efforts to make the supply chain as efficient as possible for both
parties. Future opportunities to improve efficiency include, but are not
limited to, EDI, bar coding, custom palletization, network channels and the use
of returnable totes. Both parties agree to work in good faith to achieve this
goal.

1.5.1 FINISHED GOODS REQUIREMENTS PLANNING.

1.5.1.1 Both parties agree that the echeloning of products
based on line item usage generally makes sense. Assuming there are no
significant customer contractual issues or financial impacts to Baxter,
Baxter agrees to the parameters set forth by the rationalized supply chain.
If after the appropriate review there are significant customer contractual
issues or financial impacts to Baxter, 1995 will be used as the baseline
for where products are stocked and the number of low velocity SKU's will
not exceed 1995 levels.

1.5.1.2 Allegiance will not be required to carry more than 1995
average Days Inventory On Hand.

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1.5.2 ALLEGIANCE INBOUND FREIGHT ADMINISTRATIVE SERVICES.
Allegiance shall continue to provide the following administrative services for
all inbound freight shipments (i.e., shipments of Products from manufacturing
plants to replenishment centers and distribution centers or from replenishment
centers to distribution centers) to the extent that such services were normally
being provided by Baxter's U.S. Distribution business to Baxter's I.V. Division
prior to the effective date of this Agreement: (a) freight payments, (b) audit
of freight payments, (c) transportation cost reporting, and (d) logistics
analysis/distribution technology to include network planning and replenishment
center sourcing. Allegiance's compensation for such services shall be
determined in accordance with the methodology used by Baxter prior to the
effective date of this Agreement. For an additional fee to be agreed upon,
Allegiance may agree to provide to Baxter additional inbound freight
administrative services beyond the scope of the services normally being
furnished by Baxter's U.S. Distribution business to Baxter's I.V. Division prior
to the effective date of this Agreement.

1.6 DISTRIBUTION.

1.6.1 RECEIVING (NOTIFICATION AND PLANNING).

1.6.1.1 Product will be system received within one and one-half
business days of arrival at Allegiance's replenishment center or
distribution center.

1.6.1.2 Allegiance will coordinate with Baxter to schedule
receiving appointments for Products coming from manufacturing facilities
and replenishment centers, and in unloading Products. Allegiance will
follow Bill of Lading (BOL) instructions regarding receipt unless late
arrival prevents Allegiance from doing so, and alternative arrangements
have not been made.

1.6.1.3 Allegiance will receive products at distribution
centers using Baxter's and Allegiance's computer systems or an Allegiance
warehouse management system that will upload to such computer systems.

1.6.2 WAREHOUSE MANAGEMENT.

1.6.2.1 Allegiance will be responsible for the management of
its replenishment centers and distribution centers.

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1.6.2.2 Allegiance will hold Baxter inventory in Allegiance's
replenishment center or its distribution centers.

1.6.2.3 Except as otherwise agreed, Allegiance will adhere to
existing storage, shipping and receiving practices, including practices
regarding time-sensitive Products.

1.6.2.4 Allegiance will measure and report to Baxter on a monthly
basis Product damage or loss that occurs at Allegiance facilities.
Allegiance shall compensate Baxter pursuant to Section 6.18 of this
Agreement for any damage or loss that is Allegiance's responsibility under
this Agreement.

1.6.2.5 Allegiance will measure and report to Baxter on a
monthly basis Product damage that occurs prior to arrival at Allegiance's
distribution centers or its replenishment center.

1.6.3 CYCLE COUNTS AND PHYSICAL INVENTORIES.

1.6.3.1 Allegiance will continue to perform counts of Baxter's
Product inventory in all Allegiance facilities through annual physical
inventories or cycle counts, following substantially the same practices as
employed by Baxter and Baxter's U.S. Distribution business prior to the
effective date of this Agreement, at no additional cost to Baxter.

1.6.3.2 Allegiance facilities that performed cycle counts for
the Products prior to the effective date of this Agreement will continue to
do so consistent with practices utilized prior to the date hereof.

1.6.3.3 Allegiance shall provide Baxter with the results of its
cycle counts by the tenth business day after the count was taken.

1.6.3.4 Baxter personnel and external auditors for Baxter shall
have the right to audit an Allegiance cycle count of the Products at any
time up to 90 days after the end of the month in which the cycle count is
conducted.

1.6.3.5 Baxter personnel and external auditors for Baxter shall
have the right to audit Product inventory in Allegiance facilities at any
mutually-acceptable time upon not more than five business days advance
notice.

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1.6.3.6 Allegiance facilities that performed annual physical
inventories prior to the effective date of this Agreement will continue to
do so during the Term of this Agreement. The annual physical inventory
will take place in October of each year during the Term of this Agreement.
Baxter will select a day in October acceptable to Allegiance on which the
physical inventory will take place.

1.6.3.7 Allegiance will have 20 business days from the day of
the physical inventory to reconcile, system enter, and report the physical
inventory results to Baxter.

1.6.3.8 Each Allegiance facility participating in the physical
inventory must demonstrate a gross variance of the dollar value of the
Product inventory on TOPS within a range of -5% to +5%. Baxter may require
Allegiance facilities that do not meet this standard to perform another
physical inventory in April of the following calendar year. If the gross
variance is outside of the range of -1.5% to +1.5%, Baxter may require
Allegiance to perform specified Product physical inventory counts.

1.6.3.9 To the extent practicable, Baxter and Allegiance shall
record any annual physical inventory adjustments into their respective
accounting records at the same time.

1.6.3.10 Baxter shall have the right to have Baxter personnel
and external auditors present at Allegiance facilities on the day that the
physical inventory is conducted. In addition, Baxter shall have the right
to audit Allegiance's annual physical inventory results at any time up to 3
months after the date on which Allegiance records its annual inventory
adjustments into its accounting records.

1.6.4 ORDER FULFILLMENT. When customer orders are released
through Baxter's computer system to Allegiance's computer system, Allegiance
personnel will pick, pack, load and stage and ship-verify the customer order for
delivery within the Allegiance distribution center. For Agency Model
transactions, Allegiance personnel will continue to provide problem resolution
for electronic data interchange (EDI) orders to the same extent as provided by
Baxter's U.S. Distribution business to Baxter's I.V. Division immediately prior
to the effective date of this Agreement, at no additional charge to Baxter.

1.6.5 OUTBOUND SHIPMENT.

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1.6.5.1 Allegiance personnel will be responsible for the
selection and routing, private fleet or commercial carrier, of the Baxter
customer order.

1.6.5.2 Allegiance shipments will be based on BOL instructions.
If no specific instruction appears on the in BOL, shipments will occur on
the next scheduled delivery or within a maximum of two business days (if no
scheduled delivery).

1.6.6 FREIGHT CLAIMS.

1.6.6.1 Allegiance will be responsible for filing freight
claims and resolving product shortages and overages, including providing
proof of delivery, with respect to all Product shipments.

1.6.6.2 If Allegiance is unable to furnish proof of delivery
with respect to Products shipped on Allegiance's private fleet within a
reasonable period of time thereafter, it shall compensate Baxter for such
undelivered Product in accordance with Section 6.18 of this Agreement.

1.6.7 LOT TRACKING. Allegiance shall provide lot tracking
capabilities as provided by Baxter for the Products prior to the effective date
of this Agreement.

1.6.8 RETURN GOODS MANAGEMENT.

1.6.8.1 Allegiance shall arrange for and pick up, process and
dispose of returned Products at Baxter's request.

1.6.8.2 In the event of returned Products, a return goods
authorization will be issued by Baxter Customer Service and Allegiance will
arrange for and pick up such Products within 5 business days. However, if
the customer is located in a remote area where pick-up within 5 business
days would be impracticable, Allegiance will use commercially reasonable
efforts to pick up the returned Products at the next scheduled delivery,
but in no event later than 30 days after its receipt of such return goods
authorization.

1.6.8.3 Allegiance will continue practices existing immediately
prior to the effective date of this Agreement regarding returned goods
processing, including unloading, segregation, inspection, product
disposition (restocking, disposal, or transport for restocking),

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documentation, and forwarding paperwork for Baxter to administer credit.

1.6.8.4 Return goods processing time (receipt date at
distribution center to paperwork receipt at Baxter) will not exceed 30
days.

1.6.8.5 Allegiance shall use commercially reasonable efforts to
dispose of returned Products in a cost-effective manner, subject to
Baxter's instructions.

1.7 PRODUCT FIELD CORRECTIVE ACTIONS.

1.7.1 Allegiance shall perform field corrective action ("FCA")
services in a manner consistent with the quality systems, procedures and
specifications as of the effective date of this Agreement. Allegiance shall
provide the following FCA services for the fee stated in Section 6.16.1:

a. FCA notification processing;
b. FCA disposition processing;
c. storage of Products affected by an FCA inside an Allegiance
distribution center for up to six months from the date of
initiation of the FCA;
d. transportation of all Products affected by the FCA to
Baxter, freight collect;
e. rework or inspections of Products by Allegiance employees;
f. discard and destruction of Products utilizing nonhazardous
waste disposal methods;
g. delivery of recall report information to Baxter;
h. incoming inspection of all Baxter Products for open FCAs for
twelve months from the date of initiation of the FCA;
i. third-party invoices for any of the services listed above;
and
j. third-party invoices for any services in addition to those
listed above as performed in 1996.

1.7.2 At Baxter's request and with Baxter's approval, Allegiance shall
perform FCA services not included in Section 1.7.1 for additional compensation
to be agreed upon. Baxter will be invoiced separately for such additional
services pursuant to Section 6.16.2 of this Agreement. Examples of additional
FCA services addressed by this Section 1.7.2 include:

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a. all third-party invoices related to expenses incurred by
Allegiance (except expenses related to the discard and
destruction of non-hazardous Products) that arise out of the
need for Baxter to issue an FCA for Products;
b. computer system upgrades requested by Baxter or Baxter for
Allegiance FCA systems;
c. storage of Products affected by an FCA for periods longer
than six months or storage of such Products in rented
trailers; and
d. incoming inspection of all Products for open FCAs for
periods longer than 12 months from the date of initiation of
the initiation of the FCA.

1.7.3 For purposes of the subsequent provisions of this
Section 1.7, Allegiance shall use commercially reasonable efforts to accomplish
the FCA tasks identified within the time periods indicated. If extraordinary
volume or other circumstances make such time periods impracticable, Baxter and
Allegiance will make adjustments by extending time periods, setting priorities
or otherwise.

1.7.4 Allegiance shall perform FCA notification to Allegiance's
distribution centers and replenishment center based upon priorities. Priority A
notification requires extraordinary and immediate action. Priority B
notification requires notification to all Allegiance distribution centers and
its replenishment center within one business day. Priorities will be based on
the urgency of the FCA as determined primarily by Baxter.

1.7.5 For FCAs involving Products sold under the Distributor
Model, Allegiance shall provide customer lists to Baxter the next business day
for requests received before 1:00 p.m. Central Standard Time.

1.7.6 Allegiance shall perform stock checks based upon priorities.
Priority A requires extraordinary and immediate action. Priority B requires
processing and reporting on the same day. Priority C will be negotiated based
upon needs but generally requires processing and reporting in 2 to 5 business
days. Priorities will be based on the urgency of the FCA as determined
primarily by Baxter.

1.7.7 Initial inventory reports shall be issued in 5 business days
from initial FCA notification to Allegiance's distribution centers or
replenishment center unless otherwise requested.

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1.7.8 Subject to local restrictions regarding discard of the
products, routine dispositions (as designated by Baxter) shall be issued to
Allegiance's distribution centers and replenishment center in 5 business days.
Allegiance's distribution centers and replenishment center shall then have 5
business days to process the disposition.

1.7.9 Subject to local restrictions regarding discard of the
Products, expedited dispositions (as designated by Baxter) shall be issued to
Allegiance's distribution centers and replenishment center within 1 business
day. Allegiance's distribution centers and replenishment center shall then have
five business days to process the expedited disposition.

1.7.10 Subject to local restrictions regarding discard of the
Products, extraordinary dispositions (as designated by Baxter) shall be issued
within 1 business day. Allegiance's distribution centers and replenishment
center shall then have one business day to process the expedited disposition.

1.7.11 Reconciled disposition reports for quantity variance shall be
negotiated between Allegiance and Baxter at the time of disposition.

1.7.12 The necessity for and content of sampling plans and protocols
shall be negotiated at the time of the FCA.

1.7.13 Allegiance shall cooperate with Baxter in performing any FCA
by identifying affected Products and customers, developing an action-specific
management plan detailing specific responsibilities, and notifying customers of
any such action. Allegiance shall encourage customers to follow instructions
related to any hold or recall situation.

1.7.14 FCAS FOR KITS. Allegiance shall implement and report, as
necessary, any Product FCAs for Kits, following, to the extent commercially
reasonable, the same instructions and priorities provided for Products sold
pursuant to the Agency Model or the Distributor Model. Allegiance shall provide
to Baxter a customer list for specialized distribution such as ValueLink and
other low unit of measure ("LUM") programs. Allegiance shall implement the FCA
for such specialized distribution. Allegiance shall reconcile the Kit portion
of any recall and provide Baxter with all required recall data.

1.8 DIVISIONAL BONUS PROGRAM.

1.8.1 Allegiance shall participate in the Baxter divisional bonus
programs for the Products if and to the extent

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that such programs include Allegiance products and such programs are in
existence as of the effective date of this Agreement.

1.8.2 Allegiance shall continue to bill the customer for sales of
Allegiance products and promptly provide to Baxter information related to such
sales necessary to calculate the divisional bonus. Baxter will invoice the
bonus allocation to Allegiance.

1.8.3 Baxter shall prepare and present the divisional bonus
payments to customers, and Allegiance shall have the right to have Allegiance
representatives present at the presentation.

1.8.4 Allegiance shall use commercially reasonable efforts to
cooperate with Baxter in the event customers request that divisional bonus
payments be made by alternative means, for example, through credits on
Allegiance statements of account.

1.8.5 [BEGINNING WITH CALENDAR YEAR 1997, ALLEGIANCE SHALL PAY TO
BAXTER ALLEGIANCE'S SHARE OF OPERATIONS AND SYSTEMS EXPENSES REQUIRED TO SUPPORT
THE ADMINISTRATION OF THE DIVISIONAL BONUS PROGRAM BASED UPON ALLEGIANCE'S SHARE
OF THE DIVISIONAL BONUS AS A PERCENTAGE OF THE TOTAL DIVISIONAL BONUS.
NOTWITHSTANDING THE PRECEDING SENTENCE, ALLEGIANCE'S SHARE OF SUCH OPERATIONS
AND SYSTEMS EXPENSES SHALL NOT EXCEED * * *.]

1.9 PRIOR NOTICE. To the extent practicable, Allegiance shall provide at
least six months prior written notice to Baxter before making any change in its
business operations that is likely to impact materially Baxter's business
operations, revenues or costs. Such changes include, but are not limited to,
Allegiance's closure of one or more of its distribution centers.

2. AGENCY MODEL.

2.1 GENERAL.

2.1.1 Allegiance will system receive the Products into Baxter's
computer system.

2.1.2 Allegiance will receive the shipping documentation from
Baxter's computer system and pick-up information by facsimile.

2.1.3 Allegiance will perform shipment verification on Baxter's
computer system.

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2.2 CUSTOMER SERVICE. Allegiance shall provide customer service support
and order entry as follows for Products sold to Subdistributors (except for EIS
customers and anaesthesia dealers, for whom Baxter will provide all dealer
management services):

2.2.1 When utilizing the dealer management group as an agent to
service Alternate Site Distributors and Alternative Acute Care Distributors:

2.2.1.1 Allegiance's dealer management group will act as
Baxter's agent in negotiating agreements with Alternate Site Distributors
and Alternative Acute Care Distributors as designated by Baxter for
Products and will act as the primary interface with such Alternate Site
Distributors and Alternative Acute Care Distributors.

2.2.1.2 Allegiance shall seek Baxter's approval which must be
obtained by the Allegiance dealer management group prior to setting up any
accounts for Alternate Site Distributors or Alternative Acute Care
Distributors.

2.2.1.3 Baxter will establish sales strategies, selling terms,
ordering policies, and pricing for sales to Alternate Site Distributors and
Alternative Acute Care Distributors.

2.2.1.4 Allegiance shall provide operational support including
order entry/customer service, billing/contract and pricing administration,
collection, dealer rebates, trace sales, return processing, accounts
receivable dispute resolution, system support, and new account set-up.

2.3 PRICING/BILLING.

2.3.1 When utilizing the dealer management group as an agent to
sell and service Alternate Site Distributors and Alternative Acute Care
Distributors:

2.3.1.1 Allegiance's dealer management group must seek approval
from Baxter which must be obtained prior to any agreement with an Alternate
Site Distributor or an Alternative Acute Care Distributor to fund margin or
pay sales tracing fees.

2.3.1.2 Allegiance's dealer management group will perform the
billing function for Baxter using Baxter's computer system.

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2.3.2 When Allegiance's surgery center sales force is promoting
Baxter's sale of the Products to surgery centers, Allegiance's sales force shall
operate within the price guidelines set by Baxter.

2.3.3 ADDITIONAL CUSTOMER-REQUESTED SERVICES. In conjunction with
the Agency Model, if a customer requests Product-related services from
Allegiance that are in addition to the services that Allegiance has agreed to
provide under the foregoing provisions of Exhibit C, Allegiance will provide to
Baxter a description of the additional services requested and its associated
fees for such services. Baxter will conduct all preliminary negotiations with
the customer relative to such additional services. Based on these negotiations,
Baxter will advise Allegiance as to whether (a) Baxter will contract directly
with Allegiance for provision of such additional services, or (b) Allegiance
should contract directly with the customer for provision of such services.

2.4 DISTRIBUTION.

2.4.1 OUTBOUND SHIPMENT.

2.4.1.1 Allegiance shall provide the following standard
delivery services ("Standard Delivery"): (a) with respect to customer
contracts in connection with new relationships beginning after September
30, 1996, Allegiance shall provide delivery of carton quantities,
palletized, delivered to the customer's receiving area (loading dock) at
least two days per week (or three days per week for shipments to alternate
site customers); or (b) with respect to all other transactions, delivery
services consistent with Allegiance's performance at the customer level
immediately preceding the effective date of this Agreement. Allegiance
will share with Baxter the costs and savings associated with Standard
Delivery as set forth in Section 6.11.

2.4.1.2 Allegiance shall deliver Products by air freight or by
messenger ("Premium Delivery") when requested by Baxter. Allegiance will
share with Baxter the costs and savings associated with Uncollected Premium
Delivery Costs as set forth in Section 6.11 of this Agreement.

2.4.1.3 Allegiance shall make deliveries of Products in
addition to Standard Delivery ("Incremental Deliveries") when requested by
Baxter. For calendar year 1997 Allegiance will be compensated by Baxter
for providing such Incremental Deliveries in an amount equal to * * * of
the amount, if any, that Baxter invoices to its customers

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for such Incremental Deliveries. For 1998 and subsequent calendar years
during the Term, the parties will agree in Council prior to the beginning
of each year upon Allegiance's compensation for providing such Incremental
Deliveries.

2.4.1.4 During calendar year 1997, Allegiance will review with
Baxter on a quarterly basis in the Council the operational and financial
effects of the terms of this Agreement regarding Incremental Deliveries,
and will renegotiate such terms for 1997 if necessary to keep both parties
financially whole. Without limiting the foregoing sentence, the parties
will renegotiate such terms for 1997 if (a) the total number of Incremental
Deliveries of Products increase substantially more rapidly than Agency Net
Sales, and (b) Allegiance's costs incurred in providing such Incremental
Deliveries (net of freight and net of any reimbursement by Baxter pursuant
to Exhibit D, Section 1.5.4), increase substantially.

2.4.1.5 Allegiance shall provide enhanced delivery services
(e.g., custom palletization, inside delivery, etc.) that are outside the
basic agreements ("Enhanced Delivery"), when requested by Baxter, for
compensation to be agreed upon in accordance with Section 2.3.3 of this
Exhibit C (Additional Services).

2.4.1.6 Allegiance will ship-verify shipments of Products to
customers by private fleet or commercial carriers within one business day.

2.4.2 FREIGHT CLAIMS. Allegiance will pay to Baxter any amounts
recovered with respect to freight claims filed on behalf of Baxter within 30
days of receipt, except that (1) Allegiance may set-off against such payments
any amounts that it has previously paid to Baxter with respect to the same
claim; and (2) during the Interim Period, the provisions of Exhibit F shall
control with respect to payment of any amounts recovered with respect to such
freight claims for Products shipped to customers under the Interim Distributor
Model.

2.4.3 ALLEGIANCE OUTBOUND FREIGHT ADMINISTRATIVE SERVICES.
Allegiance shall continue to provide the following administrative services for
all outbound freight shipments (i.e., shipments of Products from Allegiance
facilities to customers) to the extent such services were normally being
provided by Baxter's U.S. Distribution business to Baxter's I.V. Division prior
to the effective date of this Agreement: (a) freight payments, (b) audit of
freight payments, (c) transportation cost reporting, and

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(d) logistics analysis/distribution technology to include network planning and
replenishment center sourcing, at no additional cost to Baxter. For an
additional fee to be agreed upon, Allegiance may agree to provide to Baxter
additional outbound freight services beyond the scope of the services normally
being furnished by Baxter's U.S. Distribution business to Baxter's I.V. Division
prior to the effective date of this Agreement.

3. DISTRIBUTOR MODEL AND BCS KIT MODEL.

3.1 GENERAL.

3.1.1 Allegiance system receives the Products into its computer
system.

3.1.2 Each business day during the Term, Allegiance shall report
to Baxter its aggregate sales of Products for the previous business day by code
and by customer for Distributor Model transactions and BCS Kits, and such
reports shall also include, with respect to Distributor Model transactions, the
Suggested Sales Price, Allegiance's actual purchase price of the Products, and
sufficient information regarding customer discounts, returns, allowances and all
other applicable customer debits and credits to permit Baxter to calculate
Distributor Net Sales.

3.1.3 For all transactions under the Distributor Model, Allegiance
will provide Baxter each business day with customer Product demand information
by product code to support Baxter's finished goods requirements planning.

3.2 CUSTOMER SERVICE. Allegiance shall provide customer service support
and order entry as follows for all Products sold under the Distributor Model and
the BCS Kits Model:

3.2.1 PRE-SALES SERVICES. Allegiance shall perform the following
pre-sales services:

3.2.1.1 PRODUCT/SERVICE SPECIFICATIONS - Allegiance shall
forward to Baxter any requests for Product information not available on
Allegiance systems.

3.2.1.2 PRICING/CONTRACTING INFORMATION - Allegiance shall
develop and maintain contract information for all contracts, and such
information shall be accessible to Allegiance via its computer system.

3.2.1.3 PRODUCT AVAILABILITY - Allegiance shall provide fill
rate and product availability information from

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Allegiance and Baxter computer systems to all Allegiance customer service
personnel.

3.2.1.4 COMPETITIVE PRODUCT CROSS-REFERENCING - Allegiance
shall update information cross-referencing Products and competitive
products on a consistent time frame and provide it to its service personnel
via Allegiance's computer system.

3.2.1.5 SALES REPRESENTATIVE INFORMATION - Allegiance shall
provide Allegiance sales representative identification to the customer.
This information will reside in the Allegiance customer master file and be
updated as needed.

3.2.1.6 HARDWARE SALES - Specific questions regarding hardware
sales should be referred to Baxter's hardware order entry personnel.

3.2.1.7 NEW CUSTOMER SET-UP - Allegiance customer service
personnel will ensure effective and efficient coding of all new customers
into the customer master files.

3.2.2 ORDER FULFILLMENT/SALES PROCESS.

3.2.2.1 ORDER PLACEMENT - Allegiance customer service personnel
will be the initial access point for customer into Allegiance and will
handle inquiries and order placement efficiently and effectively. The
order entry activity will function on Allegiance's computer system.

3.2.2.2 ORDER TRACKING - Allegiance shall maintain the ability
to identify to customers the location of Products in the order process.

3.2.2.3 SPECIAL REQUEST PROCESSING - Allegiance customer
service personnel will be required to process special handling requests by
customer such as drop shipping, alternate shipping, special handling, lot
holding, etc., and will work within contract guidelines and procedural
boundaries to service the customer.

3.2.2.4 INVOICING - Allegiance will perform billing for the
Products via appropriate computer systems.

3.2.2.5 CUSTOMER SATISFACTION - Allegiance's service personnel
are accountable for the customer's satisfaction regarding the service
provided. Allegiance

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will conduct annual surveys of customer satisfaction levels and manage
improvement plans.

3.2.3 POST-SALES SERVICE.

3.2.3.1 DISCOUNTS - Allegiance will pass all appropriate sales
information to Baxter which will calculate discounts and incentives for all
customers.

3.2.3.2 CREDIT AND COLLECTION - Allegiance is responsible for
collecting on outstanding invoices. Allegiance shall have the sole
authority to issue credits.

3.2.3.3 CREDITS FOR RETURNED GOODS, SHORTAGES, DAMAGES, AND
MISDELIVERIES - Allegiance shall be responsible for issuing credits and
resolving customer issues relating to returned goods, shortages, damages
and misdeliveries. Allegiance shall use commercially reasonable efforts to
advise Baxter of all Product-related credits and any other customer
resolutions likely to affect Baxter's relationship with the customer.

3.2.3.4 PRICING DISPUTES - Pricing disputes will be handled by
Allegiance.

3.2.3.5 BACK ORDER STATUS AND RESOLUTION - Allegiance will be
accountable for managing customer communications of back orders to provide
accurate and timely information on resolution. Allegiance will communicate
appropriate product substitution information to the customer.

3.2.3.6 PRODUCT COMPLAINT - Initial customer Product complaints
will be logged by Allegiance customer service. Such complaints may be
escalated for resolution.

3.3 PRICING/BILLING.

3.3.1 Allegiance will negotiate the delivered price for the
Products.

3.3.2 Allegiance will quote the Allegiance price to the customer
in response to market conditions but may quote as its price the Suggested Sales
Price, plus any markup or less any markdown it feels is appropriate, including
any markup for added services.

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3.3.3 Each customer will sign a bid or contract with Allegiance
and an addendum or new contract with Baxter that states that such customer has
reached agreement with Allegiance on the final price such customer will pay.
The customer must comply with the purchase requirements of the bilateral
contract with Baxter, and such bilateral contract shall continue to constitute a
binding commitment of the customer to Baxter. Shortfall charges and
cancellation fees, if any, under such bilateral contract will be calculated
using the Suggested Sales Price and will be administered by Baxter.

3.3.4 Allegiance shall process all billing to the customer on its
computer system.

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AGENCY, SERVICES, AND DISTRIBUTION AGREEMENT

EXHIBIT D

BAXTER'S DUTIES

1. GENERAL DUTIES UNDER AGENCY MODEL, DISTRIBUTOR MODEL, AND BCS KITS MODEL.

1.1 CORPORATE AGREEMENT BONUS PROGRAM. Baxter shall participate in the
Existing Corporate Agreements bonus program as follows:

1.1.1 Baxter shall provide to Allegiance comparable sales and
gross profit data as it provided prior to October 1, 1996, for each applicable
customer participating in the Existing Corporate Agreements Bonus Program.

1.1.2 [BEGINNING WITH CALENDAR YEAR 1997, BAXTER SHALL PAY TO
ALLEGIANCE BAXTER'S SHARE OF OPERATIONS AND SYSTEMS EXPENSES REQUIRED TO SUPPORT
THE ADMINISTRATION OF THE EXISTING CORPORATE AGREEMENTS BONUS PLAN BASED UPON
BAXTER'S SHARE OF THE CORPORATE AGREEMENT BONUS AS A PERCENTAGE OF THE TOTAL
CORPORATE AGREEMENT BONUS. NOTWITHSTANDING THE PRECEDING SENTENCE, BAXTER'S
SHARE OF SUCH OPERATIONS AND SYSTEMS EXPENSES SHALL NOT EXCEED * * *.]

1.1.3 Baxter may have a representative(s) present when Allegiance
presents each bonus check to each customer.

1.2 SALES.

1.2.1 Baxter will use commercially reasonable efforts to monitor
critical business indicators in the areas of customer service, materials
management, distribution services, pricing/billing and compliance with all
specific service requirements set forth in this Exhibit D. Without limitation
to the foregoing sentence, Baxter will use commercially reasonable efforts to
measure and assess customer satisfaction for Baxter sales processes and sales
representatives, to the extent Baxter provides such sales-related functions
under this Agreement. Baxter will also use commercially reasonable efforts to
measure and assess critical business indicators relating to other customer-
related services provided by Baxter under this Agreement (e.g., customer fill
rate, pricing accuracy).

1.2.2 Baxter shall participate with Allegiance in a semi-annual
review of regional account segmentation, performance

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to critical business indicators, and regional sales to be conducted between the
leaders of their respective regional sales organizations. Allegiance and Baxter
will work together in good faith to develop action plans to improve customer
satisfaction in areas that are mutually identified as key factors for customer
growth and retention, or areas where Baxter's performance is significantly
(statistically defined) below that of its competitors.

1.2.3 COMPETITIVE PRODUCT SUBSTITUTIONS - Baxter shall update
competitive product substitution information on a consistent time frame and
provide it to Allegiance customer service personnel via Baxter's system.

1.3 MARKETING. Baxter shall use commercially reasonable efforts to market
the Products in accordance with the following:

1.3.1 During the Term of this Agreement, Baxter shall continue to
devote substantially the same degree of effort to marketing and promoting the
Products (such effort to be judged in the aggregate) as it did prior to the
effective date of this Agreement.

1.3.2 Baxter shall provide product management services to surgery
centers and to Alternate Site Distributors.

1.3.3 Baxter shall provide marketing services to the Long
Term/Subacute and Homecare customers.

1.3.4 Baxter shall provide product and service development in the
same manner as provided by Baxter prior to the effective date of this Agreement.

1.3.5 Baxter shall maintain its own communications resources and
will coordinate communications messages with Allegiance where appropriate.

1.3.6 Baxter shall attempt whenever possible to share with
Allegiance expenses for convention fees, industry organizations, and industry
databases where appropriate, and convention assets originally purchased by
Baxter shall remain Baxter's.

1.3.7 Baxter shall provide sales volumes by Product category for
inclusion on Allegiance sales reports as provided by Baxter prior to the
effective date of this Agreement.

1.4 NATIONAL SAMPLE CENTER. Baxter shall own the Products stocked in the
Sample Center.

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1.5 MATERIALS MANAGEMENT. Allegiance and Baxter shall use commercially
reasonable efforts to make the supply chain as efficient as possible for both
parties. Future opportunities to improve efficiency include, but are not
limited to, EDI, bar coding, custom palletization, new work channels and the use
of returnable totes. Both parties shall work in good faith to achieve this
goal.

1.5.1 FINISHED GOODS REQUIREMENTS PLANNING.

1.5.1.1 Baxter manufacturing planning will evaluate all
pipeline segments for domestic customers.

1.5.1.2 Baxter will establish appropriate stocking levels for
all product codes of Products to meet required customer service
commitments.

1.5.1.3 Baxter shall not require Allegiance to carry more than
1995 average Days Inventory On Hand. Stocking levels should be consistent
with Baxter's planned turn improvement for the Products.

1.5.1.4 Both parties agree that the echeloning of products
based on line item usage generally makes sense. Assuming there are no
significant customer contractual issues or financial impacts to Baxter,
Baxter agrees to the parameters set forth by the rationalized supply chain.
If after the appropriate review there are significant customer contractual
issues or financial impacts to Baxter, 1995 will be used as the baseline
for where products are stocked and the number of low velocity SKU's will
not exceed 1995 levels.

1.5.2 PIPELINE VISIBILITY. Baxter will provide to Allegiance
visibility to actual inventory levels for all Baxter segments of the Product
pipeline.

1.5.3 INBOUND FREIGHT SHIPMENTS.

1.5.3.1 Baxter will ship all products to appropriate Baxter or
Allegiance replenishment centers as directed by the replenishment center
sourcing model.

1.5.3.2 Product will move on carriers agreed upon by the
parties in the Council.

1.5.3.3 The physical replenishment of Products from
replenishment centers to distribution centers will use

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the following process: (a) variable review, (b) load build, and (c) pick,
pack, schedule delivery, load and ship.

1.5.3.4 Baxter will coordinate with Allegiance to schedule
receiving appointments for Products shipped to Allegiance facilities from
manufacturing facilities and replenishment centers, and in unloading
Products. Baxter will provide Bill of Lading (BOL) instructions regarding
receipt, where appropriate.

1.5.3.5 Baxter is ultimately responsible for freight charges
for shipments of Products from Baxter manufacturing facilities to Baxter or
Allegiance replenishment centers and from Baxter and Allegiance
replenishment centers to Allegiance distribution centers.

1.5.4 OUTBOUND SHIPMENT

1.5.4.1 Standard Delivery -- Baxter shall use commercially
reasonable efforts to implement Standard Delivery when negotiating new
customer agreements or renegotiating expiring customer agreements, with the
goal of reducing Allegiance's overall number of Product deliveries and its
related delivery costs. Baxter will share with Allegiance the costs and
savings associated with Standard Delivery as set forth in Section 6.11 of
this Agreement.

1.5.4.2 Premium Delivery -- When Baxter's customers are
required to pay for Premium Delivery of Products, Baxter will collect such
amounts from the customers and pay the amounts collected to Allegiance on a
quarterly basis in accordance with Section 6.11 of this Agreement. Baxter
will share with Allegiance the costs and savings associated with
Uncollected Premium Delivery Costs as set forth in Section 6.11 of this
Agreement.

1.5.4.3 Incremental Deliveries -- For calendar year 1997,
Baxter will pay Allegiance an amount equal to * * * of the amount, if any,
that Baxter invoices to its customers for Incremental Deliveries of
Products. Such payments shall be made on a quarterly basis in accordance
with Section 6.11 of this Agreement. For 1998 and subsequent calendar
years during the Term, the parties will agree in Council upon Allegiance's
compensation for providing such Incremental Deliveries, prior to the
beginning of each year.

1.5.4.4 For calendar year 1997, Baxter shall review with
Allegiance in the Council on a quarterly basis

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the operational and financial effects of the terms of this Agreement
regarding Incremental Deliveries of Products, and agrees to renegotiate
such terms for 1997 if necessary to keep both parties financially whole.
Without limiting the preceding sentence, Baxter shall renegotiate such
terms with Allegiance if (a) the total number of Incremental Deliveries of
Products increase substantially more rapidly than Agency Net Sales, and (b)
Allegiance's costs (net of freight) incurred in providing such Incremental
Deliveries, net of any payments by Baxter under this Section, increase
substantially.

1.5.5 FREIGHT CLAIMS. Baxter will use commercially reasonable
efforts to assist Allegiance in carrying out its responsibilities under this
Agreement regarding filing freight claims and resolving product shortages and
overages, including proof of delivery.

1.5.6 PACKAGING QUALITY AND LOAD BUILD CONFIGURATION. Quality of
packaging and load build configuration will conform to uniform distribution
standards (E.G., palletized, etc.) as agreed by the parties in the Council.

1.5.7 WAREHOUSE INVENTORY MANAGEMENT.

1.5.7.1 Baxter will specify storage requirements for the
Products.

1.5.7.2 Baxter will manage inventory levels for Baxter products
within the replenishment centers utilizing the "Compass" inventory system
or equivalent system.

1.5.8 CYCLE COUNTS AND PHYSICAL INVENTORIES.

1.5.8.1 Baxter will provide at least 5 days advance notice
prior to conducting inventory counts at any Allegiance locations.

1.5.8.2 Baxter shall not audit Allegiance cycle counts more
than 90 days after the month in which such cycle count was conducted.

1.5.8.3 For each year during the Term of this Agreement, Baxter
shall agree with Allegiance upon the day in October on which the annual
physical inventory will take place.

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1.5.8.4 To the extent practicable, Baxter and Allegiance shall
record any annual physical inventory adjustments into their respective
accounting records at the same time.

1.5.8.5 Baxter may audit Allegiance's physical inventory
results at any time up to 3 months after the date on which Allegiance
records its annual inventory adjustments into its accounting records.

1.5.8.6 Baxter shall be solely responsible for determining (a)
the gross variance of the dollar value of the Product inventory on TOPS for
each Allegiance facility participating in the physical inventory, and (b)
whether each such variance is within the permitted range.

1.6 PRODUCT FCAs.

1.6.1 Baxter shall provide to Allegiance in a format to be agreed upon
by the parties all information reasonably required by Allegiance to perform
Allegiance's duties in connection with Product FCAs. Such information shall
include, without limitation, product identifiers, reason priority, and any
information related to disposition plans.

1.6.2 Baxter shall have sole authority to initiate any FCA. If Baxter
is required to initiate an FCA for any Product, Baxter's Vice President of
Quality Management (or such person's designee) shall notify Allegiance's Vice
President of Quality Management (or such person's designee).

1.6.3 Baxter shall cooperate with Allegiance in performing any FCA by
identifying affected Products and customers, developing an action-specific
management plan detailing specific responsibilities, and notifying customers of
any such action. Baxter and Allegiance shall encourage customers to follow
instructions related to any FCA situation.

1.6.4 Baxter shall be solely responsible for all communications with
the U.S. Food and Drug Administration in connection with the Products.

1.7 DIVISIONAL BONUS PROGRAM.

1.7.1 Baxter shall be responsible for administering the divisional
bonus program. The divisional bonus allocation will be based on actual calendar
year-end payments and actual calendar year-end sales to applicable customers.

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1.7.2 Baxter shall prepare and present the divisional bonus
payments to customers, and Allegiance shall have the right to have Allegiance
representatives present at the presentation.

1.7.3 Baxter shall use commercially reasonable efforts to
cooperate with Allegiance in the event customers request that divisional bonus
payments be made by alternative means, for example, through credits on
Allegiance statements of account.

2. AGENCY MODEL AND DIRECT SALES.

2.1 CUSTOMER SERVICE. Baxter shall be responsible for order entry,
pricing and invoicing for all Products sold under the Agency Model or sold
directly to customers. Beginning January 1, 1997, Baxter shall be responsible
for all customer service support for all Products sold under the Agency Model or
sold directly to customers.

2.1.1 PRE-SALES SERVICES. Baxter shall perform the following pre-
sales services:

2.1.1.1 PRODUCT/SERVICE SPECIFICATIONS - Baxter shall provide
Product information as resident on Baxter systems. Additional information
shall be provided through the Product Information Center or as requested by
Allegiance Customer Service. (Requests for Product information not
available on Allegiance systems shall be forwarded to Baxter customer
service).

2.1.1.2 PRODUCT AVAILABILITY - Baxter shall provide fill rate
and product availability information to all service personnel and regions,
and such information shall reside in Allegiance and Baxter systems.

2.1.2 ORDER FULFILLMENT/SALES PROCESS.

2.1.2.1 ORDER TRACKING - Baxter shall maintain the ability to
identify to customers the location of Products in the order process.

2.1.2.2 SPECIAL REQUEST PROCESSING - Baxter customer service
personnel will be required to identify special handling requests by
customer such as drop shipping, alternate shipping, special handling, lot
holding, etc., and will work within contract guidelines and procedural
boundaries to service the customer.

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2.1.3 POST-SALES SERVICE.

2.1.3.1 CREDIT AND COLLECTION - Baxter is responsible for
collecting on outstanding invoices. Baxter shall use commercially
reasonable efforts to advise Allegiance of any significant customer credit
problems.

2.1.3.2 CREDITS FOR RETURNED GOODS, SHORTAGES, DAMAGES, AND
MISDELIVERIES - Baxter shall be responsible for issuing all credits to
customers and resolving customer issues relating to returned goods,
shortages, damages and misdeliveries. Baxter shall use commercially
reasonable efforts to advise Allegiance of any Product-related credits or
other customer resolutions likely to affect Allegiance's relationship with
the customer.

2.1.3.3 RETURN GOODS MANAGEMENT - In the event of returned
Products, a return goods authorization will be issued by Baxter. Baxter
shall resolve the returned Products problem (issue credit, deliver
substitute, etc.).

2.1.3.4 BACK ORDER STATUS AND RESOLUTION - Baxter will be
accountable for managing customer communication of back orders to provide
accurate and timely information on resolution. Baxter will communicate
appropriate product substitution information to customers.

2.1.3.5 PRODUCT COMPLAINT - Initial customer Product complaints
will be logged by Baxter customer service. Such complaints may be
escalated for resolution.

2.1.3.6 TECHNICAL SUPPORT- Basic Product -related information
as resident on Baxter's computer system will be provided. Additional
information including technical letters and clinical information will be
provided by Baxter's product information center.

2.1.3.7 TECHNICAL SERVICE, PARTS AND REPAIR - Parts information
as provided in Baxter's computer system or Product file will be shared with
customer by Baxter customer service. Baxter will also provide, as
appropriate, additional transfer or access to specialist.

2.1.4 OTHER ISSUES/SERVICES.

2.1.4.1 TELEMARKETING - Telemarketing can be provided by
Allegiance or Baxter as needed for deployment

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purposes and strategic account management. Fees to be determined as
needed.

2.2 PRICING/BILLING.

2.2.1 Pricing will be solely Baxter's responsibility. Baxter will
negotiate the delivered product price with the customer. Baxter will submit all
requests for bids, bilaterals, quotes, etc., to the customer.

2.2.2 Baxter will contract directly with the customer at a product
price which includes Standard Delivery. Should a customer require services in
excess of Standard Delivery, Baxter will discuss with Allegiance the method of
reimbursing Allegiance for additional delivery services. Baxter will determine
the method of charging the customer therefor.

2.2.3 Baxter will bill the customer on its computer system.

2.2.4 When utilizing the dealer management group as an agent to
service Alternate Site Distributors and Alternate Acute Care Distributors:

2.2.4.1 Baxter will set pricing including guidelines for the
Allegiance dealer management group for pricing to Alternate Site
Distributors and Alternate Acute Care Distributors;

2.2.4.2 Baxter will work with the customer to obtain the
appropriate two-party contract signed between the customer and Baxter to
adjust Baxter's obligations under any existing bilateral agreement;

2.2.4.3 Baxter will be responsible for determining all pricing
and contract terms for a Baxter agreement with a Alternate Site Distributor
or an Alternate Acute Care Distributor.

2.2.5 Baxter will set the price including guidelines for the
Allegiance surgery center sales force when such sales force solicits orders from
surgery centers, and Baxter will process all billing relating to surgery center
customers on Baxter's computer system.

3. DISTRIBUTOR MODEL.

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3.1 If a customer approaches Baxter rather than Allegiance in connection
with a Distributor Model transaction, Baxter will advise the customer that the
customer must obtain the delivered price from Allegiance, and Baxter will advise
Allegiance of the Suggested Sales Price. Baxter may inform the customer that it
will provide a Suggested Sales Price to Allegiance, and Allegiance could use the
Suggested Sales Price as a starting point. Nevertheless, Allegiance shall have
the sole right to set the delivered price.

3.2 Baxter will transfer to Allegiance's computer system all inventory
level information related to the Products.

3.3 Baxter will cooperate with Allegiance in developing and implementing
Allegiance's proposed vendor managed inventory ("VMI")system.

3.4 Baxter will administer customer contracts on its computer system
including, without limitation, account number set-up, ship-to/sold-to
information, licensing information and ongoing customer contract maintenance.

3.5 Baxter will transfer to Allegiance's computer system the Suggested
Sales Price related to the Products.

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AGENCY, SERVICES, AND DISTRIBUTION AGREEMENT

EXHIBIT E

SUPPLIER SCOREBOARD

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<PAGE>

AGENCY, SERVICES AND DISTRIBUTION AGREEMENT

EXHIBIT F

INTERIM DISTRIBUTOR MODEL

1. GENERAL PROVISIONS.

1.1 All transactions under the Distributor Model during the Interim Period
will follow the Interim Distributor Model set forth in this Exhibit F.

1.2 Except as expressly stated in or necessarily implied by this Exhibit F,
all provisions of the body of this Agreement having general applicability, and
all provisions specifically relating to the Distributor Model, shall also apply
to the Interim Distributor Model set forth in this Exhibit F.

1.3 Allegiance will use commercially reasonable efforts, and Baxter will
cooperate with Allegiance to install all necessary systems and make all other
necessary preparations to permit terminating the Interim Distributor Model and
implementing the Distributor Model as set forth in the main text of this
Agreement as soon as possible, but in no event later than September 30, 1997.

2. INTERIM DISTRIBUTOR MODEL. Notwithstanding Section 3.3 of this Agreement,
for all transactions under the Interim Distributor Model:

Allegiance shall maintain the principal contractual relationship with the
customer for sales, sales support, customer invoicing, accounts receivable, and
customer service in connection with the supply of the Products under the Interim
Distributor Model. Such Interim Distributor Model shall apply to the provision
by Allegiance of Kits (except BCS Kits), Cost Management, ValueLink, and other
services consolidated on an Allegiance invoice for Products and, in some
instances Allegiance products (as required by the customer). Baxter shall use
reasonable efforts to cooperate with Allegiance and to facilitate Allegiance's
fulfillment of its obligations hereunder. Baxter shall sell the Products to
Allegiance at a price generally applicable to all of Baxter's distributors of
the Products (the "Distributor List Price"). Baxter shall not change its
Distributor List Price for any Product more frequently than once per calendar
year. Baxter shall provide to Allegiance a

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Suggested Sales Price for the Products; provided, however, that Allegiance shall
have the sole right and responsibility for negotiating and contracting with each
customer the delivered price of the Products. If the customer has a then-
current contract with Baxter for such Products, the Suggested Sales Price shall
be the then-current contract price. If Baxter has an agreement with any
customer for Baxter's provision of Products to such customer and such customer
subsequently requests (a) Kits (except BCS Kits), and/or (b) Cost Management,
ValueLink, and other services consolidated on an Allegiance invoice for such
Products and, in some instances, Allegiance products, then all such Interim
Distributor Model sales of Products to such customer shall apply to any minimum
purchase commitments or quantity discounts contained in Baxter's agreement with
such customer.

For all Products sold under the Interim Distributor Model, Allegiance will
deduct from its purchase payments to Baxter an amount equal to the amount, if
any, by which the Distributor List Price exceeds the Suggested Sales Price (the
"Vendor Rebate"). Such Vendor Rebate shall be in addition to the service fee
and other payments set forth in Section 6 of this Agreement.

3. INVOICING AND PAYMENTS FOR INTERIM DISTRIBUTOR MODEL. Notwithstanding any
contrary provisions of Section 8 of this Agreement:

3.1 On or before the fifth business day of each calendar month during the
Interim Period, Baxter shall provide to Allegiance a service fee report in a
format to be agreed upon, showing the service fees payable for Products sold
under the Interim Distributor Model during the previous month. On or before the
second business day of each month during the Interim Period, Allegiance shall
report to Baxter its aggregate sales and returns of Products for the preceding
month by code and by customer for Interim Distributor Model transactions, and
such reports shall also include the Suggested Sales Price, the Distributor List
Price, and the applicable Vendor Rebate for such Products.

3.2 Allegiance shall pay Baxter for its aggregate purchases of Products
under the Interim Distributor Model, net 60 days from the date of Baxter's
invoice to Allegiance. Allegiance may deduct from such purchase payments to
Baxter any Vendor Rebates then owed to Allegiance by Baxter.

3.3 Baxter shall pay Allegiance any applicable service fees in connection
with sales of Products under the Interim Distributor Model on the 15th day of
the month following the month in which such sales are reported.

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3.4 Notwithstanding the foregoing provisions of this Section 3 of Exhibit
F, Allegiance's payment for Products transferred by Baxter to Allegiance prior
to October 1, 1996 shall occur on November 15, 1996.

4. TRANSFER OF TITLE AND RISK OF LOSS UNDER THE INTERIM DISTRIBUTOR MODEL.

4.1 Notwithstanding Section 13 of this Agreement, title and risk of loss
with respect to Products to be sold pursuant to the Interim Distributor Model
shall pass from Baxter to Allegiance upon issuance of Baxter's invoice to
Allegiance for such Products.

4.2 Notwithstanding Section 4.1 of this Exhibit F and Sections 6.17 and
6.18 of this Agreement, if any Products purchased by Allegiance under the
Interim Distributor Model are damaged, lost or stolen while in an Allegiance-
owned replenishment center or distribution center, and Allegiance is responsible
under this Agreement for carton failure and such damage, theft or loss, (1)
Baxter will issue a credit memo to Allegiance for such damaged, lost or stolen
Products, but not carton failure, at Baxter's applicable Distributor List Price,
and (2) Baxter will invoice Allegiance monthly for such damaged, lost or stolen
Products at its applicable standard cost as stated in Baxter's inventory
valuation reports.

4.3 Notwithstanding Section 1.6.7.2 of Exhibit C of the Agreement, during
the Interim Period, Allegiance rather than Baxter shall have the right to any
amounts recovered with respect to freight claims for Products shipped from
Allegiance facilities to customers under the Interim Distributor Model.

5. TERMINATION OF INTERIM DISTRIBUTOR MODEL.

5.1 On the date agreed upon for termination of the Interim Distributor
Model and the transition to the Distributor Model, but no later than September
30, 1997, Baxter will purchase from Allegiance all Products then in Allegiance's
inventory at Baxter's Distributor List Price. Baxter will issue Allegiance a
credit memorandum reflecting such purchase within 30 days after receipt of
Allegiance's invoice for such inventory. Baxter and Allegiance will cooperate
with each other in providing any inventory reports or conducting any audits in
connection with such transition.

5.2 Once the parties have made the transition to the Distributor Model as
contemplated in Section 1.2 of this Exhibit F, the provisions of this Exhibit F
relating to the Interim

F-3

<PAGE>

Distributor Model shall have no further effect, except that both parties shall
have the right to receive any amounts owed under the Interim Distributor Model.

F-4

<PAGE>

U.S. $1,200,000,000

---------------------

CREDIT AGREEMENT

(FACILITY A)

----------------------

Dated as of September 23, 1996

among

ALLEGIANCE CORPORATION
as Borrower

THE FINANCIAL INSTITUTIONS NAMED HEREIN
as Banks

THE FIRST NATIONAL BANK OF CHICAGO
as Syndication Agent

NATIONSBANK OF TEXAS, N.A.
as Documentation Agent

MORGAN GUARANTY TRUST COMPANY OF NEW YORK
as Syndication Agent

and

BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION
as Administrative Agent

Arranged by

BA SECURITIES, INC.

<PAGE>

TABLE OF CONTENTS

SECTION PAGE

ARTICLE I
DEFINITIONS

SECTION 1.01. Defined Terms..............................................1
SECTION 1.02. Computation of Time Periods...............................14
SECTION 1.03. Accounting Terms and Principles...........................14

ARTICLE II
THE SYNDICATED BORROWING FACILITY AND
THE SWING-LINE BORROWING FACILITY

SECTION 2.01. The Syndicated Borrowing Facility.........................15
SECTION 2.02. Making the Syndicated Advances............................15
SECTION 2.03. Method of Electing Interest Rates.........................16
SECTION 2.04. Swing-Line Facility....................................... 7

ARTICLE III
THE COMPETITIVE BID BORROWING FACILITY

SECTION 3.01. The Competitive Bid Facility..............................20
SECTION 3.02. Competitive Bid Quote Request.............................21
SECTION 3.03. Invitation for Competitive Bid Quotes.....................22
SECTION 3.04. Submission and Contents of Competitive
Bid Quotes................................................22
SECTION 3.05. Notice to the Borrower....................................24
SECTION 3.06. Acceptance and Notice by the Borrower.....................24
SECTION 3.07. Allocation by Administrative Agent........................25
SECTION 3.08. Notification of Acceptances to the
Affected Banks............................................25
SECTION 3.09. Funding of Competitive Bid Advances.......................26

ARTICLE IV
GENERAL TERMS

SECTION 4.01. Illegality; Interest Rate Inadequate
or Unfair.................................................26
SECTION 4.02. Effect of Notice of Borrowing;
Maximum Number of Borrowings..............................28
SECTION 4.03. Effect of Failure to Borrow or Fund.......................29
SECTION 4.04. Facility Fees ............................................30
SECTION 4.05. Reduction of the Commitments..............................32
SECTION 4.06. Repayment.................................................32
SECTION 4.07. Interest..................................................32
SECTION 4.08. Additional Interest on Eurodollar
Rate Advances.............................................34
SECTION 4.09. Interest on Overdue Principal.............................34
SECTION 4.10. Interest Rate Determinations..............................35

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PAGE

SECTION 4.11. Performance of Banks' Obligations.........................35
SECTION 4.12. Optional Prepayments......................................36
SECTION 4.13. Increased Costs...........................................37
SECTION 4.14. Payments and Computations.................................38
SECTION 4.15. Taxes.....................................................39
SECTION 4.16. The Notes.................................................42
SECTION 4.17. Sharing of Payments, Etc..................................43
SECTION 4.18. Termination and Prepayment with
Respect to Any Bank.......................................45

ARTICLE V
CONDITIONS OF LENDING

SECTION 5.01. Conditions Precedent to the First
Borrowing.................................................47
SECTION 5.02. Conditions Precedent to Each
Borrowing.................................................49

ARTICLE VI
REPRESENTATIONS AND WARRANTIES

SECTION 6.01. Representations and Warranties of
the Borrower..............................................50

ARTICLE VII
COVENANTS

SECTION 7.01. Affirmative Covenants of the Borrower.....................51
SECTION 7.02. Negative Covenants of the Borrower........................56

ARTICLE VIII
EVENTS OF DEFAULT

SECTION 8.01. Events of Default.........................................61

ARTICLE IX
THE ADMINISTRATIVE AGENT

SECTION 9.01. Appointment and Authorization;
"Administrative Agent"....................................64
SECTION 9.02. Delegation of Duties......................................65
SECTION 9.03. Liability of Administrative Agent.........................65
SECTION 9.04. Reliance by Administrative Agent..........................65
SECTION 9.05. Notice of Default.........................................66
SECTION 9.06. Credit Decision...........................................67

SECTION 9.07. Indemnification of Administrative
Agent.....................................................67

SECTION 9.08. Administrative Agent in Individual
Capacity..................................................68

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PAGE

SECTION 9.09. Successor Administrative Agent............................68
SECTION 9.10. Other Agents..............................................69

ARTICLE X
MISCELLANEOUS

SECTION 10.01. Amendments, Etc..........................................69
SECTION 10.02. Notices, Etc.............................................70
SECTION 10.03. No Waiver; Cumulative Remedies...........................71
SECTION 10.04. Costs and Expenses; Indemnification......................71
SECTION 10.05. Right of Set-Off.........................................72
SECTION 10.06. Binding Effect; Assignments and
Participations...........................................73
SECTION 10.07. Governing Law............................................75
SECTION 10.08. Execution in Counterparts................................76
SECTION 10.09. Severability.............................................76
SECTION 10.10. Entire Agreement.........................................76

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<PAGE>

EXHIBIT AND SCHEDULES

Exhibit 2.02 Form of Notice of Syndicated Borrowing
Exhibit 2.03 Form of Notice of Interest Rate Election
Exhibit 2.04 Form of Notice of Swing-Line Borrowing
Exhibit 3.02 Form of Competitive Bid Quote Request
Exhibit 3.04 Form of Competitive Bid Quote
Exhibit 3.06 Form of Notice of Competitive Bid
Borrowing
Exhibit 4.16(a) Form of Syndicated Note
Exhibit 4.16(b) Form of Competitive Bid Note
Exhibit 4.16(C) Form of Swing-Line Note
Exhibit 5.01(a)(v)(A) Form of Opinion of Borrower's
General Counsel
Exhibit 5.01(a)(v)(B) Form of Opinion of Borrower's Special
Counsel
Exhibit 7.01(g)(ii) Form of Certificate of Independent
Accountants
Exhibit 10.06 Form of Assignment and Acceptance

Schedule 1.01 Applicable Lending Offices

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<PAGE>

CREDIT AGREEMENT

(FACILITY A)

Dated as of September 23, 1996

This CREDIT AGREEMENT (FACILITY A) (this "AGREEMENT") dated as of
September 23, 1996 is made by and among the following parties:

(i) ALLEGIANCE CORPORATION, a Delaware corporation (the "BORROWER"),

(ii) the financial institutions listed on the signature pages of this
Agreement under the heading "Banks" (such financial institutions,
and any successor financial institution that becomes a party to
this Agreement pursuant to SECTION 4.18 or 10.06, hereinafter
referred to as the "BANKS"),

(iii) THE FIRST NATIONAL BANK OF CHICAGO, as syndication agent and as a
co-arranger, NATIONSBANK OF TEXAS, N.A., as documentation agent
and as a co-arranger, and MORGAN GUARANTY TRUST COMPANY OF NEW
YORK, as syndication agent and as a co-arranger (collectively,
the "CO-ARRANGERS"),

(iv) BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION ("BOFA"),
as administrative agent hereunder (such administrative agent and
any successor administrative agent appointed pursuant to SECTION
9.09 hereinafter referred to as the "ADMINISTRATIVE AGENT"), and

(v) BANK OF AMERICA ILLINOIS, as the Swing-Line Bank (as defined
below).

The parties hereto agree as follows:

ARTICLE I
DEFINITIONS

SECTION 1.01. DEFINED TERMS. As used in this Credit Agreement
(Facility A) (this "AGREEMENT"), the following terms shall have the following
meanings (such meanings to be equally applicable to both the singular and plural
forms of the terms defined):

<PAGE>

"ABSOLUTE RATE" means, with respect to an Absolute Rate Advance made
by a given Bank for the relevant Interest Period, the rate of interest per annum
(rounded to the nearest 1/100 of 1%) offered by such Bank and accepted by the
Borrower with respect to such Absolute Rate Advance.

"ABSOLUTE RATE ADVANCE" means an Advance made or to be made by a Bank
pursuant to ARTICLE III as an Absolute Rate Advance in accordance with the
applicable Notice of Competitive Bid Borrowing. Each Absolute Rate Advance
shall bear interest at an Absolute Rate as provided in SECTION 4.07(c).

"ABSOLUTE RATE AUCTION" means a solicitation of Competitive Bid Quotes
setting forth Absolute Rates for Absolute Rate Advances to be extended pursuant
to ARTICLE III.

"ADJUSTED DEBT" means, at any time, (a) all Debt, MINUS (b) an amount
equal to all cash and cash equivalent investments of the Borrower and its
Consolidated Subsidiaries at such time, PLUS (c) any tax liability that would be
due and payable by the Borrower or any of its Subsidiaries (after giving effect
to any offsets or deductions available to the Borrower and its Subsidiaries)
during the ninety day period immediately following and arising from the use of
such cash and cash equivalent investments to reduce or repay debt obligations of
the Borrower or any of its Subsidiaries, PLUS (d) to the extent not included in
the computation of Debt, the aggregate outstanding investment or claim held at
such time by purchasers, assignees or other transferees of (or of interests in)
receivables of the Borrower and its Consolidated Subsidiaries in connection with
any revolving Securitization Transaction (regardless of the accounting treatment
of such Securitization Transaction).

"ADVANCE" means a Syndicated Advance, a Swing-Line Advance and/or a
Competitive Bid Advance, as the context requires.

"AFFILIATE" means, as to any Person, any other Person that, directly
or indirectly, controls, is controlled by or is under common control with such
Person.

"AGENT-RELATED PERSONS" means BofA and any successor administrative
agent arising under SECTION 9.09, together with their respective Affiliates
(including, in the case of BofA, the Arranger and the Swing-Line Bank), and the
officers, directors, employees, agents and attorneys-in-fact of such Persons and
Affiliates.

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<PAGE>

"ANNIVERSARY" means, with respect to any calendar year, the date in
such year which is the anniversary of the Closing Date.

"APPLICABLE LENDING OFFICE" means (i) with respect to each Bank, such
Bank's Domestic Lending Office in the case of a Base Rate Advance, such Bank's
Eurodollar Lending Office in the case of a Eurodollar Rate Advance, and such
Bank's Competitive Bid Lending Office in the case of a Competitive Bid Advance
and (ii) with respect to the Swing-Line Bank, the Swing-Line Bank's Domestic
Lending Office.

"ARRANGER" means BA Securities, Inc., a Delaware corporation.

"ATTORNEY COSTS" means and includes all fees and disbursements of any
law firm or other external counsel, the allocated cost of internal legal
services and all disbursements of internal counsel.

"AVAILABLE COMMITMENT" means, with respect to any Bank at any time, an
amount equal to (i) such Bank's Commitment at such time MINUS (ii) an amount
equal to such Bank's ratable share, determined on the basis that such Bank's
Commitment bears to all Commitments at such time, of the aggregate principal
amount of (A) all Competitive Bid Advances outstanding at such time and (B) all
Swing-Line Advances outstanding at such time.

"BASE RATE" means, for any day, the higher of (i) the Reference Rate
for such day and (ii) the sum of the latest Federal Funds Rate PLUS 0.50%.

"BASE RATE ADVANCE" means (i) an Advance made or to be made by a Bank
pursuant to SECTION 2.01, as a Base Rate Advance in accordance with the
applicable Notice of Syndicated Borrowing, or pursuant to SECTION 4.01, as a
Base Rate Advance in substitution for a Fixed Rate Advance, or pursuant to
SECTION 2.04(d) in connection with the repayment of a Swing-Line Advance, and
(ii) any Advance Converted into a Base Rate Advance in accordance with SECTION
2.03 or 4.01. Each Base Rate Advance shall bear interest as provided in
SECTION 4.07(a).

"BAXTER" means Baxter International Inc., a Delaware corporation.

"BORROWING" means a Syndicated Borrowing, a Swing-Line Advance and/or
a Competitive Bid Borrowing, as the context requires.

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<PAGE>

"BORROWING DATE" means a date on which an Advance is, or is proposed
to be, made hereunder.

"BUSINESS DAY" means any day other than a Saturday, Sunday or other
day on which commercial banks are required or authorized by law to close in New
York City or Chicago, Illinois and, if the applicable Business Day relates to
any Eurodollar Advance, means such a day on which dealings are carried on in the
London interbank market.

"CLOSING DATE" means September 23, 1996.

"COMMITMENT" means, with respect to any Bank at any time the amount
indicated opposite such Bank's name on the signature pages hereof, as such
amount may have been reduced as of or prior to such time pursuant to SECTION
4.05 or modified in accordance with SECTION 10.06.

"COMPETITIVE BID ADVANCE" means an advance by a Bank to the Borrower
pursuant to ARTICLE III and refers to a Eurodollar Bid Rate Advance, an Absolute
Rate Advance or an advance in substitution therefor pursuant to SECTION 4.01.

"COMPETITIVE BID BORROWING" means a borrowing consisting of
Competitive Bid Advances (i) made on the same day by the Banks whose Competitive
Bid Quotes in connection with a given type of auction, whether a Eurodollar
Auction or an Absolute Rate Auction, shall have been accepted by the Borrower in
accordance with SECTION 3.06 and (ii) having the same Interest Period.

"COMPETITIVE BID BORROWING FACILITY" has the meaning assigned to that
term in SECTION 3.01.

"COMPETITIVE BID LENDING OFFICE" means, with respect to each Bank, the
office of such Bank specified as its "Competitive Bid Lending Office" opposite
its name on SCHEDULE 1.01 hereto (or, if no such office is specified, its
Domestic Lending Office) or such other office of such Bank as such Bank may from
time to time specify to the Borrower and the Administrative Agent. Any Bank may
from time to time by notice to the Borrower and the Administrative Agent
designate separate Competitive Bid Lending Offices for its Absolute Rate
Advances and its Eurodollar Bid Rate Advances, in which case all references
herein to the "Competitive Bid Lending Office" of such Bank shall be deemed to
refer to any one or both of such offices, as the context may require.

"COMPETITIVE BID MARGIN" means a margin above or below the applicable
Eurodollar Rate which is offered for a Eurodollar Bid Rate Advance, expressed as
a percentage (rounded to the nearest 1/10,000 of 1%) to be added to or
subtracted from such

-4-

<PAGE>

Eurodollar Rate.

"COMPETITIVE BID NOTE" has the meaning assigned to that term in
SECTION 4.16(b).

"COMPETITIVE BID QUOTE" means a Competitive Bid Quote substantially in
the form of EXHIBIT 3.04 hereto, completed by a Bank and delivered by such Bank
to the Administrative Agent in accordance with SECTION 3.04.

"COMPETITIVE BID QUOTE REQUEST" means a Competitive Bid Quote Request
substantially in the form of EXHIBIT 3.02 hereto, completed by the Borrower and
delivered by the Borrower to the Administrative Agent in accordance with
SECTION 3.02.

"CONSOLIDATED" refers to the full consolidation of the accounts of the
Borrower and its Subsidiaries in accordance with generally accepted accounting
principles, including principles of consolidation, and SECTION 1.03.

"CONSOLIDATED CAPITALIZATION" means, at any time, the sum at such time
of: (i) the Consolidated stockholders' equity of the Borrower and its
Consolidated Subsidiaries, and (ii) Consolidated Adjusted Debt; PROVIDED that,
at all times, Consolidated Capitalization shall be calculated without giving
effect to any write-off of (or similar reduction in) goodwill relating to
acquisitions made by the Borrower or any of its Consolidated Subsidiaries prior
to the date on which the Distribution shall occur to the extent that, at the
time such write-off is made, the aggregate amount of all such write-offs (after
giving effect to such write-off) does not exceed the amount set forth below for
the applicable period in which such write-off occurs:

Aggregate
From and Including To but Excluding Write-offs
- ------------------ ---------------- ----------

Closing Date Anniversary in 1997 $750,000,000
Anniversary in 1997 Anniversary in 1998 $650,000,000
Anniversary in 1998 Anniversary in 1999 $550,000,000
Anniversary in 1999 Anniversary in 2000 $450,000,000
Anniversary in 2000 Anniversary in 2001 $350,000,000

"CONSOLIDATED NET TANGIBLE ASSETS" means the total amount of assets
which would be included on a Consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries (and which shall reflect the deduction of applicable
reserves) after deducting therefrom all current liabilities of the Borrower and
its Consolidated Subsidiaries and all Intangible Assets.

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<PAGE>

"CONVERT", "CONVERSION" and "CONVERTED" each refers to a conversion of
Advances of one Type into Advances of another Type or a continuation of Advances
as the same Type for an additional Interest Period, in each case pursuant to
SECTION 2.03.

"CREDIT RATING" has the meaning assigned to that term in SECTION
4.04(a).

"DEBT" means the sum of: (i) indebtedness for borrowed money or for
the deferred purchase price of property or services carried as indebtedness on
the Consolidated balance sheet of the Borrower and its Consolidated
Subsidiaries, (ii) obligations of the Borrower and its Consolidated Subsidiaries
as lessee under leases that, in accordance with generally accepted accounting
principles, are recorded as capital leases, (iii) obligations of the Borrower
and its Consolidated Subsidiaries under direct or indirect guaranties in respect
of, and obligations (contingent or otherwise) to purchase or otherwise acquire,
or otherwise to assure a creditor against loss in respect of indebtedness or
obligations of others of the kinds referred to in clauses (i) and (ii) above
(other than Debt of any Subsidiary, to the extent such Debt is included in the
calculation of Debt as a result of clause (i) or (ii) above) in excess of
$25,000,000 in the aggregate (provided that for purposes of SECTION 8.01(e), the
$25,000,000 threshold above shall not apply) and (iv) indebtedness or
obligations of the kinds referred to in clauses (i), (ii) or (iii) above of the
Borrower's unconsolidated Subsidiaries in excess of $200,000,000 in the
aggregate. The term "Debt" shall not include the undrawn face amount of any
letter of credit issued for the account of the Borrower or any of its
Consolidated Subsidiaries in the ordinary course of the Borrower's or such
Subsidiary's business, but shall include the reimbursement obligation owing from
time to time by the Borrower or any of its Consolidated Subsidiaries in respect
of drawings made under any letter of credit in the event reimbursement is not
made immediately following the applicable drawing.

"DISTRIBUTION" means the distribution by Baxter to its stockholders of
all of the outstanding shares of common stock of the Borrower, which shall be a
wholly-owned subsidiary of Baxter prior to giving effect thereto.

"DOMESTIC LENDING OFFICE" means, with respect to each Bank, the office
of such Bank specified as its "Domestic Lending Office" opposite its name on
SCHEDULE 1.01 hereto or such other office of such Bank as such Bank may from
time to time specify to the Borrower and the Administrative Agent.

-6-

<PAGE>

"ENVIRONMENTAL LAWS" means federal and state laws, rules and
regulations relating to the release, emission, disposal, storage and related
handling of waste materials, pollutants and hazardous substances.

"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.

"EUROCURRENCY LIABILITIES" has the meaning assigned to that term in
Regulation D of the Board of Governors of the Federal Reserve System, as in
effect from time to time.

"EURODOLLAR ADVANCE" means any Eurodollar Rate Advance or Eurodollar
Bid Rate Advance.

"EURODOLLAR AUCTION" means a solicitation of Competitive Bid Quotes
setting forth Competitive Bid Margins in relation to the applicable Eurodollar
Rate for Eurodollar Bid Rate Advances to be extended pursuant to ARTICLE III.

"EURODOLLAR BID RATE" means, with respect to a Eurodollar Bid Rate
Advance made by a given Bank for the relevant Interest Period, the sum of
(a) the Eurodollar Rate applicable thereto and (b) the Competitive Bid Margin
offered by such Bank and accepted by the Borrower with respect to such
Eurodollar Bid Rate Advance.

"EURODOLLAR BID RATE ADVANCE" means an Advance made or to be made by a
Bank pursuant to ARTICLE III as a Eurodollar Bid Rate Advance in accordance with
the applicable Notice of Competitive Bid Borrowing. Each Eurodollar Bid Rate
Advance shall bear interest at a Eurodollar Bid Rate as provided in
SECTION 4.07(c).

"EURODOLLAR LENDING OFFICE" means, with respect to each Bank, the
office of such Bank specified as its "Eurodollar Lending Office" opposite its
name on SCHEDULE 1.01 hereto (or, if no such office is specified, its Domestic
Lending Office) or such other office of such Bank as such Bank may from time to
time specify to the Borrower and the Administrative Agent.

"EURODOLLAR MARGIN" has the meaning assigned to that term in SECTION
4.07(b).

-7-

<PAGE>

the London interbank market at 11:00 a.m. (London time) two Business Days before
the first day of such Interest Period for a period approximately equal to such
Interest Period and in an amount approximately equal (i) in the case of a
Eurodollar Rate Advance, to the principal amount of such Reference Bank's
Eurodollar Rate Advance comprising part of such Borrowing and (ii) in the case
of a Eurodollar Bid Rate Advance, to the Syndicated Reduction to occur in such
Reference Bank's Available Commitment as a result of the Competitive Bid
Borrowing to which such Eurodollar Bid Rate Advance relates. The Eurodollar
Rate for the Interest Period for each Eurodollar Advance comprising part of the
same Borrowing shall be determined by the Administrative Agent on the basis of
applicable rates furnished to and received by the Administrative Agent from the
Reference Banks two Business Days before the first day of such Interest Period,
SUBJECT, HOWEVER, to the provisions of SECTION 4.10.

"EURODOLLAR RATE ADVANCE" means (i) an Advance made or to be made by a
Bank pursuant to SECTION 2.01, as a Eurodollar Rate Advance in accordance with
the applicable Notice of Syndicated Borrowing, and (ii) any Advance Converted
into a Eurodollar Rate Advance in accordance with SECTION 2.03. Each Eurodollar
Rate Advance shall bear interest as provided in SECTION 4.07(b).

"EURODOLLAR RATE RESERVE PERCENTAGE" of any Bank for the Interest
Period for any Eurodollar Advance means the maximum reserve percentage
applicable during such Interest Period (or, if more than one such percentage
shall be so applicable, the daily average of such percentages for those days in
such Interest Period during which any such percentage shall be so applicable)
under regulations issued from time to time by the Board of Governors of the
Federal Reserve System for determining the reserve requirement (including,
without limitation, any emergency, supplemental or other marginal reserve
requirement and taking into account any transitional adjustments or other
scheduled changes in reserve requirements during such Interest Period) for such
Bank with respect to liabilities or assets consisting of or including
Eurocurrency Liabilities having a term equal to such Interest Period.

"EVENTS OF DEFAULT" has the meaning assigned to that term in
SECTION 8.01.

-8-

<PAGE>

by the Administrative Agent of the rates for the last transaction in overnight
Federal funds arranged prior to 9:00 a.m. (New York City time) on that day by
each of three leading brokers of Federal funds transactions in New York City
selected by the Administrative Agent.

"FIRST BORROWING" means the initial Borrowing made by the Borrower
hereunder.

"FIXED RATE ADVANCES" means Eurodollar Rate Advances or Competitive
Bid Advances (excluding Competitive Bid Advances bearing interest at the Base
Rate pursuant to SECTION 4.01) or any combination of the foregoing.

"FORM 10" means the Registration Statement on Form 10 filed by the
Borrower under the Securities Exchange Act of 1934, File No. 1-11885, as it
became effective as of September 20, 1996.

"GOVERNMENTAL AUTHORITY" means any nation or government, any state or
other political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government,
and any corporation or other entity owned or controlled, through stock or
capital ownership or otherwise, by any of the foregoing.

"IBOR RATE" means, for the Interest Period for any Swing-Line Advance,
an interest rate per annum equal to the Swing-Line Bank's cost of funds in the
interbank market for a same day borrowing for a period approximately equal to
such Interest Period and in an amount approximately equal to such Swing-Line
Advance as quoted by the Swing-Line Bank to the Borrower pursuant to
SECTION 2.04(a).

"INTANGIBLE ASSETS" means all assets of the Borrower and its
Consolidated Subsidiaries which are treated as intangibles or goodwill in
conformity with generally accepted accounting principles on the Consolidated
balance sheet of the Borrower and its Consolidated Subsidiaries.

-9-

<PAGE>

other transferees of (or of interests in) receivables of the Borrower and its
Consolidated Subsidiaries in connection with a revolving Securitization
Transaction (regardless of the accounting treatment of such Securitization
Transaction).

"INTEREST PERIOD" means, for each Advance comprising part of the same
Borrowing, the period commencing on the date of such Advance (or, in the case of
any Syndicated Borrowing, on the effective date of Conversion thereof pursuant
to SECTION 2.03) and ending on the last day of the period selected by the
Borrower pursuant to the provisions below. The duration of each such Interest
Period shall be (a) in the case of a Base Rate Advance, any number of days from
7 days to 180 days, (b) in the case of a Eurodollar Rate Advance, one, two or
three weeks or one, two, three or six months, (c) in the case of a Eurodollar
Bid Rate Advance, one, two or three weeks or one, two, three or six months or
such other periods as the Administrative Agent and the Borrower may agree for
purposes of, and prior to the issuance of, any Competitive Bid Request, (d) in
the case of an Absolute Rate Advance, a number of days not less than 7 days and
not more than 180 days, and (e) in the case of a Swing-Line Advance, a number of
days not to exceed 7 days, in each case as the Borrower may select pursuant to
SECTION 2.02, 2.03, 2.04 or 3.02, as applicable; PROVIDED, that:

(i) The duration of any Interest Period which would otherwise end
after the Termination Date shall end on the Termination Date;

(ii) Interest Periods commencing on the same day for Advances
comprising the same Borrowing shall be of the same duration;

(iii) Whenever the last day of any Interest Period would otherwise
occur on a day other than a Business Day, the last day of such Interest
Period shall be extended to occur on the next succeeding Business Day,
unless, in the case of any Interest Period for a Eurodollar Advance, such
extension would cause the last day of such Interest Period to occur in the
next following calendar month, in which case the last day of such Interest
Period shall occur on the immediately preceding Business Day; and

(iv) If an Interest Period (other than a one, two or three week
Interest Period) for a Eurodollar Advance begins on the last Business Day
of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of

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<PAGE>

such Interest Period), such Interest Period shall end on the last Business
Day of a calendar month.

"LOAN DOCUMENT" has the meaning assigned to that term in SECTION 9.01.

"MAJORITY BANKS" means at any time Banks having at least 51% of the
then aggregate amount of the Commitments or, if the Commitments have been
terminated, holding at least 51% of the aggregate principal amount of Advances
then outstanding.

"MARGIN STOCK" has the meaning assigned to that term under
Regulation U issued by the Board of Governors of the Federal Reserve System.

"MATERIAL DEFAULT AMOUNT" means an amount equal to two percent (2%) of
Consolidated Net Tangible Assets, as determined at any time by reference to the
balance sheet of the Borrower and its Consolidated Subsidiaries then most
recently delivered to the Banks in accordance with SECTION 7.01(g)(i) or (ii)
or, if no such balance sheet has been delivered pursuant to such Sections, by
reference to the combined balance sheet of the Borrower for the six month period
ended June 30, 1996 set forth in the Form 10.

"MATERIAL SUBSIDIARY" means, in the case of any specified condition or
event, any Subsidiary or group of Subsidiaries (A) each of which has suffered
such condition or event to occur and (B) that in the aggregate represents five
percent (5%) or more of the net revenues or the Consolidated Net Tangible Assets
of the Borrower and its Consolidated Subsidiaries, as reflected in the then most
recent financial statements of the Borrower and its Consolidated Subsidiaries
delivered pursuant to SECTION 7.01(g)(i) or (ii) or, if no such financial
statements have been delivered pursuant to such Sections, in reference to the
combined financial statements of the Borrower for the six month period ended
June 30, 1996 set forth in the Form 10.

"MOODY'S" means Moody's Investors Service, Inc., or its successor.

"NOTES" has the meaning assigned to that term in SECTION 4.16(b).

"NOTICE OF BORROWING" means a Notice of Competitive Bid Borrowing, a
Notice of Swing-Line Borrowing and/or a Notice of Syndicated Borrowing, as the
context requires.

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"NOTICE OF COMPETITIVE BID BORROWING" has the meaning assigned to that
term in SECTION 3.06.

"NOTICE OF INTEREST RATE ELECTION" has the meaning assigned to that
term in SECTION 2.03.

"NOTICE OF SWING-LINE BORROWING" has the meaning assigned to that term
in SECTION 2.04(b).

"NOTICE OF SYNDICATED BORROWING" has the meaning assigned to that term
in SECTION 2.02.

"PAYMENT SHARING NOTICE" means a written notice from the Borrower or
any Bank to each of the Administrative Agent and the Borrower advising that an
Event of Default has occurred and is continuing and requesting that the
Administrative Agent allocate payments received from the Borrower in accordance
with SECTION 4.17(b).

"PERSON" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a government
or political subdivision or an agency or instrumentality thereof.

"REFERENCE BANKS" means BofA, The First National Bank of Chicago and
Morgan Guaranty Trust Company of New York, and each successor financial
institution that shall be designated as a Reference Bank hereunder pursuant to
SECTION 4.10(c) or otherwise in accordance with this Agreement.

"REFERENCE RATE" means, for any day, the rate of interest in effect
for such day as publicly announced from time to time by BofA in San Francisco,
California, as its "reference rate." (The "reference rate" is a rate set by
BofA based upon various factors including BofA's costs and desired return,
general economic conditions and other factors, and is used as a reference point
for pricing some loans, which may be priced at, above, or below such announced
rate.)

"S&P" means Standard & Poor's Ratings Group, or its successor.

"SECURED DEBT" means any Debt or other obligation or liability of the
Borrower or any of its Material Subsidiaries the payment of which is secured by
a Security Interest.

"SECURITIZATION TRANSACTION" has the meaning assigned to that term in
SECTION 7.02(a)(12).

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"SECURITY INTEREST" means any lien, security interest, mortgage or
other charge or encumbrance of any kind, title retention device, pledge or any
other type of preferential arrangement, upon or with respect to any property of
the Borrower or of any Material Subsidiary, whether now owned or hereafter
acquired.

"SUBSIDIARY" means any entity with respect to which the Borrower alone
owns, the Borrower and one or more Subsidiaries together own, or one or more
Subsidiaries of the Borrower together own, in each such case directly or
indirectly, capital stock (or the equivalent equity interest) having ordinary
voting power to elect a majority of the members of the Board of Directors of
such corporation (or, in the case of a partnership or joint venture, having the
majority interest in the capital or profits of such entity).

"SWING-LINE ADVANCE" has the meaning assigned to that term in SECTION
2.04.

"SWING-LINE BANK" means Bank of America Illinois or any other Bank as
a successor Swing-Line Bank.

"SWING-LINE NOTE" has the meaning assigned to that term in SECTION
4.16(c).

"SYNDICATED ADVANCE" means an advance by a Bank to the Borrower
pursuant to SECTION 2.02 or SECTION 2.04(d), as the same may be converted or
continued from time to time pursuant to SECTION 2.03. At any time, depending
upon the interest rate selected therefor or otherwise applicable thereto in
accordance with SECTION 2.03 and 4.01, a Syndicated Advance shall be either a
Base Rate Advance or a Eurodollar Rate Advance.

"SYNDICATED BORROWING" means a borrowing consisting of Syndicated
Advances of the same Type made on the same day by the Banks, as the same may be
converted or continued from time to time pursuant to SECTION 2.03 and after
giving effect to any subsequent Conversion in connection with which a single
Syndicated Borrowing may have been divided into several Syndicated Borrowings or
several Syndicated Borrowings may have been combined (in whole or in part) into
a single Syndicated Borrowing. An Advance substituted, pursuant to SECTION
4.01, for a Syndicated Advance made in connection with any Syndicated Borrowing
shall continue to comprise a part of such Syndicated Borrowing with the same
effect as if such substituted Advance were an Advance of the Type requested in
the applicable Notice of Syndicated Borrowing or Notice of Interest Rate
Election.

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"SYNDICATED BORROWING FACILITY" has the meaning assigned to that term
in SECTION 2.01.

"SYNDICATED NOTE" has the meaning assigned to that term in
SECTION 4.16(a).

"SYNDICATED REDUCTION" means, with respect to any Bank at any time,
the temporary reduction in such Bank's Available Commitment existing at such
time as a result of clause (ii) of the definition of Available Commitment and,
with respect to all Banks, the aggregate amount of such reductions existing at
such time.

"TERMINATION DATE" means the earlier of (i) September 23, 2001 and
(ii) the date on which the Commitments shall have been reduced to zero or
terminated in whole pursuant to the terms hereof.

"TYPE" of Advance means (i) in the case of Syndicated Advances,
Eurodollar Rate Advances or Base Rate Advances and (ii) in the case of
Competitive Bid Advances, Eurodollar Bid Rate Advances or Absolute Rate Advances
or any Type of Advance described in clause (i) which shall, pursuant to
SECTION 4.01, be substituted therefor.

"UNFUNDED LIABILITIES" means, in the case of a single employer pension
benefit plan which is covered by Title IV of ERISA, the amount, if any, by which
the present value of all vested benefits accrued to the date of determination
under such plan exceeds the fair market value of all assets of such plan
allocable to such benefits as of such date, and, in the case of a multi-employer
pension benefit plan, the withdrawal liability of the Borrower and its
Subsidiaries.

"UNMATURED EVENT OF DEFAULT" means any event that would constitute an
Event of Default but for the requirement that notice be given or time elapse or
both.

SECTION 1.02. COMPUTATION OF TIME PERIODS. In this Agreement, when
computing periods of time from a specified date to a later specified date, the
word "from" means "from and including" and the words "to" and "until" each means
"to but excluding."

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changes concurred in by the Borrower's independent accountants or, in the case
of the financial statements required to be delivered pursuant to
SECTION 7.01(g)(i), as determined by the Borrower to be required in accordance
with then existing generally accepted accounting principles). If any change
after the date hereof in accounting principles would have a material effect upon
the results of any calculation required by or in compliance with any provision
of this Agreement, then such calculation shall be made or compliance with such
provision shall be determined using accounting principles in effect on the date
hereof.

ARTICLE II
THE SYNDICATED BORROWING FACILITY AND
THE SWING-LINE BORROWING FACILITY

SECTION 2.01. THE SYNDICATED BORROWING FACILITY. Each Bank severally
agrees, on the terms and conditions provided herein, to make Syndicated Advances
to the Borrower from time to time on any Business Day during the period from the
date hereof to the Termination Date in an aggregate amount not to exceed at any
time outstanding the amount of such Bank's Available Commitment (the "SYNDICATED
BORROWING FACILITY"). Subject to SECTION 4.01 and SECTION 2.04(d), each
Syndicated Borrowing (i) shall be in an aggregate amount not less than
$10,000,000 (and in integral multiples of $1,000,000 in excess thereof), (ii)
shall be made on the same day from the Banks ratably according to their
respective Commitments and (iii) shall consist of Syndicated Advances of the
same Type. Within the limits of each Bank's Available Commitment, the Borrower
may borrow Syndicated Advances under this SECTION 2.01, maintain Syndicated
Advances outstanding by Converting such Syndicated Advances pursuant to SECTION
2.03, or prepay Syndicated Advances pursuant to SECTION 4.12, and reborrow
Syndicated Advances under this SECTION 2.01.

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promptly notify each Bank by telephone (to be confirmed immediately in writing),
telecopier or telex of the date, applicable interest rate and aggregate amount
of such Syndicated Borrowing and such Bank's ratable portion of such Syndicated
Borrowing. Each Bank, for the account of its Applicable Lending Office, shall
before 12:00 Noon (Chicago time) on the Borrowing Date specified in the notice
received from the Administrative Agent pursuant to the preceding sentence,
deposit such Bank's ratable portion of such Syndicated Borrowing in same day
funds to the Administrative Agent's Clearing Account No. 12331-15202 (unless
another account is designated by the Administrative Agent for such purpose),
Reference: Allegiance Corporation, maintained at 1850 Gateway Boulevard,
Concord, California 94520. After the Administrative Agent's receipt of such
funds and upon fulfillment of the applicable conditions set forth in ARTICLE V,
the Administrative Agent shall promptly make same day funds in the amount of
such funds available to the Borrower, at the Administrative Agent's address
provided in SECTION 10.02.

SECTION 2.03. METHOD OF ELECTING INTEREST RATES. (a) The Advances
included in each Syndicated Borrowing shall bear interest initially at the type
of rate specified by the Borrower in the applicable Notice of Syndicated
Borrowing. Thereafter, the Borrower may from time to time elect to change or
continue the type of interest rate borne by each Syndicated Borrowing (subject
in each case to the provisions of ARTICLE IV), as follows:

(i) if such Advances are Base Rate Advances, the Borrower may elect
to (A) convert such Advances to Eurodollar Rate Advances or (B) continue
such Advances as Base Rate Advances, in each case effective as of any
Business Day; and

(ii) if such Advances are Eurodollar Rate Advances, the Borrower may
elect to (A) convert such Advances to Base Rate Advances or (B) continue
such Advances as Eurodollar Rate Advances for an additional Interest
Period, in each case effective on the last day of the then current Interest
Period applicable to such Advances.

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with SECTION 4.12), the Advances comprising such Borrowing shall be, as
applicable, converted into or continued as Base Rate Advances having an Interest
Period of 30 days. A Notice of Interest Rate Election may, if it so specifies,
apply to only a portion of the aggregate principal amount of the relevant
Borrowing; PROVIDED that (i) such portion is allocated ratably among the
Advances comprising such Borrowing and (ii) the portion to which such Notice of
Interest Rate Election applies, and the remaining portion to which it does not
apply, are each $10,000,000 or any larger multiple of $1,000,000.

(b) Each Notice of Interest Rate Election shall be substantially in
the form of EXHIBIT 2.03 hereto and shall specify:

(i) the Borrowing (or portion thereof) to which such notice applies;

(ii) the date on which the conversion or continuation selected in such
notice is to be effective, which shall comply with the applicable clause of
SUBSECTION (a) above;

(iii) if the Advances comprising such Borrowing are to be converted,
the next Type of Advances; and

(iv) the duration of the new Interest Period.

Each Interest Period specified in a Notice of Interest Rate Election shall
comply with the provisions of the definition of Interest Period. Each Notice of
Interest Rate Election shall be irrevocable when given by the Borrower.

(c) Upon receipt of a Notice of Interest Rate Election from the
Borrower pursuant to SUBSECTION (a) above, the Administrative Agent shall
promptly notify each Bank of the contents thereof.

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in excess of one month in duration, and each Conversion into any Eurodollar Rate
Advance proposed to occur during any such period of suspension and proposed to
have any longer Interest Period shall be a Conversion to a Eurodollar Rate
Advance having an Interest Period of one month. In each case, such suspension
shall become effective upon notice thereof to the Borrower and each of the
Banks, and shall remain in effect until the Event of Default or Unmatured Event
of Default giving rise to such notice is cured or waived.

SECTION 2.04. SWING-LINE FACILITY. (a) AVAILABILITY. The Swing-
Line Bank agrees, on the terms and conditions provided herein, to make advances
(each a "SWING-LINE ADVANCE") to the Borrower from time to time on any Business
Day during the period from the date hereof to the Termination Date in an
aggregate principal amount not to exceed at any time outstanding $100,000,000;
PROVIDED that the aggregate principal amount of Swing-Line Advances outstanding
at any time, together with the outstanding principal amount of Syndicated
Advances and Competitive Bid Advances outstanding at such time, shall not exceed
the aggregate Commitments at such time. The Borrower may on any Business Day
request a quote of the IBOR Rate which would be applicable for Swing-Line
Advances, specifying the amount of the contemplated Swing-Line Advance and the
maturity date thereof. The Swing-Line Bank agrees promptly to provide such quote
to the Borrower on the Business Day of such request or the immediately following
Business Day if such request is received after 12:00 noon (Chicago time). Each
Swing-Line Advance shall be in a minimum amount of $10,000,000 and integral
multiples of $500,000 in excess of that amount. Within the limits and on the
conditions set forth in this Agreement, the Borrower may from time to time
borrow, repay and reborrow under this SECTION 2.04.

(b) BORROWING NOTICE. Each Swing-Line Advance shall be requested by
telephone (to be confirmed immediately in writing), telecopier or telex notice
given by the Borrower to the Administrative Agent and the Swing-Line Bank not
later than 12:00 noon (Chicago time) on the proposed Borrowing Date; PROVIDED
that any such request shall be made within 30 minutes (or such other period of
time as the Borrower and the Swing-Line Bank may agree) after the most recent
quote of the IBOR Rate by the Swing-Line Bank. Each notice of a Swing-Line
Advance pursuant to this SECTION 2.04(b) (a "NOTICE OF SWING-LINE BORROWING")
shall be in substantially the form of EXHIBIT 2.04 hereto, specifying the date
of the proposed Swing-Line Advance (which shall be a Business Day), the amount
of the proposed Swing-Line Advance and the Interest Period for the proposed
Swing-Line Advance, and shall include such information as shall be required by
SECTION 7.01(h).

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(c) MAKING OF SWING-LINE ADVANCES. Promptly upon receipt of a Notice
of Swing-Line Borrowing pursuant to SECTION 2.04(b), and in any event not later
than 2:00 p.m. (Chicago time) on the applicable Borrowing Date, the Swing-Line
Bank shall make available to the Administrative Agent in same day funds at the
Administrative Agent's address specified in SECTION 10.02 the amount of the
Swing-Line Advance requested by the Borrower. After the Administrative Agent's
receipt of such funds and upon fulfillment of the applicable conditions set
forth in ARTICLE V, the Administrative Agent shall promptly make same day funds
in the amount of such funds available to the Borrower, at the Administrative
Agent's address specified in SECTION 10.02.

(d) REPAYMENT OF SWING-LINE ADVANCES. The Borrower shall repay each
Swing-Line Advance on the last day of the Interest Period for such Advance.
Outstanding Swing-Line Advances may be repaid from, among other sources of
funds, the proceeds of Syndicated Advances, Competitive Bid Advances or new
Swing-Line Advances.

The Swing-Line Bank may at any time in its discretion with respect to
any outstanding Swing-Line Advance, by delivery of a notice to the
Administrative Agent no later than 9:00 a.m. (Chicago time) on any Business Day,
require that a Syndicated Borrowing be made on such Business Day for the purpose
of repaying such Swing-Line Advance. Any such Syndicated Borrowing shall be in
an aggregate amount equal to the outstanding principal amount of the Swing-Line
Advance to be repaid together with all accrued and unpaid interest thereon as of
the date of such Syndicated Borrowing. Upon receipt of such notice from the
Swing-Line Bank, the Administrative Agent shall in turn promptly notify each
Bank and the Borrower by telephone (to be confirmed immediately in writing),
telecopier or telex of the date and aggregate amount of such Syndicated
Borrowing and such Bank's ratable portion of such Syndicated Borrowing. Each
Bank, for the account of its Applicable Lending Office, shall before 12:00 noon
(Chicago time) on the Borrowing Date specified in the notice received from the
Administrative Agent pursuant to the preceding sentence, deposit such Bank's
ratable portion of such Syndicated Borrowing in same day funds to the
Administrative Agent's Clearing Account No. 12331-15202 (unless another account
is designated by the Administrative Agent for such purpose), Reference:
Allegiance Corporation, maintained at 1850 Gateway Boulevard, Concord,
California 94520. The Administrative Agent shall make all such funds received
by it available immediately to the Swing-Line Bank. Syndicated Advances made
pursuant to this SECTION 2.04(d) shall initially be Base Rate Advances having a
ten (10) day Interest Period and thereafter may be continued as Base Rate
Advances or converted into Eurodollar Rate Advances in

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the manner provided in SECTION 2.03 and subject to the other conditions and
limitations set forth in this ARTICLE II.

If on any date any Bank fails to make available to the Administrative
Agent the amount of the Syndicated Advance required to be made by it on such
date under this SECTION 2.04(d), such Bank shall be deemed to have
unconditionally and irrevocably purchased from the Swing-Line Bank as of such
date, without recourse or warranty, an undivided interest and participation in
the applicable Swing-Line Advance in the amount of such Syndicated Advance, and
such amount may be recovered from such Bank together with interest thereon, for
each day commencing on such date and ending on the date such amount is received,
at the Federal Funds Rate for each of the first three days such amount is owed
and at the Base Rate thereafter.

Unless the Administrative Agent or a Bank shall have notified the
Swing-Line Bank, prior to the making by the Swing-Line Bank of any Swing-Line
Advance, that any applicable condition precedent set forth in SECTION 5.01 or
SECTION 5.02 had not then been satisfied, such Bank's obligation to make
Syndicated Advances pursuant to this SECTION 2.04(d) to repay Swing-Line
Advances, or to purchase a participation interest in any such Swing-Line Advance
pursuant to this SECTION 2.04(d), shall be unconditional, continuing,
irrevocable and absolute and shall not be affected by any circumstance,
including, without limitation, (A) any set-off, counterclaim, recoupment,
defense or other right which such Bank may have against the Administrative
Agent, the Swing-Line Bank or any other Person, (B) the occurrence or
continuance of an Event of Default or Unmatured Event of Default, unless the
Swing-Line Bank shall have received notice thereof from the Administrative Agent
or a Bank prior to the making of such Advance, (C) any adverse change in the
condition (financial or otherwise) of the Borrower, or (D) any other
circumstance, happening or event whatsoever. In the event that any Bank fails
to make payment to the Administrative Agent of any amount due under this
SECTION 2.04(d), the Administrative Agent shall be entitled to receive, retain
and apply against such obligation principal and interest on any Syndicated
Advance or Competitive Bid Advance made by such defaulting Bank or any facility
fee or other amount otherwise due such defaulting Bank which payment would
otherwise be payable to such Bank hereunder until the Administrative Agent
receives such payment from such defaulting Bank or such obligation is otherwise
fully satisfied.

ARTICLE III
THE COMPETITIVE BID BORROWING FACILITY

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SECTION 3.01. THE COMPETITIVE BID FACILITY. Each Bank severally
agrees, on the terms and conditions provided herein, to make available to the
Borrower a competitive bid borrowing facility (the "COMPETITIVE BID BORROWING
FACILITY") pursuant to which the Borrower may, from time to time on any Business
Day during the period from the date hereof to the Termination Date and as
otherwise set forth in this ARTICLE III, request all of the Banks or certain
Banks specified by the Borrower to offer to make Competitive Bid Advances to the
Borrower. Each Bank of which any such request shall be made may, but shall have
no obligation to, make such offers and the Borrower may, but shall have no
obligation to, accept any such offer in the manner set forth in this
ARTICLE III. The Competitive Bid Borrowing Facility is an entirely separate
facility from the Syndicated Borrowing Facility; PROVIDED that the aggregate
principal amount of Competitive Bid Advances outstanding at any time, together
with the aggregate principal amount of Syndicated Advances and Swing-Line
Advances outstanding at such time, shall not exceed the aggregate Commitments at
such time. Within the limits and on the conditions set forth in this
ARTICLE III, the Borrower may from time to time borrow, repay and reborrow under
this ARTICLE III.

SECTION 3.02. COMPETITIVE BID QUOTE REQUEST. When the Borrower
wishes to request offers to make Competitive Bid Advances under this
ARTICLE III, it shall deliver to the Administrative Agent a Competitive Bid
Quote Request by telephone (confirmed immediately in writing), telecopier or
telex so as to be received no later than (x) 10:00 a.m. (Chicago time) at least
four Business Days prior to the Borrowing Date proposed therein, in the case of
a Eurodollar Auction or (y) 10:00 a.m. (Chicago time) at least one Business Day
prior to the Borrowing Date proposed therein, in the case of an Absolute Rate
Auction (or, in either case upon reasonable prior notice to the Banks, such
other time and date as the Borrower and the Administrative Agent may agree),
specifying:

(a) the proposed Borrowing Date, which shall be a Business Day, for
the proposed Competitive Bid Advances,

(b) the aggregate principal amount of such Competitive Bid Advances,
which aggregate principal amount shall be not less than $2,000,000 or an
integral multiple of $500,000 in excess thereof;

(d) the Interest Period applicable thereto, and

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(e) if fewer than all Banks are to be solicited, the names of the
Banks to be solicited; PROVIDED that the Borrower shall not specify fewer
than all of the Banks, and the Administrative Agent shall reject any
Competitive Bid Quote Request that specifies fewer than all of the Banks,
if the aggregate principal amount of all Competitive Bid Advances which
will be outstanding after giving effect to the Competitive Bid Advances
requested in such Competitive Bid Quote Request and which shall have been
made in response to one or more Competitive Bid Quote Requests that
specified fewer than all of the Banks exceeds $500,000,000.

The Borrower may request offers to make Competitive Bid Advances for
more than one Interest Period, but not more than five Interest Periods, in a
single Competitive Bid Quote Request. No Competitive Bid Quote Request shall be
given within five Business Days (or such other number of days as the Borrower
and the Administrative Agent may agree) of any other Competitive Bid Quote
Request. A Competitive Bid Quote Request that does not conform substantially to
the format of EXHIBIT 3.02 hereto shall be rejected, and the Administrative
Agent shall promptly notify the Borrower of such rejection by telephone, telex,
or telecopy.

SECTION 3.03. INVITATION FOR COMPETITIVE BID QUOTES. The
Administrative Agent shall (a) promptly upon receipt of a Competitive Bid Quote
Request that is not rejected pursuant to SECTION 3.02, and in any event not
later than (i) 11:00 a.m. (Chicago time) on the date of receipt of a Competitive
Bid Quote Request, in the case of a Eurodollar Auction, and (ii) 11:00 a.m.
(Chicago time) on the date of receipt of a Competitive Bid Quote Request, in the
case of an Absolute Rate Auction, provide to each applicable Bank by telex or
telecopy a copy of such Competitive Bid Quote Request or a summary of the
contents thereof. If, pursuant to SECTION 3.02, the Borrower and the
Administrative Agent shall agree as to times for the delivery of a Competitive
Bid Quote Request other than those set forth in SECTION 3.02, and shall notify
the Banks thereof, such notice to the Banks shall set forth in addition any
changes in the times set forth in this SECTION 3.03. A Competitive Bid Quote
Request shall not be revocable at any time after the Administrative Agent's
notice to the Banks by telephone of such Competitive Bid Quote Request.

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SECTION 3.04 and must be submitted to the Administrative Agent by telex or
telecopy at its offices specified in or pursuant to SECTION 10.02 not later than
(x) 11:00 a.m. (Chicago time) at least three Business Days prior to the proposed
Borrowing Date, in the case of a Eurodollar Auction or (y) 9:00 a.m. (Chicago
time) on the proposed Borrowing Date, in the case of an Absolute Rate Auction
(or, in either case upon reasonable prior notice to the Banks, such other time
and date as the Borrower and the Administrative Agent may agree); PROVIDED that
Competitive Bid Quotes submitted by BofA or any Affiliate thereof may be
submitted, and may only be submitted, if the Administrative Agent or BofA or
such Affiliate notifies the Borrower of the terms of the offer or offers
contained therein not later than fifteen minutes prior to the time all other
Banks are required hereunder to submit Competitive Bid Quotes to the
Administrative Agent. Subject to ARTICLES V and VIII, any Competitive Bid Quote
so made shall be irrevocable except with the written consent of the
Administrative Agent and the Borrower.

(b) Each Competitive Bid Quote shall be in substantially the form of
EXHIBIT 3.04 hereto and shall in any case specify:

(i) the proposed Borrowing Date, which shall be the same as that set
forth in the applicable Competitive Bid Quote Request;

(ii) the principal amount of the Competitive Bid Advance for which
each such offer is being made, which principal amount (1) may be greater
than, less than or equal to the Commitment of the quoting Bank, (2) must be
at least $2,000,000 or an integral multiple of $500,000 in excess thereof,
(3) may not exceed the aggregate principal amount of Competitive Bid
Advances for which offers were requested and (4) must be identified with an
Interest Period specified in the applicable Competitive Bid Quote Request;

(iii) in the case of a Eurodollar Auction, the Competitive Bid Margin
offered for each such Competitive Bid Advance;

(iv) in the case of an Absolute Rate Auction, the Absolute Rate
offered for each such Competitive Bid Advance;

(v) the identity of the quoting Bank; and

(vi) if the quoting Bank shall therein make offers with respect to
more than one Type of Competi-

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tive Bid Advance, or at several rates or for several Interest Periods, in each
case as shall have been requested by the Borrower in the applicable Competitive
Bid Quote Request, the maximum aggregate principal amount with respect to all
such Competitive Bid Advances that such Bank shall be willing to extend to the
Borrower on such proposed Borrowing Date.

(i) is not substantially in the form of EXHIBIT 3.04 hereto or does
not specify all of the information required by SECTION 3.04(b);

(ii) contains qualifying, conditional or similar language, other than
any such language contained in EXHIBIT 3.04;

(iii) proposes terms other than or in addition to those set forth in
the applicable Competitive Bid Quote Request; or

(iv) arrives after the time set forth in SECTION 3.04(a).

If any Competitive Bid Quote shall be rejected pursuant to this SECTION 3.04(c),
the Administrative Agent shall notify the relevant Bank of such rejection as
soon as practical.

SECTION 3.05. NOTICE TO THE BORROWER. The Administrative Agent shall
promptly notify the Borrower of the terms (i) of any Competitive Bid Quote
submitted by a Bank that is in accordance with SECTION 3.04 and (ii) of any
Competitive Bid Quote submitted by a Bank which amends, modifies or is otherwise
inconsistent with a previous Competitive Bid Quote submitted by such Bank with
respect to the same Competitive Bid Quote Request. Any such subsequent
Competitive Bid Quote shall be disregarded by the Administrative Agent unless
such subsequent Competitive Bid Quote specifically states that it is submitted
solely to correct a manifest error in such former Competitive Bid Quote. The
Administrative Agent's notice to the Borrower shall specify the aggregate
principal amount of Competitive Bid Advances for which offers have been received
for each Interest Period specified in the related Competitive Bid Quote Request
and the respective principal amounts and Competitive Bid Margins or Absolute
Rates, as the case may be, so offered.

SECTION 3.06. ACCEPTANCE AND NOTICE BY THE BORROWER. Not later than
(x) 12:00 noon (Chicago time) at least three Busi-

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ness Days prior to the proposed Borrowing Date, in the case of Eurodollar
Auction or (y) 10:00 a.m. (Chicago time) on the proposed Borrowing Date, in the
case of an Absolute Rate Auction (or, in either case upon reasonable prior
notice to the Banks, such other time and date as the Borrower and the
Administrative Agent may agree), the Borrower shall notify the Administrative
Agent of its acceptance or non-acceptance of any or all of the offers so
notified to it pursuant to SECTION 3.05; PROVIDED, however, that the failure by
the Borrower to give such notice to the Administrative Agent with respect to any
such offer shall be deemed to be a rejection of such offer. In the case of
acceptance, such notice (a "NOTICE OF COMPETITIVE BID BORROWING") shall be
substantially in the form of EXHIBIT 3.06 hereto and shall specify the aggregate
principal amount of offers for each Interest Period that are accepted. The
Borrower may accept any Competitive Bid Quote in whole or in part; PROVIDED
that:

(a) the aggregate principal amount of Competitive Bid Advances may
not exceed the applicable amount set forth in the related Competitive Bid
Quote Request,

(b) acceptance of offers may only be made on the basis of ascending
Competitive Bid Margins or Absolute Rates, as the case may be, starting
with the lowest and continuing with the next lowest until offers in the
aggregate amount specified by the Borrower for acceptance shall have been
accepted, and

(c) the Borrower may not accept any offer that is described in
SECTION 3.04(c) or that otherwise fails to comply with the requirements of
this Agreement.

SECTION 3.07. ALLOCATION BY ADMINISTRATIVE AGENT. If offers are made
by two or more Banks with the same Competitive Bid Margins or Absolute Rates, as
the case may be, for a greater aggregate principal amount than the amount in
respect of which offers remain to be accepted, as specified by the Borrower, for
the related Interest Period (after giving effect to the acceptance of all offers
made at lower rates), the principal amount of Competitive Bid Advances in
respect of which such offers are accepted shall be allocated by the
Administrative Agent among such Banks as nearly as possible (in such multiples,
not greater than $500,000, as the Administrative Agent may deem appropriate) in
proportion to the aggregate principal amount of such offers. Allocations by the
Administrative Agent of the amounts of Competitive Bid Advances shall be
conclusive in the absence of manifest error.

SECTION 3.08. NOTIFICATION OF ACCEPTANCES TO THE AFFECTED BANKS.
The Administrative Agent shall (a) promptly

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following its receipt of a Notice of Competitive Bid Borrowing and in any event
not later (x) 12:30 p.m. (Chicago time), in the case of a Eurodollar Auction or
(y) 10:30 a.m. (Chicago time), in the case of an Absolute Rate Auction, on the
date of its receipt of such Notice of Competitive Bid Borrowing, provide notice
by telephone to each Bank that has made a Competitive Bid Quote of the extent to
which its offer or offers have been accepted, specifying in such notice the
principal amount of each Competitive Bid Advance in respect of which such
Competitive Bid Quote has been accepted, the Interest Period therefor and the
Competitive Bid Margin or Absolute Rate therefor, as applicable and (b) promptly
thereafter provide notice to such Banks by telex or telecopy confirming the
same. If, pursuant to SECTION 3.06, the Borrower and the Administrative Agent
shall agree as to times for the delivery of a Notice of Competitive Bid
Borrowing other than those set forth in SECTION 3.06, and shall notify the Banks
thereof, such notice to the Banks shall set forth in addition any changes in the
times set forth in this SECTION 3.08.

SECTION 3.09. FUNDING OF COMPETITIVE BID ADVANCES. Each Bank that is
to make a Competitive Bid Advance in connection with any Notice of Competitive
Bid Borrowing shall, before 12:00 Noon (Chicago time) on the first day of the
Interest Period therefor specified in the notice from the Administrative Agent
delivered pursuant to SECTION 3.08, deposit the amount of each of such Bank's
Competitive Bid Advances in same day funds to the Administrative Agent's Account
No. 12331-15202 (unless another account is designated by the Administrative
Agent for such purpose), Reference: Allegiance Corporation, maintained at 1850
Gateway Boulevard, Concord, California 94520. After the Administrative Agent's
receipt of such funds and upon fulfillment of the applicable conditions set
forth in ARTICLE V, the Administrative Agent shall promptly make same day funds
in the aggregate amount of such Competitive Bid Advances available to the
Borrower, at the Administrative Agent's address provided in SECTION 10.02.
Promptly following each Competitive Bid Advance, the Administrative Agent shall
notify each Bank of the amount thereof, the consequent Syndicated Reduction and
the Interest Periods for such Competitive Bid Advances.

ARTICLE IV
GENERAL TERMS

SECTION 4.01. ILLEGALITY; INTEREST RATE INADEQUATE OR UNFAIR. The
obligation of each Bank to extend an Advance on the date therefor is subject to
the following:

(a) If, after the date of this Agreement, the adoption of any
applicable law, rule or regulation, or any change therein, or any change in the
interpretation or administration thereof by

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any governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any Bank (or its
Eurodollar Lending Office) with any request or directive (whether or not having
the force of law) of any such authority, central bank or comparable agency shall
make it unlawful or impossible for any Bank (or its Eurodollar Lending Office)
to make, maintain or fund its Eurodollar Advances, such Bank shall so notify the
Administrative Agent. The Administrative Agent and such Bank shall forthwith
give notice thereof to the other Banks and the Borrower, whereupon until such
Bank notifies the Borrower and the Administrative Agent that the circumstances
giving rise to such suspension no longer exist, the obligation of such Bank to
make (or to Convert other Advances into) Eurodollar Advances shall be suspended
and each Eurodollar Advance which such Bank shall thereafter be required to make
hereunder (or Convert into) shall be made as (or Converted into) a Base Rate
Advance, which Base Rate Advance shall be made (or Converted) on the same day
and have the same Interest Period as the Eurodollar Advances made (or Converted
into) by the other Banks and comprising the balance of such Borrowing. If such
Bank (A) shall determine that it may not lawfully continue to maintain and fund
any of its outstanding Eurodollar Advances to the last day of the Interest
Period therefor and (B) shall so specify in a written notice to the Borrower and
the Administrative Agent, the Borrower shall immediately Convert in full the
then outstanding principal amount of each such Eurodollar Advance into a Base
Rate Advance in an equal principal amount (on which interest and principal shall
be payable contemporaneously with the related Eurodollar Advances of the other
Banks).

(b) Subject to SECTION 4.10(c), if by the Business Day before the
first day of any Interest Period in respect of a Borrowing to consist of
Eurodollar Advances less than two Reference Banks furnish timely information to
the Administrative Agent for determining the Eurodollar Rate for Eurodollar
Advances comprising such Borrowing, the Administrative Agent shall by 12:00 Noon
(Chicago time) on such Business Day notify the Borrower of such event, and the
right of the Borrower to select Eurodollar Advances for such Borrowing or any
subsequent Borrowing (and the right of the Borrower to Convert Advances into
Eurodollar Rate Advances) shall be suspended until the Administrative Agent
shall notify the Borrower and the Banks that the circumstances causing such
suspension no longer exist. The obligation of the Banks to make Eurodollar
Advances in connection with such Notice of Borrowing shall thereupon terminate,
and each Bank obligated to participate in such Borrowing shall extend a Base
Rate Advance to the Borrower in lieu of the originally requested Eurodollar
Advance, which Base Rate Advance shall be made on the date specified in the
original Notice of Borrowing

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and shall have an Interest Period which is co-extensive with the Interest Period
originally requested. In the case of an outstanding Notice of Interest Rate
Election at the time any such suspension shall occur, such Notice shall be
deemed amended, without any further action on the part of the Borrower, to
request that the Syndicated Advances specified therein be Converted to Base Rate
Advances.

(c) If the Majority Banks (or, in the case of a Competitive Bid
Borrowing comprised of Eurodollar Bid Rate Advances, Banks selected to make at
least 51% of the aggregate principal amount of such Advances) shall, by
11:00 a.m. (Chicago time) on the Business Day before the first day of any
Interest Period in respect of a Borrowing to consist of Eurodollar Advances,
notify the Administrative Agent and the Borrower (setting forth in writing the
reasons therefor) that the Eurodollar Rate for Eurodollar Advances comprising
such Borrowing will not adequately reflect the cost to such Banks of making or
funding their respective Eurodollar Advances for such Borrowing or Conversion,
the right of the Borrower to select Eurodollar Advances for such Borrowing or
Conversion and any subsequent Borrowing or Conversion shall be suspended until
the Administrative Agent shall notify the Borrower and the Banks that the
circumstances causing such suspension no longer exist. The obligation of the
Banks to make Eurodollar Advances in connection with such Notice of Borrowing
shall thereupon terminate and each Bank obligated to participate in such
Borrowing shall extend a Base Rate Advance to the Borrower in lieu of the
originally requested Eurodollar Advance, which Base Rate Advance shall be made
on the date specified in the original Notice of Borrowing and shall have an
Interest Period which is co-extensive with the Interest Period originally
requested. In the case of an outstanding Notice of Interest Rate Election at
the time any such suspension shall occur, such Notice shall be deemed amended,
without any further action on the part of the Borrower, to request that the
Syndicated Advances specified therein be Converted to Base Rate Advances.

SECTION 4.02. EFFECT OF NOTICE OF BORROWING; MAXIMUM NUMBER OF
BORROWINGS. (a) Subject to SECTION 4.01, each Notice of Borrowing and Notice
of Interest Rate Election shall be irrevocable and binding on the Borrower. In
the event that a Notice of Borrowing or Notice of Interest Rate Election is made
by telephone and the written confirmation thereof differs in any respect from
such telephone notice, the information contained in the telephone notice or the
written confirmation, as the case may be, upon which the Administrative Agent
shall have relied, as evidenced by its corresponding notice to the Banks, shall
control for purposes of Advances to be made or Converted under this Agreement.

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<PAGE>

(b) A Notice of Borrowing shall be rejected by the Administrative
Agent, and the Banks shall have no obligation to extend any Advances that may be
requested in such Notice of Borrowing, if after giving effect to the Borrowing
requested in such Notice of Borrowing there would then be more than twenty-six
Borrowings outstanding (whether Syndicated Borrowings, Competitive Bid
Borrowings or any combination of the foregoing, but excluding Swing-Line
Advances).

SECTION 4.03. EFFECT OF FAILURE TO BORROW OR FUND. (a) In the case
of any Borrowing which the related Notice of Borrowing (or Notice of Interest
Rate Election) specifies is to be comprised of (or continued as or converted to)
Fixed Rate Advances or a Swing-Line Advance, the Borrower shall indemnify each
Bank against all direct out-of-pocket losses and reasonable expenses incurred by
such Bank as a result of any failure by the Borrower to borrow, continue or
convert such Borrowing or Advance in the manner specified in the applicable
notice or to fulfill on or before the date specified for such Borrowing the
applicable conditions set forth in ARTICLE V to the extent of all direct out-of-
pocket losses and reasonable expenses incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by such Bank to fund the
Advance to be made by such Bank as part of such Borrowing when such Advance, as
a result of such failure, is not made on such date. The Borrower shall not be
liable to any Bank under this SECTION 4.03(a) with respect to consequential
damages arising or incurred by such Bank in connection with the Borrower's
failure to fulfill timely the applicable conditions set forth in ARTICLE V.

(b) Unless the Administrative Agent shall have received notice from a
Bank prior to the date of any Borrowing (or, in the case of any Borrowing
comprised of Base Rate Advances, prior to 12:00 Noon (Chicago time) on the date
of such Borrowing) that such Bank will not make available to the Administrative
Agent such Bank's ratable portion of such Borrowing, the Administrative Agent
may assume that such Bank has made such portion available to the Agent on the
date of such Borrowing in accordance with the terms of SECTION 2.02, SECTION
2.04 or SECTION 3.09, as applicable, and the Administrative Agent may, in
reliance upon such assumption make available to the Borrower or the Swing-Line
Bank on such date a corresponding amount. If and to the extent that such Bank
shall not have so made such ratable portion available to the Administrative
Agent, such Bank and the Borrower severally agree to repay to the Administrative
Agent forthwith on demand such corresponding amount together with interest
thereon, for each day from the date such amount is made available to the
Borrower until the date such amount is repaid to the Administrative Agent, at
(i) in the case of the Borrower, the interest rate applicable at the time to
Advances comprising such

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Borrowing and (ii) in the case of such Bank, at the Federal Funds Rate, for each
of the first three days such amount is owed, and at the Base Rate thereafter.
If such Bank shall repay to the Administrative Agent such corresponding amount,
such amount so repaid shall constitute such Bank's Advance as part of such
Borrowing for purposes of this Agreement.

(c) The failure of any Bank to make the Advance to be made by it as
part of any Borrowing shall not relieve any other Bank of its obligation, if
any, hereunder to make its Advance on the date of such Borrowing, but no Bank
shall be responsible for the failure of any other Bank to make the Advance to be
made by such other Bank on the date of any Borrowing.

SECTION 4.04. FACILITY FEES AND CERTAIN CREDIT RATING DETERMINATIONS.
(a) FACILITY FEES. The Borrower agrees to pay to the Administrative Agent for
the account of each Bank a facility fee at the respective rates per annum set
forth below on the average daily amount of such Bank's Commitment. The
applicable rate for any period shall be determined on the basis of the publicly
announced ratings ("CREDIT RATINGS") by Moody's and S&P on the Borrower's senior
non-credit-enhanced unsecured indebtedness during such period (or, if no rated
senior non-credit-enhanced unsecured indebtedness is then outstanding, the
indicative ratings issued by Moody's and S&P with respect to senior non-credit-
enhanced unsecured long-term indebtedness of the Borrower in effect during such
period), the applicable rate to change when and as such Credit Ratings change.

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<PAGE>

Level Credit Ratings Facility Fee
- ----- -------------- ------------

1. Credit Ratings are A3 or
better by Moody's or A- or
better by S&P .075%

2. Level 1 shall not apply, and
Credit Ratings are Baa1 or
better by Moody's or BBB+
or better by S&P .100%

3. Neither Level 1 nor Level 2
shall apply, and Credit Ratings
are Baa2 or better by Moody's
or BBB or better by S&P .110%

4. None of Levels 1, 2 or 3
shall apply, and Credit
Ratings are Baa3 or better by
Moody's or BBB- or better by
S&P .125%

5. Credit Ratings are below Baa3
by Moody's and BBB- by S&P .225%

The facility fee described in this SECTION 4.04(a) shall accrue from and
including the date hereof to but excluding the Termination Date or, in the case
of any Bank, the earlier date of reduction to zero of such Bank's Commitment
hereunder, and shall be payable quarterly during the term of each Bank's
Commitment hereunder, in arrears, not later than the last day of each January,
April, July and October, commencing October 31, 1996 and, in the case of each
Bank, on the date such Bank's Commitment shall be reduced to zero.

(b) CREDIT RATING DETERMINATIONS. For purposes of determining the
applicable facility fee with respect to any period and the Eurodollar Margin
with respect to any Interest Period:

(i) Any change in a Credit Rating shall be deemed to become effective
on the date of public announcement thereof (or, in the case of indicative
ratings, the date of issuance thereof) and shall remain in effect until the
date of public announcement that such rating shall no longer be in effect
(or, in the case of any indicative rating, the issuance of other evidence
of

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<PAGE>

the revocation thereof or a change therein by the applicable rating
agency);

(ii) If, during any period, only one of Moody's and S&P shall have
announced a Credit Rating, the Level immediately below (i.e., resulting in
higher pricing for the Borrower) the Level in which such Credit Rating
falls shall apply;

(iii) If, during any period, neither Moody's nor S&P shall have
announced a Credit Rating, the Credit Rating shall (subject to CLAUSE (v)
below) be deemed to be below Baa3 (Moody's) and BBB- (S&P), respectively,
during such period;

(iv) If, during any period that both Moody's and S&P have announced a
Credit Rating, such Credit Ratings (subject to CLAUSE (v) below) fall
within different Levels under SECTION 4.04(a) or SECTION 4.07(b), then (A)
in the case of a differential of one Level, the Level resulting in the
lower pricing for the Borrower shall apply (unless one of the Credit
Ratings is BB or lower or Ba2 or lower, in which case Level 5 will apply)
and (B) in the case of a differential of two or more Levels, the Level
immediately following the Level that would have resulted in the lower
pricing shall apply; and

(v) The Borrower may substitute Duff & Phelps (or another nationally
recognized rating agency acceptable to the Majority Banks) for Moody's or
S&P (A) at any time during any period in which either CLAUSE (iii) or (iv)
above shall apply or the proviso to the definition of "Eurodollar Margin"
in SECTION 4.07(b) shall apply; PROVIDED that in the case of CLAUSE (iv) or
the proviso in SECTION 4.07(b), such substitution may be made only in
respect of the rating agency that shall have issued the lower of the two
ratings then in effect from Moody's and S&P; and (B) at any other time with
the prior written consent of the Majority Banks. Any Credit Rating assigned
by a substitute credit rating agency, prior to the determination of the
facility fee for the period during which such Credit Rating shall be in
effect or the determination of the Eurodollar Margin with respect to any
Interest Period, shall be converted to the nationally recognized equivalent
thereof under the rating system employed by Moody's or S&P, as applicable.

(c) ARRANGEMENT AND AGENCY FEES. The Borrower agrees to pay to the
Administrative Agent, each Co-Arranger and the Arranger such fees at such times
and in such amounts as are mutually agreed to from time to time by the Borrower
and the

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Administrative Agent, each Co-Arranger or the Arranger, as the case may be.

SECTION 4.05. REDUCTION OF THE COMMITMENTS. The Borrower may, upon
at least two (2) Business Days' written notice to the Administrative Agent,
terminate in whole or reduce ratably in part the respective Commitments of the
Banks; PROVIDED that (i) any such reduction shall not exceed an aggregate amount
equal to the unused portions of the respective Available Commitments of the
Banks at such time, and (ii) in the case of any partial reduction of the
Commitments, such partial reduction shall be in an aggregate amount not less
than the lesser of (A) $10,000,000 (or an integral multiple of $1,000,000 in
excess thereof) and (B) the aggregate amount at such time of the unused portions
of the respective Available Commitments.

SECTION 4.06. REPAYMENT. Each Syndicated Advance shall mature, and
the principal amount thereof shall be due and payable, on the Termination Date.
Each Competitive Bid Advance and each Swing-Line Advance shall mature, and the
principal amount thereof shall be due and payable, on the last day of the
Interest Period therefor.

SECTION 4.07. INTEREST. The Borrower shall pay interest on the
unpaid principal amount of each Advance made by each Bank from the date of such
Advance until such principal amount shall be paid in full at the following rates
per annum:

(a) BASE RATE ADVANCES. If such Advance is a Base Rate Advance, a
rate per annum equal at all times during each Interest Period for such Advance
to the Base Rate in effect from time to time, payable quarterly in arrears on
the last day of January, April, July and October and on the Termination Date.

(b) EURODOLLAR RATE ADVANCES. If such Advance is a Eurodollar Rate
Advance, a rate per annum equal at all times during the Interest Period for such
Advance to the Eurodollar Rate for such Interest Period PLUS the Eurodollar
Margin as in effect from time to time, payable on the last day of such Interest
Period and, if such Interest Period has a duration of more than three months, on
the date during such Interest Period which occurs three months after the first
day of such Interest Period.

"EURODOLLAR MARGIN" means, at any time, the applicable rate per annum
set forth in the table below, determined in accordance with SECTION 4.04(b) on
the basis of the Credit Ratings in effect at such time:

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Eurodollar
Level Credit Ratings Margin
- ----- -------------- ------

1. Credit Ratings are A3 or
better by Moody's or A- or
better by S&P .155%

2. Level 1 shall not apply, and
Credit Ratings are Baa1 or
better by Moody's or BBB+
or better by S&P .200%

3. Neither Level 1 nor Level 2
shall apply, and Credit Ratings
are Baa2 or better by Moody's
or BBB or better by S&P .215%

4. None of Levels 1, 2 or 3
shall apply, and Credit
Ratings are Baa3 or better by
Moody's or BBB- or better by
S&P .250%

5. Credit Ratings are below Baa3
by Moody's and BBB- by S&P .425%

PROVIDED, that if at any time one Credit Rating is Baa3 or BBB- and the other
Credit Rating is Ba1 or BB+, then the applicable Eurodollar Margin at such time
for Level 4 shall be .300%.

(c) COMPETITIVE BID ADVANCES. Subject to SECTION 4.01, if such
Advance is a Competitive Bid Advance, a rate per annum equal (i) in the case of
an Absolute Rate Advance, to the Absolute Rate that shall have been offered by
such Bank pursuant to SECTION 3.04 in its Competitive Bid Quote related thereto
and accepted by the Borrower pursuant to SECTION 3.06 in its Notice of
Competitive Bid Borrowing related thereto and (ii) in the case of a Eurodollar
Bid Rate Advance, to the Eurodollar Bid Rate calculated on the basis of the
Competitive Bid Margin that shall have been offered by such Bank pursuant to
SECTION 3.04 in its Competitive Bid Quote related thereto and accepted by the
Borrower pursuant to SECTION 3.06 in its Notice of Competitive Bid Borrowing
related thereto, in each case payable on the last day of the applicable Interest
Period and, if such Interest Period has a duration of more than 90 days or three
months, as the case may be, on each day which occurs during such Interest Period
every 90 days or three months, as the case may be, from the first day of such
Interest Period.

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(d) SWING-LINE ADVANCES. If such Advance is a Swing-Line Advance, a
rate per annum equal at all times during the Interest Period for such Advance to
the IBOR Rate for such Interest Period PLUS 1.00%, payable on the last day of
such Interest Period.

SECTION 4.08. ADDITIONAL INTEREST ON EURODOLLAR RATE ADVANCES. The
Borrower shall pay to each Bank, so long as such Bank shall be required under
regulations of the Board of Governors of the Federal Reserve System to maintain
reserves with respect to liabilities or assets consisting of or including
Eurocurrency Liabilities, additional interest on the unpaid principal amount of
each Eurodollar Rate Advance of such Bank, from the date of such Advance until
such principal amount is paid in full, at an interest rate per annum equal at
all times during the Interest Period for such Advance to the remainder obtained
by subtracting (i) the Eurodollar Rate for such Interest Period from (ii) the
rate obtained by dividing such Eurodollar Rate referred to in clause (i) above
by that percentage equal to 100% minus the Eurodollar Rate Reserve Percentage of
such Bank for such Interest Period, payable on each date on which interest is
payable on such Advance. Such additional interest shall be determined by such
Bank and notified in writing to the Borrower through the Administrative Agent.
Such determination shall be binding for all purposes in the absence of manifest
error; PROVIDED that no challenge to such determination may be made by the
Borrower after the sixtieth day following delivery of such notification to the
Borrower.

SECTION 4.09. INTEREST ON OVERDUE PRINCIPAL. If any amount of
principal is not paid when due (whether at stated maturity, by acceleration or
otherwise), that amount of principal shall bear interest, from the date on which
such amount is due until such amount is paid in full, payable on demand, at a
rate per annum equal at all times to 2% per annum above the Base Rate in effect
from time to time.

SECTION 4.10. INTEREST RATE DETERMINATIONS. (a) Each Reference Bank
agrees to furnish to the Administrative Agent timely information for the purpose
of determining each Eurodollar Rate. Subject to SUBSECTION (c) of this Section,
if any one or more of the Reference Banks shall not furnish such timely
information to the Administrative Agent for determination of any such interest
rate, the Administrative Agent shall determine such interest rate on the basis
of timely information furnished by the remaining Reference Banks.

(b) The Administrative Agent shall give prompt notice to (i) the
Borrower and the Banks, of any applicable interest rate determined by the
Administrative Agent for purposes of

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SECTION 4.07 and the applicable rate, if any, furnished by each Reference Bank
for determining the applicable interest rate under SECTION 4.07(b) and (ii) the
Borrower and each Bank that is to make a Eurodollar Bid Rate Advance in
connection with any Notice of Competitive Bid Borrowing, of the applicable rate,
if any, furnished by each Reference Bank for determining the applicable
Eurodollar Bid Rate with respect to such Eurodollar Bid Rate Advance.

(c) If any Reference Bank shall fail to furnish timely information to
the Administrative Agent for determining the Eurodollar Rate with respect to any
requested Borrowing, the Borrower shall be entitled to designate one or more of
the other Banks hereunder as successor Reference Banks. Each such designation
shall be subject to the consent of the Majority Banks, which consent shall not
be unreasonably withheld. Upon such consent, the affected Reference Bank shall
cease to be a Reference Bank hereunder and each successor Reference Bank shall
be a Reference Bank for all purposes of this Agreement until such time as either
(i) such Reference Bank shall no longer be a Bank hereunder or (ii) the Borrower
shall replace such Reference Bank pursuant to this SECTION 4.10(c).

SECTION 4.11. PERFORMANCE OF BANKS' OBLIGATIONS. Each Bank shall use
commercially reasonable efforts to keep apprised of all events and circumstances
(a) that would excuse or prohibit such Bank from performing its obligation to
make (or to Convert Advances into) Eurodollar Rate Advances hereunder pursuant
to SECTION 4.01(a) or (b) that would permit such Bank to demand increased costs
pursuant to SECTION 4.13. Such Bank shall, as soon as practicable after
becoming aware of any such event or circumstance, use commercially reasonable
efforts, to the extent permitted by law, to perform its obligations to make
Eurodollar Advances through another office or lending office, and with respect
to increased costs, to reduce such increased costs (if the use of such other
office or lending office or such reduction would not adversely affect the
performance of such obligations or repayment of the Advances or result in any
increased cost, loss, liability or other disadvantage to such Bank in such
Bank's good faith judgment), in either case if by taking the action contemplated
by the foregoing, such event or circumstance would cease to exist.

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<PAGE>

confirmed immediately in writing), telecopier or telex, stating in such notice
the proposed date and aggregate principal amount of the prepayment, and if such
notice is given the Borrower shall, prepay (i) the outstanding principal amount
of the Syndicated Advances made as part of the same Syndicated Borrowing in
whole or, in the case of a Syndicated Borrowing comprised solely of Base Rate
Advances, ratably in part and (ii) the outstanding principal amount of any
Swing-Line Advance in whole or in part, in each case by paying the principal
amount to be prepaid together with accrued interest thereon and other amounts
then due and owing, if any, hereunder to the date of prepayment; PROVIDED that
each partial prepayment shall be in an amount not less than $10,000,000 and in
an integral multiple of $1,000,000. Each such optional prepayment of a
Syndicated Borrowing shall be applied to prepay ratably the Syndicated Advances
of the several Banks included in such Syndicated Borrowing. If the Borrower
prepays any Swing-Line Advance, or any Syndicated Borrowing consisting of
Eurodollar Rate Advances, on any day other than the last day of an Interest
Period for such Swing-Line Advance or such Syndicated Borrowing, the Borrower
shall reimburse each Bank (or, in the case of a Swing-Line Advance, the Swing-
Line Bank) for the losses, costs and expenses contemplated in SECTION 10.04(b).
The Borrower may not, unless otherwise required hereunder, prepay any
Competitive Bid Advance without the consent of the Bank which shall have
extended such Competitive Bid Advance.

(b) Upon receipt of a notice of prepayment pursuant to this
SECTION 4.12, the Administrative Agent shall promptly notify each Bank of the
contents thereof and of such Bank's ratable share, if any, of such prepayment.
In the event the Borrower and a Bank agree to the prepayment to such Bank of a
Competitive Bid Advance, and such prepayment is made, the Borrower thereupon
shall notify the Administrative Agent and the Administrative Agent shall
promptly notify the other Banks thereof.

SECTION 4.13. INCREASED COSTS. Subject to SECTION 4.11, if:

(a) due to either (i) the introduction of or any change (other than
any change by way of imposition or increase of reserve requirements
included in the Eurodollar Rate Reserve Percentage) in or in the
interpretation of any law or regulation or (ii) the compliance with any
guideline or request from any central bank or other governmental authority
(whether or not having the force of law), there shall be any increase in
the cost to any Bank of agreeing or committing to make or making, funding
or maintaining any Advances hereunder; or

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(b) either (i) the introduction of or any change in or in the
interpretation of any law, rule, regulation or guideline adopted after the
date hereof and arising out of the July 1988 report of the Basle Committee
on Banking Regulation and Supervisory Practices entitled "International
Convergence of Capital Measurement and Capital Standards" or
(ii) compliance by any Bank with any law or regulation, or with any
guideline or request from any central bank or other governmental authority
(whether or not having the force of law), affects or would affect the
amount of capital required or expected to be maintained by such Bank or any
corporation controlling such Bank and such Bank determines that the amount
of such capital is increased by or based upon the existence of such Bank's
commitment to lend hereunder and other commitments of this type, or upon
the making or funding of its Advances hereunder,

then the Borrower shall from time to time, upon 15 days' written demand by such
Bank (with a copy of such demand to the Administrative Agent), pay to the
Administrative Agent for the account of such Bank additional amounts sufficient
to (i) in the case of any of the events described in CLAUSE (a) above, reimburse
such Bank for such increased cost, such increased cost to be determined by such
Bank using its customary methods therefor (and, if such Bank uses from time to
time more than one such method, the method chosen for application hereunder
shall be that method which most accurately determines such increased cost), and
(ii) in the case of any of the events described in CLAUSE (b) above, compensate
such Bank in light of such circumstances, to the extent such Bank reasonably
determines such increase in capital to be allocable to the existence of such
Bank's commitment to lend or maintain Advances hereunder. A certificate as to
any such amount (demonstrating, in reasonable detail, the calculations used by
such Bank to determine such amount), submitted to the Borrower and the
Administrative Agent by such Bank, shall be conclusive and binding for all
purposes in the absence of manifest error; PROVIDED that no challenge to such
determination may be made by the Borrower after the sixtieth day following
delivery of such notification to the Borrower.

SECTION 4.14. PAYMENTS AND COMPUTATIONS. (a) The Borrower shall
make each payment hereunder and under the Notes not later than 12:00 noon
(Chicago time) on the day when due in U.S. Dollars to the Administrative Agent
in same day funds. The Administrative Agent is hereby authorized to charge the
Borrower's account with the Administrative Agent, after notice to the Borrower
of the amount to be charged, for each payment of principal, interest and fees as
such payment becomes due. The

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Administrative Agent will promptly thereafter (but in no event later than the
next Business Day) cause such funds to be distributed ratably (unless otherwise
contemplated herein) to the Banks for the account of their respective Applicable
Lending Offices, in each case to be applied in accordance with the terms of this
Agreement.

(b) All computations of interest based on the Base Rate shall, to the
extent such Base Rate is determined by reference to the Reference Rate, be made
on the basis of a year of 365 or 366 days, as the case may be, and all other
calculations of interest and facility fees shall be made on the basis of a year
of 360 days, in each case for the actual number of days (including the first day
but excluding the last day) occurring in the period for which such interest or
facility fees are payable. Each determination by the Administrative Agent of an
interest rate hereunder shall be conclusive and binding for all purposes in the
absence of manifest error. No challenge to any determination by the
Administrative Agent pursuant to this subsection may be made by the Borrower
after the sixtieth day following delivery to the Borrower of written
notification of such determination.

(c) Whenever any payment hereunder or under the Notes shall be stated
to be due on a day other than a Business Day, such payment shall be made on the
next succeeding Business Day, and such extension of time shall in such case be
included in the computation of payment of interest or facility fee, as the case
may be. If such extension would cause such payment with respect to a Eurodollar
Advance to be made in the next following calendar month, such payment shall be
made on the immediately preceding Business Day and the period of time during
which such payment would have been outstanding but for compliance with this
provision shall not be included in the computation of payment of interest with
respect thereto.

(d) Unless the Administrative Agent shall have received notice from
the Borrower prior to the date on which any payment is due to the Banks
hereunder that the Borrower will not make such payment in full, the
Administrative Agent may assume that the Borrower has made such payment in full
to the Administrative Agent on such date and the Administrative Agent may, in
reliance upon such assumption, cause to be distributed to each Bank on such due
date an amount equal to the amount then due such Bank. If and to the extent the
Borrower shall not have so made such payment in full to the Administrative
Agent, each Bank shall repay to the Administrative Agent forthwith on demand
such amount distributed to such Bank together with interest thereon, for each
day from the date such amount is distributed to such Bank until the date such
Bank repays such amount to the Administrative

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Agent, at the Federal Funds Rate, for each of the first three days such amount
is owed, and at the Base Rate thereafter.

SECTION 4.15. TAXES. (a) Any and all payments by the Borrower
hereunder or under the Notes shall be made, in accordance with SECTION 4.14,
free and clear of and without deduction for any and all present or future taxes,
levies, imposts, deductions, charges or withholdings, and all liabilities with
respect thereto, EXCLUDING, (i) in the case of each Bank and the Administrative
Agent, taxes imposed on any of its overall net income, and franchise taxes
imposed on it, by the jurisdiction under the laws of which such Bank or the
Administrative Agent (as the case may be) is organized or any political
subdivision thereof, and (ii) in the case of each Bank, taxes imposed on its net
income, and franchise taxes imposed on it, by the jurisdiction of such Bank's
Applicable Lending Office or any political subdivision thereof (all such taxes,
levies, imposts, deductions, charges, withholdings and liabilities, less the
exclusions described in clauses (i) and (ii) above, being hereinafter referred
to as "TAXES").

(b) In addition, the Borrower agrees to pay any present or future
stamp or documentary taxes or any other excise or property taxes, charges or
similar levies which arise (i) from any payment made hereunder or under the
Notes to any Applicable Lending Office or to any lending or other office
established pursuant to SECTION 4.11 or otherwise in accordance with this
Agreement with respect to Advances made or to be made under this Agreement or
(ii) from the execution or delivery of this Agreement or the Notes or any
amendment hereto or thereto (hereinafter referred to as "OTHER TAXES").

(c) The Borrower will indemnify each Bank and the Administrative
Agent for the full amount of Taxes and Other Taxes (including, without
limitation, any Taxes or Other Taxes imposed by any jurisdiction on amounts
payable under this SECTION 4.15) incurred by such Bank or the Administrative
Agent (as the case may be) or any liability incurred by such Bank or the
Administrative Agent (as the case may be) (including penalties and interest
unless caused by the gross negligence or willful misconduct of such Bank or the
Administrative Agent, as the case may be) arising therefrom or with respect
thereto, whether or not such Taxes or Other Taxes were correctly or legally
asserted. This indemnification shall be made within 30 days from the date such
Bank or the Administrative Agent (as the case may be) makes written demand
therefor, which demand shall demonstrate, in reasonable detail, the
circumstances concerning the imposition of, and the calculations used to
determine, such Taxes or Other Taxes.

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(d) Each Bank that is not a United States person (as such term is
defined in Section 7701(a)(30) of the Internal Revenue Code of 1986, as amended
(the "CODE")) shall submit to the Borrower and the Administrative Agent, within
31 days of the date hereof, duly completed and signed copies of either Form 1001
(relating to such Bank and entitling it to a complete exemption from withholding
on all amounts to be received by such Bank at any Applicable Lending Office
designated by such Bank, including fees, pursuant to this Agreement and the
Advances) or Form 4224 (relating to all amounts to be received by such Bank at
any Applicable Lending Office designated by such Bank, including fees, pursuant
to this Agreement and the Advances) of the United States Internal Revenue
Service. Thereafter and from time to time, each such Bank shall submit to the
Borrower and the Administrative Agent such additional duly completed and signed
copies of one or the other of such forms (or such successor forms as shall be
adopted from time to time by the relevant United States taxing authorities) as
may be (i) requested by the Borrower or the Administrative Agent from such Bank
and (ii) required under then current United States law or regulations to avoid
United States withholding taxes on payments in respect of all amounts to be
received by such Bank at any Applicable Lending Office designated by such Bank,
including fees, pursuant to this Agreement or the Advances. Upon the request of
the Borrower or the Administrative Agent, each Bank that is a United States
person (as such term is defined in Section 7701(a)(30) of the Code) shall submit
to the Borrower or the Administrative Agent, as the case may be, promptly
following such Person's request therefor a certificate to the effect that it is
such a United States person and certification of its taxpayer identification
number on Form W-9. If any Bank determines, as a result of any change in
applicable law, regulation or treaty, or in any official application or
interpretation thereof, that it is unable to submit to the Borrower or the
Administrative Agent any form or certificate that such Bank is obligated to
submit pursuant to this subsection, or that such Bank is required to withdraw or
cancel any such form or certificate previously submitted, such Bank shall
promptly notify the Borrower and the Administrative Agent of such fact;
PROVIDED, HOWEVER, that delivery of such notice shall not preclude the exercise
by such Bank of any of its rights under this SECTION 4.15. If any Bank claiming
exemption from United States withholding tax by filing IRS Form 4224 grants a
participation in all or part of the obligations of the Borrower to such Bank,
such Bank agrees to undertake sole responsibility for complying with the
withholding tax requirements imposed by Sections 1441 and 1442 of the Code.

No amount that shall be required to be paid by the Borrower pursuant
to SUBSECTION (a), (b) or (c) of this SECTION 4.15 shall be payable by the
Borrower to any Bank that

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(i) is not, on the date such Person becomes party to this Agreement as a "Bank",
either (x) required to submit Form 1001 (relating to such Bank and entitling it
to a complete exemption from withholding on all amounts to be received by such
Bank at any Applicable Lending Office designated by such Bank, including fees,
pursuant to this Agreement and the Advances) or Form 4224 (relating to all
amounts to be received by such Bank at any Applicable Lending Office designated
by such Bank, including fees, pursuant to this Agreement and the Advances) or
(y) a United States person (as such term is defined in Section 7701(a)(30) of
the Code), or (ii) shall have failed to submit to the Borrower any form or
certificate that such Bank shall have been required to file pursuant to this
subsection and shall have been entitled to file under applicable law.

If the IRS or any other Governmental Authority of the United States or
other jurisdiction asserts a claim that the Borrower or the Administrative Agent
did not properly withhold tax from amounts paid to or for the account of any
Bank (because the appropriate form was not delivered or was not properly
executed, or because such Bank failed to notify the Borrower or the
Administrative Agent of a change in circumstances which rendered the exemption
from, or reduction of, withholding tax ineffective, or for any other reason)
such Bank shall indemnify each of the Borrower and the Administrative Agent
fully for all amounts paid, directly or indirectly, by such Person as tax or
otherwise, including penalties and interest, and including any taxes imposed by
any jurisdiction on the amounts payable to the Borrower or the Administrative
Agent under this Section, together with all costs and expenses including
Attorney Costs. The obligation of each of the parties under this SECTION 4.15
shall survive the payment of all obligations of the Borrower under this
Agreement and the Notes and the resignation or replacement of the Administrative
Agent.

SECTION 4.16. THE NOTES. (a) The indebtedness of the Borrower
resulting from Syndicated Advances made by each Bank to the Borrower shall be
evidenced by a promissory note of the Borrower payable to the order of such Bank
substantially in the form of EXHIBIT 4.16(a) hereto (sometimes called a
"SYNDICATED NOTE"). Each Bank may, by notice to the Administrative Agent and
the Borrower to be given not later than three Business Days prior to the First
Borrowing, request that its Base Rate Advances and Eurodollar Rate Advances each
be evidenced by separate promissory notes. Each such promissory note shall be
substantially in the form of EXHIBIT 4.16(a), with appropriate modifications to
reflect the fact that each such promissory note evidences solely Syndicated
Advances of the relevant Type. Each reference in this Agreement or the Notes to
the "Notes" or the "Syndicated Notes" of such Bank shall mean and be deemed to
refer to and include any

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or all of such substituted promissory notes, as the context may require.

(b) The indebtedness of the Borrower resulting from the Competitive
Bid Advances made by each Bank to the Borrower shall be evidenced by a
promissory note of the Borrower payable to the order of such Bank substantially
in the form of EXHIBIT 4.16(b) hereto (sometimes called a "COMPETITIVE BID NOTE"
and together with the Syndicated Notes and the Swing-Line Note, the "NOTES").
Each Bank may, by notice to the Administrative Agent and the Borrower to be
given not later than three Business Days prior to the First Borrowing, request
that its Absolute Rate Advances and Eurodollar Bid Rate Advances be evidenced by
separate promissory notes. Each such promissory note shall be substantially in
the form of EXHIBIT 4.16(b), with appropriate modifications to reflect the fact
that each such promissory note evidences solely Competitive Bid Advances of the
relevant Type. Each reference in this Agreement or the Notes to the "Notes" or
the "Competitive Bid Notes" of such Bank shall mean and be deemed to refer to
and include either or both of such substituted promissory notes, as the context
may require.

(c) The indebtedness of the Borrower resulting from the Swing-Line
Advances made by the Swing-Line Bank to the Borrower shall be evidenced by a
promissory note of the Borrower payable to the order of the Swing-Line Bank
substantially in the form of EXHIBIT 4.16(c) hereto (sometimes called the
"SWING-LINE NOTE").

(d) Each Bank shall maintain records of all Advances made by such
Bank to the Borrower, the interest rate for such Advances and all payments made
on account of principal thereof and, prior to any transfer of any Note, such
Bank shall endorse a record of the Advances evidenced by such Note held by such
Bank on the grid attached thereto and forming a part of such Note. Failure by a
Bank to record on the appropriate Note any Advance or payment shall not relieve
the Borrower of any obligation with respect to such Advance or payment.

SECTION 4.17. SHARING OF PAYMENTS, ETC. (a) Whenever any payment
received by the Administrative Agent to be distributed to the Banks is
insufficient to pay in full the amounts then due and payable to the Banks, and
SECTION 4.17(b) does not then apply, such payment shall be distributed to the
Banks (and for purposes of this Agreement shall be deemed to have been applied
by the Banks, notwithstanding the fact that any Bank may have made a different
application in its books and records) in the following order: FIRST, to the
payment of the principal amount of the Advances which are then due and payable,
ratably among the Banks in accordance with the aggregate principal amount

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owed to each Bank; SECOND, to the payment of interest then due and payable on
the Advances, ratably among the Banks in accordance with the amount of such
interest owed to each Bank; THIRD, to the payment of the facility fees then due
and payable under SECTION 4.04(A), ratably among the Banks in accordance with
the amount of such fees owed to each Bank; and FOURTH, to the payment of any
other amount payable under this Agreement, ratably among the Banks in accordance
with the aggregate amount owed to each Bank.

(b) The Administrative Agent shall promptly advise each Bank
following its receipt of any Payment Sharing Notice. After the Administrative
Agent has received a Payment Sharing Notice, and for so long thereafter as any
Event of Default exists, all payments received by the Administrative Agent to be
distributed to the Banks shall be distributed to the Banks (and for purposes of
this Agreement shall be deemed to have been applied by the Banks,
notwithstanding the fact that any Bank may have made a different application in
its books and records) in the following order: FIRST, to the payment of amounts
payable under SECTION 10.04, ratably among the Administrative Agent, the Banks
and the Swing-Line Bank in accordance with the aggregate amount owed to each
party; PROVIDED that if any such amount payable is then being contested in good
faith by the Borrower, application of payment thereto under this clause FIRST
shall not occur without the prior written consent of the Borrower; SECOND, to
the payment of facility fees then due and payable under SECTION 4.04(a), ratably
among the Banks in accordance with the amount of such fees owed to each Bank;
THIRD, to the payment of interest then due and payable on the Advances, ratably
among the Banks in accordance with the amount of such interest owed to each
Bank; FOURTH, to the payment of the principal amount of all Borrowings
regardless of whether any such amount is then due and payable, ratably among the
Banks in accordance with the aggregate principal amount owed to each Bank; and
FIFTH, to the payment of any other amount payable under this Agreement, ratably
among the Banks in accordance with the aggregate amount owed to each Bank.

(c) If, other than as expressly provided elsewhere herein, any Bank
shall obtain any payment or other recovery (whether voluntary, involuntary,
through the exercise of any right of set-off, or otherwise) on account of
principal of or interest on any Advance, or any other amount payable hereunder,
in excess of the share of payments and other recoveries such Bank would have
received if such payment or other recovery had been distributed pursuant to the
provisions of this Agreement (including SECTION 4.17(a) or (b), if applicable at
the time of such payment or other recovery), such Bank shall immediately (i)
notify the Administrative Agent of such fact and (ii) purchase from the other
Banks such participations in the Advances made by

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(or other obligations owed by the Borrower hereunder to) them as shall be
necessary to cause such purchasing Bank to share the excess payment or other
recovery pro rata with each of them (and if SECTION 4.17(a) or (b) is then
applicable, in accordance with the order of payments set forth therein);
PROVIDED that if all or any portion of such excess payment or other recovery is
thereafter recovered from the purchasing Bank, such purchase shall to that
extent be rescinded and each other Bank shall repay to the purchasing Bank the
purchase price paid therefor, together with an amount equal to such paying
Bank's ratable share (according to the proportion of (i) the amount of such
paying Bank's required repayment to (ii) the total amount so recovered from the
purchasing Bank) of any interest or other amount paid or payable by the
purchasing Bank in respect of the total amount so recovered. The Borrower
agrees that any Bank so purchasing a participation from another Bank pursuant to
this SECTION 4.17(c) may, to the fullest extent permitted by law, exercise all
its rights of payment (including the right of set-off, but subject to
SECTION 10.05) with respect to such participation as fully as if such Bank were
the direct creditor of the Borrower in the amount of such participation. The
Administrative Agent will keep records (which shall be conclusive and binding in
the absence of manifest error) of participations purchased under this Section
and will in each case notify the Banks following any such purchases or
repayments. Nothing contained herein shall require any Bank to exercise any
right of set-off, bankers' lien, counterclaim or similar right or shall affect
the right of any Bank to exercise, and retain the benefits of exercising, any
such right with respect to any other indebtedness or obligation of the Borrower
not evidenced by this Agreement or the Notes. If under any applicable
bankruptcy, insolvency or other similar law, any Bank obtains a secured claim in
lieu of a set-off or other payment to which this SECTION 4.17 would apply, such
Bank shall, to the extent practicable, exercise its rights in respect of such
secured claim in a manner consistent with the rights of the Banks entitled under
this SECTION 4.17 to share in the benefits of any recovery on such secured
claim.

SECTION 4.18. TERMINATION AND PREPAYMENT WITH RESPECT TO ANY BANK.
(a) In addition to the right of the Borrower to terminate in whole or reduce
ratably the unused portion of the Commitments as described in SECTION 4.05 and
the right of the Borrower to ratably prepay Advances as described in
SECTION 4.12, the Borrower shall have the right to terminate the unused portion
of the Commitment of any Bank and to prepay all outstanding Advances made by
such Bank in the manner described in this SECTION 4.18 if the Borrower shall
have received notice (a "SPECIAL NOTICE") that such Bank (i) cannot extend a
Eurodollar Advance and shall exercise its rights pursuant to SECTION 4.01(a),
(ii) claims reimbursement for increased costs or

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reduced returns pursuant to SECTION 4.13 or (iii) claims reimbursement for Taxes
or Other Taxes pursuant to SECTION 4.15.

(b) Upon receipt by the Borrower of a Special Notice from any Bank
and with the consent of the Administrative Agent and the Swing-Line Bank, the
Borrower may elect to terminate the unused portion of the Commitment of such
Bank by giving notice thereof (a "TERMINATION NOTICE") to such Bank and to the
Administrative Agent on or before the thirtieth day following the date of such
Special Notice, specifying therein (i) the name of such Bank ("TERMINATED
BANK"), (ii) the proposed effective date of termination ("BANK TERMINATION
DATE") of the unused portion of such Terminated Bank's Commitment, which date
shall not in any event be less than five Business Days following the date of
such Termination Notice, (iii) one or more commercial banks (each, a "SUCCESSOR
BANK"), each such Successor Bank having a combined capital, surplus (or its
equivalent) and undivided profits in an amount not less than U.S. $500,000,000
(or its equivalent in another currency), which Successor Bank or Successor Banks
shall have agreed, in the aggregate, to succeed to the entire Commitment of such
Terminated Bank on the Bank Termination Date.

(c) Unless the Borrower shall have elected, as evidenced by its
Termination Notice, to prepay all the Advances made by a Terminated Bank
outstanding as of the Bank Termination Date, any Advance (each a "TB ADVANCE")
made by such Terminated Bank having an Interest Period ending after the Bank
Termination Date shall remain outstanding until the last day of such Interest
Period (unless required to be paid earlier in accordance with the terms of this
Agreement). On the last day of the then current Interest Period in respect of
each TB Advance, the Successor Bank shall extend an Advance to the Borrower in a
principal amount corresponding to such TB Advance, and having an Interest Period
of the type specified in the Notice of Interest Rate Election that would
otherwise have applied to such TB Advance, and the proceeds of such Advance from
the Successor Bank shall be used by the Borrower to repay such TB Advance to the
Terminated Bank. The Successor Bank or Successor Banks specified by the
Borrower in a Termination Notice shall have agreed, prior to the Bank
Termination Date, to succeed, in the aggregate, to the entire Commitment of such
Terminated Bank on the Bank Termination Date which succession shall, with
respect to the unused portion of such Terminated Bank's Commitment as of such
Bank Termination Date, become effective as of the Bank Termination Date and,
with respect to the remaining portion of such Terminated Bank's Commitment,
become effective as and when such Terminated Bank's Advances are repaid.

(d) If the Borrower shall have elected, as evidenced by its
Termination Notice, to prepay all the Advances made by a

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Terminated Bank outstanding as of the Bank Termination Date, the Successor Bank
or Successor Banks shall in the aggregate extend to the Borrower, on the Bank
Termination Date, Advances (with interest at a rate to be agreed upon by the
Borrower and each Successor Bank) corresponding in respective amounts to each
Advance being prepaid as of such date, each of which Advances shall have an
Interest Period beginning on the Bank Termination Date and ending on the last
day of the Interest Period of the Advance being prepaid to which it corresponds;
PROVIDED that, upon the mutual agreement of the Borrower and the Successor Bank
(or Successor Banks, as applicable) and notice thereof to the Administrative
Agent, the Borrower may elect not to require the Successor Bank (or Successor
Banks, as applicable) to extend Competitive Bid Advances in substitution for the
Competitive Bid Advances extended by the Terminated Bank.

(e) Each such termination pursuant to this SECTION 4.18 shall be
effective on the Bank Termination Date proposed by the Borrower in the related
Termination Notice if (i) no Event of Default shall have occurred prior to such
date and be continuing on such date, (ii) in the event the Borrower shall have
elected to prepay all Advances made by such Terminated Bank outstanding as of
such date, (A) the Borrower shall have prepaid the outstanding aggregate amount
of all Advances made by the Terminated Bank, together with accrued interest to
such date on the amount prepaid and all other amounts payable to such Bank as of
such date (including, without limitation, all accrued and unpaid interest and
facility fees) and (B) the Successor Bank or Successor Banks shall have extended
to the Borrower Advances equal in aggregate amount to the Advances of the
Terminated Bank being prepaid as required pursuant to SECTION 4.18(d), and
(iii) the Administrative Agent shall have received evidence reasonably
satisfactory to the Administrative Agent that the Successor Bank or Successor
Banks shall have agreed in the aggregate to succeed to the entire Commitment of
the Terminated Bank in accordance with this SECTION 4.18.

(f) Subject to SUBSECTION (e) above, on the Bank Termination Date,
(i) each Successor Bank shall become a party to this Agreement as if such
Successor Bank shall have been named on the signature pages hereof, and such
Successor Bank shall have all the rights and obligations of a "Bank" hereunder
and (ii) the Terminated Bank shall have no further Commitment under this
Agreement (other than with respect to Advances, if any, made by such Bank which
remain outstanding after such date) and shall no longer be a "Bank" under this
Agreement for any purpose (other than with respect to Advances made by such Bank
which remain outstanding after such date) except insofar as it shall be entitled
to any payment or indemnification, or be obligated to make any indemnification,
on account of any event which shall

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have occurred, or any right or liability which shall have arisen, on or prior to
the date of repayment of such outstanding Advances. The termination of any
Bank's Commitment and the prepayment of such Bank's Advances pursuant to this
SECTION 4.18 shall not relieve or satisfy the obligations of the Borrower to
make any such prepayments free and clear of all Taxes, to reimburse such Bank
for all Other Taxes and for all increased costs pursuant to SECTION 4.13, or to
comply with all other terms and conditions of this Agreement (including, without
limitation, SECTION 10.04). A Successor Bank shall be subject to the Syndicated
Reduction (or, in the case of more than one Successor Bank, its ratable share of
the Syndicated Reduction) of the Terminated Bank it succeeds upon the Bank
Termination Date applicable to such successor.

ARTICLE V
CONDITIONS OF LENDING

SECTION 5.01. CONDITIONS PRECEDENT TO THE FIRST BORROWING. The
obligation of each Bank to make its initial Advance is subject to the conditions
precedent that (a) the Administrative Agent shall have received all of the
following, each of which, unless otherwise indicated below, shall be dated the
date hereof and shall be in form and substance satisfactory to the
Administrative Agent and (except for the Notes) in sufficient copies for each
Bank:

(i) (A) The Syndicated Notes payable to the order of the Banks,
respectively, executed by the Borrower, (B) the Competitive Bid Notes
payable to the order of the Banks, respectively, executed by the Borrower
and (C) the Swing-Line Note payable to the order of the Swing-Line Bank,
executed by the Borrower;

(ii) Certified copies of the resolutions of the Board of Directors of
the Borrower approving this Agreement and the Notes, and of all documents
evidencing other necessary corporate action with respect to this Agreement
and the Notes;

(iii) A certificate of the Secretary or an Assistant Secretary of the
Borrower certifying the names and true signatures of the officers of the
Borrower authorized to sign this Agreement and the Notes and the other
documents or certificates to be delivered pursuant to this Agreement;

(iv) A certificate, signed by the chief financial officer or
treasurer of the Borrower, stating that as of the

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date hereof all conditions to Borrowing have been satisfied and that no
Event of Default or event which, with notice or the lapse of time or both,
would constitute an Event of Default has occurred and is continuing;

(v) A favorable opinion of (A) William Feather, General Counsel of
the Borrower, and (B) Sidley & Austin, special counsel to the Borrower, or
other counsel to the Borrower (who also may be an employee of the Borrower)
acceptable to the Administrative Agent, in its reasonable judgment, each
opinion to be substantially in the respective form set forth in
EXHIBIT 5.01(a)(v) hereto;

(vi) The Certificate of Incorporation of the Borrower, together with
all amendments thereto, certified by the Secretary of State of Delaware;

(vii) A Certificate of Good Standing with respect to the Borrower,
from the Secretary of State of Delaware;

(viii) A copy, certified by the Secretary or Assistant Secretary of
the Borrower, of the Borrower's By-Laws; and

(ix) A copy of either (i) a tax ruling from the U.S. Internal Revenue
Service or (ii) an opinion of counsel acceptable to the Administrative
Agent in its reasonable judgment, in each case to the effect that the
receipt of common stock of the Borrower by shareholders of Baxter in
connection with the Distribution will qualify under Section 355 of the
Internal Revenue Code of 1986, as amended;

(b) Immediately before and after giving effect to such Borrowing and
the application of the proceeds therefrom, the following statements shall be
true (and each of the giving of the applicable Notice of Borrowing and the
acceptance by the Borrower of the proceeds of such Borrowing shall be deemed to
constitute a representation and warranty by the Borrower to such effect):

(i) The Form 10 accurately describes in all material respects the
proposed terms of the Distribution as of the effective date of the filing
thereof, and since such date there have been no material changes to such
terms, and

(ii) The representations and warranties contained in SECTION 6.01(f)
are correct in all material respects on and as of the date of such
Borrowing as though made on and as of such date;

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substantially contemporaneous with the occurrence of the First Borrowing; and

(d) The Borrower shall have paid to the Administrative Agent and each
Co-Arranger all fees that shall have become due and payable to such Persons by
the Borrower on or prior to such date.

SECTION 5.02. CONDITIONS PRECEDENT TO EACH BORROWING. The obligation
of each Bank to make an Advance on the occasion of each Borrowing (including the
First Borrowing) shall be subject to the additional conditions precedent that on
the date of such Borrowing (a) immediately before and after giving effect to
such Borrowing and to the application of proceeds therefrom the following
statements shall be true (and each of the giving of the applicable Notice of
Borrowing and the acceptance by the Borrower of the proceeds of such Borrowing
shall be deemed to constitute a representation and warranty by the Borrower that
on the date of such Borrowing, immediately before and after giving effect
thereto and to the application of the proceeds therefrom, such statements are
true):

(i) The representations and warranties contained in SECTION 6.01
(other than the last sentence of subsection (f) thereof) are correct in all
material respects on and as of the date of such Borrowing as though made on
and as of such date, and

(ii) No event has occurred and is continuing, or would result from
such Borrowing or from the application of the proceeds therefrom, which
constitutes an Event of Default or which would constitute an Event of
Default but for the requirement that notice be given or time elapse or
both,

and (b) the Administrative Agent shall have received such other available
information concerning the business and financial condition of the Borrower as
any Bank through the Administrative Agent may reasonably request.

ARTICLE VI
REPRESENTATIONS AND WARRANTIES

SECTION 6.01. REPRESENTATIONS AND WARRANTIES OF THE BORROWER. The
Borrower represents and warrants as follows:

(a) The Borrower and each Material Subsidiary is a corporation duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation and

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has all requisite authority to conduct its business in each jurisdiction in
which the failure so to qualify would have a material adverse effect on the
business, properties, assets, operations or condition (financial or otherwise)
of the Borrower.

(b) The execution, delivery and performance by the Borrower of this
Agreement and the Notes are within the Borrower's corporate powers, have been
duly authorized by all necessary corporate action, and do not contravene (i) the
Borrower's charter or by-laws or (ii) any law or any contractual restriction
binding on or affecting the Borrower.

(c) No authorization or approval or other action by, and no notice to
or filing with, any governmental authority or regulatory body or any other
Person is required for the due execution, delivery and performance by the
Borrower of this Agreement or the Notes.

(d) This Agreement is, and the Notes when delivered hereunder will
be, the legal, valid and binding obligations of the Borrower enforceable against
the Borrower in accordance with their respective terms, subject to the effect of
any applicable bankruptcy, insolvency, reorganization, moratorium or similar law
affecting creditors' rights generally and to the effect of general principles of
equity (regardless of whether such enforceability is considered in a proceeding
in equity or at law).

(e) There is no pending or, to the best of the knowledge of the
Borrower, threatened action or proceeding affecting the Borrower or any of its
Subsidiaries before any court, governmental agency or arbitrator, which could
reasonably be expected to have a material adverse effect on the financial
condition or operations of the Borrower or which purports to affect the
legality, validity or enforceability of this Agreement or any Note.

(f) The combined balance sheet of the Borrower and its Subsidiaries
for the year ended December 31, 1995 and for the six month period ended June 30,
1996 and the related combined statements of income and stockholder's equity of
the Borrower and its Subsidiaries for the year ended December 31, 1995 and the
six month period ended June 30, 1996, in each case as set forth in the Form 10,
copies of which have been furnished to each Bank, present fairly the financial
position of the Borrower and its Subsidiaries as at the date so specified and
the results of the operations and cash flows of the Borrower and its
Subsidiaries for the periods so specified, in conformity with generally accepted
accounting principles. Since December 31, 1995 there has been no material
adverse change in such financial position or

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operations, or in the business, properties or condition of the Borrower and its
Subsidiaries taken as a whole.

(g) The Borrower is not (i) an "investment company," (ii) a company
"controlled" by an "investment company" which is registered under the Investment
Company Act of 1940, as amended, or (iii) to the best knowledge of the Borrower,
a company "controlled" by any other "investment company" within the meaning of
the Investment Company Act of 1940, as amended.

(h) Neither the Borrower nor any of its Subsidiaries is engaged in
the business of purchasing or carrying Margin Stock. The value of the Margin
Stock owned directly or indirectly by the Borrower or any Subsidiary which is
subject to any arrangement (as such term is used in Section 221.2(g) of
Regulation U issued by the Board of Governors of the Federal Reserve System)
hereunder is less than an amount equal to 25% of the value of all assets of the
Borrower and/or such Subsidiary subject to such arrangement.

(i) The operations of the Borrower and each Material Subsidiary
comply in all material respects with all Environmental Laws, the noncompliance
with which would materially adversely affect the business of the Borrower or the
ability of the Borrower to obtain credit on commercially reasonable terms.

ARTICLE VII
COVENANTS

SECTION 7.01. AFFIRMATIVE COVENANTS OF THE BORROWER. So long as any
Note shall remain unpaid or any Bank shall have any Commitment, the Borrower
will, unless the Majority Banks shall otherwise consent in writing:

(a) PAYMENT OF TAXES, ETC. Pay and discharge, and cause each
Material Subsidiary to pay and discharge, before the same shall become
delinquent, (i) all taxes, assessments and governmental charges or levies
imposed upon it or upon its income, profit or property, and (ii) all lawful
claims which, if unpaid, might by law become a lien upon its property; PROVIDED,
HOWEVER, that neither the Borrower nor any Material Subsidiary shall be required
to pay or discharge any such tax, assessment, charge or claim which is being
contested in good faith and by proper proceedings and with respect to which the
Borrower shall have established appropriate reserves in accordance with
generally accepted accounting principles.

(b) MAINTENANCE OF INSURANCE. Maintain, and cause each Material
Subsidiary to maintain, insurance with responsible and reputable insurance
companies or associations in such amounts

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and covering such risks as is usually carried by companies engaged in similar
businesses and owning similar properties in the same general areas in which the
Borrower or such Material Subsidiary operates.

(c) PRESERVATION OF CORPORATE EXISTENCE, ETC. Preserve and maintain,
and cause each Material Subsidiary to preserve and maintain, its corporate
existence, rights (charter and statutory), and franchises, except as otherwise
permitted by SECTION 7.02(c).

(d) COMPLIANCE WITH LAWS, ETC. Comply, and cause each Material
Subsidiary to comply, with the requirements of all applicable laws, rules,
regulations and orders of any governmental authority (including, without
limitation, all Environmental Laws and ERISA), noncompliance with which would
materially adversely affect the business of the Borrower or the ability of the
Borrower to obtain credit on commercially reasonable terms.

(e) KEEPING OF BOOKS. Keep, and cause each Material Subsidiary to
keep, proper books of record and account, in which full and correct entries
shall be made of all financial transactions and the assets and business of the
Borrower and each Material Subsidiary in accordance with generally accepted
accounting principles consistently applied.

(f) INSPECTION. Permit, and cause each Material Subsidiary to
permit, on reasonable prior written notice, Administrative Agent or any of
those Banks that are Co-Arrangers, and their respective representatives and
agents, to inspect any of the properties, corporate books and financial records
of the Borrower and its Material Subsidiaries, to examine and make copies of the
books of account and other financial records of the Borrower and its Material
Subsidiaries, and to discuss the affairs, finances and accounts of the Borrower
and its Material Subsidiaries with, and to be advised as to the same by, their
respective officers or directors, at such reasonable times during normal
business hours and intervals as the Administrative Agent or any such Bank may
reasonably designate.

(g) REPORTING REQUIREMENTS. Furnish to the Administrative Agent in
sufficient copies for distribution to each Bank (or, in the case of clause (ix),
each applicable Bank):

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Consolidated statement of income and cash flows of the Borrower and its
Consolidated Subsidiaries for the period commencing at the end of the
previous fiscal year and ending with the end of such quarter, certified by
the chief financial officer or treasurer of the Borrower;

(ii) As soon as available and in any event within 100 days after the
end of each fiscal year of the Borrower, a Consolidated balance sheet of
the Borrower and its Consolidated Subsidiaries as of the end of such year
and a Consolidated statement of income and stockholder's equity and cash
flows of the Borrower and its Consolidated Subsidiaries for such fiscal
year and accompanied by (A) a report of Price Waterhouse, independent
public accountants of the Borrower, or other independent public accountants
of nationally recognized standing, on the results of their examination of
the Consolidated annual financial statements of the Borrower and its
Consolidated Subsidiaries, which report shall be unqualified or shall be
otherwise reasonably acceptable to the Majority Banks; PROVIDED that such
report may set forth qualifications to the extent such qualifications
pertain solely to changes in generally accepted accounting principles from
such principles applied during earlier accounting periods, the
implementation of which changes (with the concurrence of such accountants)
is reflected in the financial statements accompanying such report, and
(B) a certificate of such accountants substantially in the form of
EXHIBIT 7.01(g)(ii);

(iii) Promptly after the sending or filing thereof, copies of all
reports which the Borrower files with the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as amended,
including, without limitation, Forms 8-K, 10-Q and 10-K and all such
reports that disclose material litigation pending against the Borrower or
any Material Subsidiary or any material noncompliance with any
Environmental Law on the part of the Borrower or any Material Subsidiary;

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status thereof and describing the action the Borrower proposes to take with
respect thereto and (B) demonstrating, in reasonable detail, the
calculations used by such officer to determine compliance with the
financial covenants contained in SECTIONS 7.01(i), 7.02(a), 7.02(b) and
7.02(d);

(v) With respect to each fiscal year for which the Borrower shall
have an aggregate Unfunded Liability of $50,000,000 or more for all of its
single employer pension benefit plans covered by Title IV of ERISA and all
multiemployer pension benefit plans covered by Title IV of ERISA to which
the Borrower has an obligation to contribute, as soon as available, and in
any event within ten months after the end of such fiscal year, a statement
of Unfunded Liabilities of each such plan, certified as correct by an
actuary enrolled in accordance with regulations under ERISA and a statement
of estimated withdrawal liability as of the most recent plan year end as
customarily prepared by the trustees under the multiemployer plans to which
the Borrower has an obligation to contribute;

(vi) As soon as possible, and in any event within 30 days after the
occurrence of each event the Borrower knows is or may be a Reportable Event
(as defined in Section 4043 of ERISA) with respect to any Plan with an
Unfunded Liability in excess of $50,000,000, a statement signed by the
chief financial officer or treasurer of the Borrower describing such
reportable event and the action which the Borrower proposes to take with
respect thereto;

(vii) As soon as possible, and in any event within five Business Days
after the Borrower shall become aware of the occurrence of each Event of
Default or event which, with notice or lapse of time or both, would
constitute an Event of Default, which Event of Default or event is
continuing on the date of such statement, a statement of the chief
financial officer or treasurer of the Borrower setting forth details of
such Event of Default or event and the action which the Borrower proposes
to take with respect thereto;

(viii) As soon as possible, and in any event within ten Business Days
of the announcement of a change in a Credit Rating, a notice from the chief
financial officer or treasurer or assistant treasurer of the Borrower
indicating (A) the new Credit Rating

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and (B) the date of the announcement of such new Credit Rating; and

(ix) Promptly from time to time, such other information as any Bank
may reasonably request through the Administrative Agent.

(h) USE OF PROCEEDS. Use the proceeds of Borrowings made under this
Agreement (i) to repay indebtedness owing to Baxter at the time of the
Distribution and (ii) for general corporate purposes not in violation of any
applicable law or regulation (including, without limitation, Regulation U and X
of the Board of Governors of the Federal Reserve System (the "MARGIN
REGULATIONS")) and for the payment of fees and expenses related to the
Distribution. With respect to any Borrowing the proceeds of which shall be used
to purchase or carry Margin Stock, the Borrower shall include in the Notice of
Borrowing for such Borrowing such information as shall enable the Banks and the
Borrower to comply with the Margin Regulations.

(i) INTEREST EXPENSE COVERAGE RATIO. Maintain a ratio of EBITDA (as
defined below) to Interest Expense as at the end of each fiscal quarter of the
Borrower with respect to the four-quarter period then ended (or, if shorter,
with respect to the period from the date on which the Distribution occurs
through the end of such fiscal quarter) of (1) in the case of each fiscal
quarter ending on or prior to December 31, 1997, not less than 3.25 to 1.0, and
(2) in the case of each fiscal quarter ending thereafter, 3.50 to 1.0.

"EBITDA" means, for any period, an amount equal to the sum (without
duplication) of (i) net income for such period before income tax expense
(excluding Extraordinary Items), PLUS (ii) Interest Expense for such period PLUS
(iii) depreciation expense for such period PLUS (iv) amortization expense for
such period including, without limitation, amortization of goodwill and other
intangible assets, in each case determined on a Consolidated basis for the
Borrower and its Consolidated Subsidiaries and, in the case of clauses (ii),
(iii) and (iv), the specified amount to be included only to the extent the same
shall have been deducted in determining net income for such period before income
tax expense.

"EXTRAORDINARY ITEMS" means (i) for any period, all extraordinary
gains and extraordinary losses recorded or recognized during such period, and
(ii) in addition, for any period ending on or prior to March 31, 1997, all
restructuring charges relating to, or arising in connection with, the
Distribution, which charges are recorded or recognized during such period;
PROVIDED that the aggregate amount of all such

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restructuring charges at any time included in "Extraordinary Items" shall not
exceed an amount equal to $50,000,000.

(j) BUSINESSES. Remain, and cause each of its Material Subsidiaries
to remain, in substantially the same businesses as are carried on by the
Borrower and such Subsidiaries on the Closing Date and businesses reasonably
related thereto.

SECTION 7.02. NEGATIVE COVENANTS OF THE BORROWER. So long as any
Note shall remain unpaid or any Bank shall have any Commitment, the Borrower
will not, without the written consent of the Majority Banks:

(a) LIENS, ETC. Suffer to exist, create, assume or incur, or permit
any of its Material Subsidiaries to suffer to exist, create, assume or incur,
any Security Interest, or assign, or permit any of its Material Subsidiaries to
assign, any right to receive income, in each case to secure Debt or any other
obligation or liability, other than:

(1) Any Security Interest to secure Debt or any other obligation or
liability of any Material Subsidiary to the Borrower.

(2) Mechanics', materialmen's, carriers' or other like liens arising
in the ordinary course of business (including construction of facilities)
in respect of obligations which are not due or which are being contested in
good faith and for which reasonable reserves have been established.

(3) Any Security Interest arising by reason of deposits with, or the
giving of any form of security to, any governmental agency or any body
created or approved by law or governmental regulation which is required by
law or governmental regulation as a condition to the transaction of any
business, or the exercise of any privilege, franchise or license.

(4) Security Interests for taxes, assessments or governmental charges
or levies not yet delinquent or Security Interests for taxes, assessments
or governmental charges or levies already delinquent but the validity of
which is being contested in good faith and for which reasonable reserves
have been established.

(5) Security Interests (including judgment liens) arising in
connection with legal proceedings so long as such proceedings are being
contested in good faith and,

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in the case of judgment liens, execution thereon is stayed.

(6) Landlords' liens on fixtures located on premises leased by the
Borrower or one of its Material Subsidiaries in the ordinary course of
business.

(7) Security Interests arising in connection with contracts and
subcontracts with or made at the request of the United States of America,
any state thereof, or any department, agency or instrumentality of the
United States or any state thereof for obligations not yet delinquent.

(8) Any Security Interest arising by reason of deposits to qualify
the Borrower or a Subsidiary to conduct business, to maintain self-
insurance, or to obtain the benefit of, or comply with, laws.

(9) Any purchase money Security Interest claimed by sellers of goods
on ordinary trade terms provided that no financing statement has been filed
to perfect such Security Interest.

(10) The extension of any Security Interest existing as of the date
hereof to additions, extensions, or improvements to the property subject to
the Security Interest which does not arise as a result of borrowing money
or the securing of Debt or other obligation or liability created, assumed
or incurred after such date.

(11) Security Interests on (i) property of a corporation or firm
existing at the time such corporation is merged or consolidated with the
Borrower or any Subsidiary or at the time of a sale, lease or other
disposition of the properties of a corporation or a firm as an entirety (or
the properties of a corporation or firm comprising a product line or line
of business, as an entirety) or substantially as an entirety to the
Borrower or a Subsidiary; or (ii) property comprising machinery, equipment
or real property acquired by the Borrower or any of its Subsidiaries, which
Security Interests shall have existed at the time of such acquisition and
secure obligations assumed by the Borrower or such Subsidiary in connection
with such acquisition; PROVIDED that the Debt or other obligations or
liabilities secured by Security Interests of the type described in this
PARAGRAPH (11) shall not at any time exceed an aggregate amount equal to
$100,000,000.

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(12) Security Interests arising in connection with the sale,
assignment or other transfer by the Borrower or any Material Subsidiary of
accounts receivable, lease receivables or other payment obligations owing
to the Borrower or any Subsidiary or any interest in any of the foregoing
(together in each case with any collections and other proceeds thereof, any
collection or deposit accounts related thereto, and any collateral,
guaranties or other property or claims in favor of the Borrower or such
Subsidiary supporting or securing payment by the obligor thereon of, or
otherwise related to, any such receivables)(each such sale, assignment or
other transfer being a "SECURITIZATION TRANSACTION"); PROVIDED that the
aggregate investment or claim held at any time by purchasers, assignees or
other transferees of (or of interests in) such receivables shall not exceed
an amount equal to $300,000,000.

(13) Security Interests securing non-recourse obligations in
connection with leveraged or single-investor lease transactions.

(14) Security Interests securing the performance of any contract or
undertaking made in the ordinary course of business (as such business is
currently conducted) other than for the borrowing of money.

(15) Any Security Interest granted by any Material Subsidiary of the
Borrower; PROVIDED, that (i) the principal business and assets of such
Material Subsidiary are located in Puerto Rico or are located outside of
the United States, its other territories and possessions, (ii) the property
of such Material Subsidiary which is subject to such Security Interest is a
parcel of real property, a manufacturing plant, manufacturing equipment, a
warehouse, or an office building hereafter acquired, constructed, developed
or improved by such Material Subsidiary, and (iii) such Security Interest
is created prior to or contemporaneously with, or within 120 days after
(x) in the case of acquisition of such property, the completion of such
acquisition and (y) in the case of the construction, development or
improvement of such property, the later to occur of the completion of such
construction, development or improvement or the commencement of operations,
use or commercial production (exclusive of test and start-up periods) of
such property, and such Security Interest secures or provides for the
payment of all or any part of the acquisition

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cost of such property or the cost of construction, development or
improvement thereof, as the case may be.

(16) Any Security Interest in deposits or cash equivalent investments
pledged with a financial institution for the sole purpose of implementing a
hedging or financing arrangement commonly known as a "back-to-back" loan
arrangement, provided in each case that neither the assets subject to such
Security Interest nor the Debt incurred in connection therewith are
reflected on the Consolidated balance sheet of the Borrower.

(17) Any Security Interest arising out of or continuing in connection
with the extension, renewal or refunding (or successive extensions,
renewals or refundings) in whole or in part of any Debt or any other
obligation or liability secured by any Security Interest referred to in the
foregoing PARAGRAPHS (1) through (16), provided that the principal amount
of Debt or any other obligation or liability secured by such Security
Interest shall not exceed the principal amount outstanding immediately
prior to such extension, renewal or refunding, and that the Security
Interest securing such Debt or other obligation or liability shall be
limited to the property which, immediately prior to such extension, renewal
or refunding secured such Debt or other obligation or liability and
additions to such property.

Notwithstanding the foregoing provisions of this SECTION 7.02(a), the
Borrower and its Material Subsidiaries may, at any time, suffer to exist, issue,
incur, assume and guarantee Secured Debt (in addition to Secured Debt permitted
to be secured under the foregoing PARAGRAPHS (1) through (17)), PROVIDED that
the aggregate amount of such Secured Debt, together with the aggregate amount of
all other Secured Debt (not including Secured Debt permitted to be secured under
the foregoing PARAGRAPHS (1) through (17)) of the Borrower and its Material
Subsidiaries which is suffered to exist, issued, incurred, assumed or
guaranteed, does not at such time exceed 3% of Consolidated Net Tangible Assets.

(b) LEVERAGE RATIO. Permit Consolidated Adjusted Debt as at the end
of any fiscal quarter to exceed an amount equal to (x) in the case of each
fiscal quarter ending on or prior to December 31, 1997, 52.5% of Consolidated
Capitalization at such time and (y) in the case of each fiscal quarter ending
thereafter, 50% of Consolidated Capitalization at such time.

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(c) MERGER, ETC. (i) Merge or consolidate with or into any Person;
PROVIDED that the Borrower may merge or consolidate with any corporation,
including any Subsidiary, which is a U.S. Corporation if (A) immediately after
giving effect to such transaction, no event shall have occurred and be
continuing which constitutes an Event of Default or which with the giving of
notice or lapse of time or both would constitute an Event of Default and (B) the
survivor of such merger or consolidation shall be the Borrower.
"U.S. CORPORATION" means a corporation organized and existing under the laws of
the United States, any state thereof or the District of Columbia.

(ii) Convey, transfer, lease or otherwise dispose of any of its
assets, or permit any Material Subsidiary to convey, transfer, lease or
otherwise dispose of any of its assets, during any calendar year if after giving
effect thereto the aggregate value of the assets of the Borrower and its
Material Subsidiaries that shall have been conveyed, transferred, leased or
otherwise disposed of during such calendar year (other than in the ordinary
course of business or in connection with a Securitization Transaction permitted
under SECTION 7.02(a)(12)) would exceed 33% of the value of the total amount of
assets on the Consolidated balance sheet of the Borrower and its Consolidated
Subsidiaries on the first day of such calendar year.

(d) LIMITATIONS ON SUBSIDIARY DEBT. Permit the aggregate amount of
Subsidiary Debt (as defined below) at any time to exceed $250,000,000.

"SUBSIDIARY DEBT" means the sum (without duplication) of (i) all Debt
to the extent the same represents an obligation of any Subsidiary of the
Borrower PLUS (ii) to the extent any Subsidiary of the Borrower is liable as a
general partner for the indebtedness and other obligations of any partnership,
all Debt of such partnership; PROVIDED that "Subsidiary Debt" shall not include
any indebtedness or other obligations with respect to which the Borrower or any
Subsidiary of the Borrower is the obligee.

ARTICLE VIII
EVENTS OF DEFAULT

SECTION 8.01. EVENTS OF DEFAULT. If any of the following events
("EVENTS OF DEFAULT") shall occur and be continuing:

(a) The Borrower shall fail to pay (i) any installment of interest on
any Note or any facility fee payable under SECTION 4.04(a), in each case when
due and such default continues

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for five days, or (ii) any amount of principal of any Note when due; or

(b) Any representation or warranty made or deemed made by the
Borrower (or any of its officers) in connection with this Agreement shall prove
to have been incorrect in any material respect when made or deemed made; or

(c) The Borrower shall fail to perform or observe any term, covenant
or agreement contained in SECTION 7.01(i), 7.02(a) or 7.02(b) of this Agreement
on its part to be performed or observed and such failure shall remain unremedied
on the earlier to occur of (i) or (ii): (i) the date 30 days after the Borrower
shall have become aware of such failure or (ii) the date that financial
statements of the Borrower shall be available from which it may be ascertained
that such failure to perform or observe such term, covenant or agreement shall
have occurred. For purposes of clause (ii) above, the date that any financial
statements shall be deemed available shall be the date on which the Borrower
shall file (or, if earlier, the date the Borrower shall have been required to
file) such financial statements with the Securities and Exchange Commission as
part of any report required to be filed pursuant to the Securities Exchange Act
of 1934, as amended; or

(d) The Borrower shall (i) fail to perform or observe, or shall
breach, any other term, covenant or agreement contained in this Agreement on its
part to be performed or observed (other than those failures or breaches referred
to in SUBSECTIONS (a), (b), (c), (d)(ii) or (d)(iii) of this SECTION 8.01) and
any such failure or breach shall remain unremedied for 30 days after written
notice thereof has been given to the Borrower by the Administrative Agent at the
request of any Bank; (ii) fail to perform or observe or shall breach
SECTION 7.02(c); or (iii) fail to perform or observe SECTION 7.01(g)(vii) and
such failure shall remain unremedied for 10 days after the occurrence thereof;
or

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specified in such agreement or instrument, if the effect of such event or
condition is to accelerate, or to permit the acceleration of, the maturity of
such Debt; or any such Debt shall be declared to be due and payable, or required
to be prepaid (other than by a scheduled prepayment), prior to the stated
maturity thereof; or any event or condition shall exist after the applicable
grace period specified in any agreement or instrument relating to a
Securitization Transaction if the effect of such event or condition is to cause
or to permit an amount not less than a Material Default Amount to become
immediately due and payable by the Borrower or any Material Subsidiary under
such Securitization Transaction; or

(f) The Borrower or any Material Subsidiary shall generally not pay
its debts as such debts become due, or shall admit in writing its inability to
pay its debts generally, or shall make a general assignment for the benefit of
creditors; or any proceeding shall be instituted by or against the Borrower or
any Material Subsidiary seeking to adjudicate it a bankrupt or insolvent, or
seeking liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief, or composition of it or its debt under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors, or seeking the
entry of an order for relief or the appointment of a receiver, trustee, or
other similar official for it or for any substantial part of its property; or
the Borrower or any Material Subsidiary shall take corporate action to authorize
any of the actions set forth above in this SUBSECTION (f); PROVIDED that, in the
case of any such proceeding filed or commenced against the Borrower or any
Material Subsidiary, such event shall not constitute an "Event of Default"
hereunder unless either (i) the same shall have remained undismissed or unstayed
for a period of 60 days, (ii) an order for relief shall have been entered
against the Borrower or such Material Subsidiary under the federal bankruptcy
laws as now or hereafter in effect or (iii) the Borrower or such Material
Subsidiary shall have taken corporate action consenting to, approving or
acquiescing in the commencement or maintenance of such proceeding; or

(g) Any judgment or order for the payment of money shall be rendered
against the Borrower or any Material Subsidiary and (i) either (A) enforcement
proceedings shall have been commenced by any creditor upon such judgment or
order or (B) there shall be any period of 10 consecutive days, in the case of a
judgment or order rendered or entered by a court located in the United States,
its territories and Puerto Rico, or 30 consecutive days, in the case of any
other court, during which a stay of enforcement of such judgment or order, by
reason of a pending appeal or otherwise, shall not be in effect, and (ii) the
amount of such judgment or order, when aggregated with the amount

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of all other such judgments and orders described in this SUBSECTION (g), shall
exceed the Material Default Amount in effect at such time; or

(h) Either (i) the Pension Benefit Guaranty Corporation shall
terminate any single-employer plan (as defined in Section 4001(b)(2) of ERISA)
that provides benefits for employees of the Borrower or any Material Subsidiary
and such plan shall have an Unfunded Liability in an amount in excess of the
Material Default Amount at such time or (ii) withdrawal liability shall be
assessed against the Borrower or any Material Subsidiary in connection with any
multiemployer plan (whether under Section 4203 or Section 4205 of ERISA) and
such withdrawal liability shall be an amount in excess of the Material Default
Amount at such time; or

(i) (i) any Person or two or more Persons acting in concert shall have
acquired beneficial ownership (within the meaning of Rule 13d-3 of the
Securities and Exchange Commission under the Securities Exchange Act of 1934),
directly or indirectly, of securities of the Borrower (or other securities
convertible into such securities) representing more than 33% of the combined
voting power of all securities of the Borrower entitled to vote in the election
of directors, other than securities having such power only by reason of the
happening of a contingency or (ii) a majority of the members of the Board of
Directors of the Borrower shall cease to be Continuing Members. For this
purpose, "CONTINUING MEMBER" means a member of the Board of Directors of the
Borrower who either (a) was a member of the Borrower's Board of Directors on the
Closing Date and has been such continuously thereafter or (b) became a member of
such Board of Directors after the Closing Date and whose election or nomination
for election was approved by a vote of at least two-thirds of the Continuing
Members then members of the Borrower's Board of Directors;

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be declared to be due and payable pursuant to the foregoing CLAUSE (ii) without
the consent of the holder of such Competitive Bid Note. In the event of the
occurrence of an Event of Default under SECTION 8.01(f), (A) the obligation of
each Bank to make Advances shall automatically be terminated and (B) the Notes,
all such interest and all such amounts shall automatically become and be due and
payable, without presentment, demand, protest or any notice of any kind, all of
which are hereby expressly waived by the Borrower.

ARTICLE IX
THE ADMINISTRATIVE AGENT

SECTION 9.01. APPOINTMENT AND AUTHORIZATION; "ADMINISTRATIVE AGENT".
(a) Each Bank hereby irrevocably (subject to SECTION 9.09) appoints, designates
and authorizes the Administrative Agent to take such action on its behalf under
the provisions of this Agreement, the Notes and any other instrument, document
or agreement executed in connection herewith (each a "LOAN DOCUMENT") and to
exercise such powers and perform such duties as are expressly delegated to it by
the terms of this Agreement or any other Loan Document, together with such
powers as are reasonably incidental thereto. Notwithstanding any provision to
the contrary contained elsewhere in this Agreement or in any other Loan
Document, the Administrative Agent shall not have any duties or
responsibilities, except those expressly set forth herein, nor shall the
Administrative Agent have or be deemed to have any fiduciary relationship with
any Bank, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or any other Loan
Document or otherwise exist against the Administrative Agent. Without limiting
the generality of the foregoing sentence, the use of the term "agent" in this
Agreement with reference to the Administrative Agent is not intended to connote
any fiduciary or other implied (or express) obligations arising under agency
doctrine of any applicable law. Instead, such term is used merely as a matter
of market custom, and is intended to create or reflect only an administrative
relationship between independent contracting parties.

(b) The Swing-Line Bank shall have all of the benefits and immunities (i)
provided to the Administrative Agent in this ARTICLE IX with respect to any acts
taken or omissions suffered by the Swing-Line Bank in connection with Swing-Line
Advances made by it as fully as if the term "Administrative Agent", as used in
this ARTICLE IX, included the Swing-Line Bank with respect to such acts or
omissions, and (ii) as additionally provided in this Agreement with respect to
the Swing-Line Bank.

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SECTION 9.02. DELEGATION OF DUTIES. The Administrative Agent may
execute any of its duties under this Agreement or any other Loan Document by or
through agents, employees or attorneys-in-fact and shall be entitled to advice
of counsel concerning all matters pertaining to such duties. The Administrative
Agent shall not be responsible in any manner to any of the Banks for the
negligence or misconduct of any agent or attorney-in-fact that it selects with
reasonable care.

SECTION 9.03. LIABILITY OF ADMINISTRATIVE AGENT. None of the Agent-
Related Persons shall (i) be liable in any manner to any of the Banks for any
action taken or omitted to be taken by any of them under or in connection with
this Agreement or any other Loan Document or the transactions contemplated
hereby (except for its own gross negligence or willful misconduct), or (ii) be
responsible in any manner to any of the Banks for any recital, statement,
representation or warranty made by the Borrower or any Subsidiary or Affiliate
of the Borrower, or any officer thereof, contained in this Agreement or in any
other Loan Document, or in any certificate, report, statement or other document
referred to or provided for in, or received by the Administrative Agent under or
in connection with, this Agreement or any other Loan Document, or the validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement or
any other Loan Document, or for any failure of the Borrower or any other party
to any Loan Document to perform its obligations hereunder or thereunder. No
Agent-Related Person shall be under any obligation to any Bank to ascertain or
to inquire as to the observance or performance of any of the agreements
contained in, or conditions of, this Agreement or any other Loan Document, or to
inspect the properties, books or records of the Borrower or any of the
Borrower's Subsidiaries or Affiliates.

SECTION 9.04. RELIANCE BY ADMINISTRATIVE AGENT. (a) The
Administrative Agent shall be entitled to rely, and shall be fully protected in
relying, upon any writing, resolution, notice, consent, certificate, affidavit,
letter, telegram, facsimile, telex or telephone message, statement or other
document or conversation believed by it to be genuine and correct and to have
been signed, sent or made by the proper Person or Persons, and upon advice and
statements of legal counsel (including counsel to the Borrower), independent
accountants and other experts selected by the Administrative Agent. As between
the Administrative Agent and the Banks, (i) the Administrative Agent shall be
fully justified in failing or refusing to take any action under this Agreement
or any other Loan Document unless it shall first receive such advice or
concurrence of the Majority Banks as it deems appropriate and, if it so
requests, it shall first be indemnified to its satisfaction by the Banks against
any and all liability and expense which may

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be incurred by it by reason of taking or continuing to take any such action and
(ii) the Administrative Agent shall in all cases be fully protected in acting,
or in refraining from acting, under this Agreement or any other Loan Document in
accordance with a request or consent of the Majority Banks and such request and
any action taken or failure to act pursuant thereto shall be binding upon all of
the Banks.

(b) For purposes of determining compliance with the conditions
specified in SECTION 5.01, each Bank that has executed this Agreement shall be
deemed to have consented to, approved or accepted or to be satisfied with, each
document or other matter either sent by the Administrative Agent to such Bank
for consent, approval, acceptance or satisfaction, or required thereunder to be
consented to or approved by or acceptable or satisfactory to the Bank.

SECTION 9.05. NOTICE OF DEFAULT. The Administrative Agent shall not
be deemed to have knowledge or notice of the occurrence of any Event of Default
or any Unmatured Event of Default, except with respect to defaults in the
payment of principal, interest and fees required to be paid to the
Administrative Agent for the account of the Banks, unless the Administrative
Agent shall have received written notice from a Bank or the Borrower referring
to this Agreement, describing such Event of Default or Unmatured Event of
Default and stating that such notice is a "notice of default". The
Administrative Agent will notify the Banks of its receipt of any such notice.
The Administrative Agent shall take such action with respect to such Event of
Default or Unmatured Event of Default as may be requested by the Majority Banks
in accordance with SECTION 10.01; PROVIDED, HOWEVER, that unless and until the
Administrative Agent has received any such request, the Administrative Agent may
(but shall not be obligated to) take such action, or refrain from taking such
action, with respect to such Event of Default or Unmatured Event of Default as
it shall deem advisable or in the best interest of the Banks.

SECTION 9.06. CREDIT DECISION. Each Bank acknowledges that none of
the Agent-Related Persons has made any representation or warranty to it, and
that no act by the Administrative Agent hereinafter taken, including any review
of the affairs of the Borrower and its Subsidiaries, shall be deemed to
constitute any representation or warranty by any Agent-Related Person to any
Bank. Each Bank represents to the Administrative Agent that it has,
independently and without reliance upon any Agent-Related Person and based on
such documents and information as it has deemed appropriate, made its own
appraisal of and investigation into the business, prospects, operations,
property, financial and other condition and creditworthiness of the

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Borrower and its Subsidiaries, and all applicable bank regulatory laws relating
to the transactions contemplated hereby, and made its own decision to enter into
this Agreement and to extend credit to the Borrower hereunder. Each Bank also
represents that it will, independently and without reliance upon any Agent-
Related Person and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit analysis, appraisals
and decisions in taking or not taking action under this Agreement and the other
Loan Documents, and to make such investigations as it deems necessary to inform
itself as to the business, prospects, operations, property, financial and other
condition and creditworthiness of the Borrower. Except for notices, reports and
other documents expressly herein required to be furnished to the Banks by the
Administrative Agent, the Administrative Agent shall not have any duty or
responsibility to provide any Bank with any credit or other information
concerning the business, prospects, operations, property, financial and other
condition or creditworthiness of the Borrower which may come into the possession
of any of the Agent-Related Persons.

SECTION 9.07. INDEMNIFICATION OF ADMINISTRATIVE AGENT. Whether or
not the transactions contemplated hereby are consummated, the Banks shall
indemnify upon demand the Agent-Related Persons (to the extent not reimbursed by
or on behalf of the Borrower and without limiting the obligation of the Borrower
to do so), pro rata, from and against any and all liabilities, obligations,
losses (other than any loss resulting from the Borrower's failure to pay any fee
referred to in SECTION 4.04(c) hereof), damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever which
may be imposed on, incurred by, or asserted against the Administrative Agent in
any way relating to or arising out of this Agreement or any action taken or
omitted by the Administrative Agent under this Agreement; PROVIDED, HOWEVER,
that no Bank shall be liable for the payment to any Agent-Related Person of any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting solely from such
Person's gross negligence or willful misconduct or from the violation by such
Person of any law or judicial order. Without limitation of the foregoing, each
Bank shall reimburse the Administrative Agent upon demand for its ratable share
of any costs or out-of-pocket expenses (including Attorney Costs) incurred by
the Administrative Agent in connection with the preparation, execution,
delivery, administration, modification, amendment or enforcement (whether
through negotiations, legal proceedings or otherwise) of, or legal advice in
respect of rights or responsibilities under, this Agreement, any other Loan
Document, or any document contemplated by or referred to herein, to the

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extent that the Administrative Agent is not reimbursed for such expenses by or
on behalf of the Borrower. The undertaking in this Section shall survive the
payment of all Advances and the resignation or replacement of the Administrative
Agent.

SECTION 9.08. ADMINISTRATIVE AGENT IN INDIVIDUAL CAPACITY. BofA and
its Affiliates may make loans to, issue letters of credit for the account of,
accept deposits from, acquire equity interests in and generally engage in any
kind of banking, trust, financial advisory, underwriting or other business with
the Borrower and its Subsidiaries and Affiliates as though BofA were not the
Administrative Agent hereunder and without notice to or consent of the Banks.
The Banks acknowledge that, pursuant to such activities, BofA or its Affiliates
may receive information regarding the Borrower or its Affiliates (including
information that may be subject to confidentiality obligations in favor of the
Borrower or such Subsidiary) and acknowledge that the Administrative Agent shall
be under no obligation to provide such information to them. With respect to its
Advances, BofA and any Affiliate thereof shall have the same rights and powers
under this Agreement as any other Bank and may exercise the same as though BofA
were not the Administrative Agent.

SECTION 9.09. SUCCESSOR ADMINISTRATIVE AGENT. The Administrative
Agent may, and at the request of the Majority Banks shall, resign as
Administrative Agent upon 30 days' notice to the Banks. If the Administrative
Agent resigns under this Agreement, the Majority Banks shall appoint from among
the Banks a successor agent for the Banks. If no successor agent is appointed
prior to the effective date of the resignation of the Administrative Agent, the
Administrative Agent may appoint, after consulting with the Banks and the
Borrower, a successor agent from among the Banks. Upon the acceptance of its
appointment as successor agent hereunder, such successor agent shall succeed to
all the rights, powers and duties of the retiring Administrative Agent and the
term "Administrative Agent" shall mean such successor agent and the retiring
Administrative Agent's appointment, powers and duties as Administrative Agent
shall be terminated. After any retiring Administrative Agent's resignation
hereunder as Administrative Agent, the provisions of this ARTICLE IX and SECTION
10.04 shall inure to its benefit as to any actions taken or omitted to be taken
by it while it was Administrative Agent under this Agreement. If no successor
agent has accepted appointment as Administrative Agent by the date which is 30
days following a retiring Administrative Agent's notice of resignation, the
retiring Administrative Agent's resignation shall nevertheless thereupon become
effective and the Banks shall perform all of the duties of the Administrative
Agent hereunder until such time, if any, as the Majority Banks appoint

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a successor agent as provided for above. Notwithstanding the foregoing,
however, BofA may not be removed as the Administrative Agent at the request of
the Majority Banks unless Bank of America Illinois shall also simultaneously be
replaced as the Swing-Line Bank hereunder pursuant to documentation in form and
substance reasonably satisfactory to Bank of America Illinois.

SECTION 9.10. OTHER AGENTS. None of the Banks identified on the cover
page of this Agreement or otherwise herein as being "co-syndication agent,"
"documentation agent, "syndication agent," or a "Co-Arranger" (collectively, the
"OTHER AGENTS") shall have any right, power, obligation, liability,
responsibility or duty under this Agreement other than those applicable to all
Banks as such or, in the case of the Co-Arrangers, the rights specified in
SECTION 7.01(f). Each Bank acknowledges that it has not relied, and will not
rely, on any of the Other Agents in deciding to enter into this Agreement or in
taking or refraining from taking any action hereunder or pursuant hereto.

ARTICLE X
MISCELLANEOUS

SECTION 10.01. AMENDMENTS, ETC. Subject to the next two sentences,
no amendment or waiver of any provision of this Agreement or the Notes, nor
consent to any departure by the Borrower therefrom, shall in any event be
effective unless the same shall be in writing and signed by the Majority Banks,
and then such waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given. No amendment, waiver or consent
shall, unless in writing and signed by all the Banks, do any of the following:
(a) waive any of the conditions specified in ARTICLE V, (b) change the
Commitments of the Banks or subject the Banks to any additional obligations,
(c) reduce the principal of, or interest on, the Notes or any facility fees or
other amount payable hereunder, (d) change any date fixed for any payment in
respect of principal of, or interest on, the Notes or any facility fees or other
amount payable hereunder, (e) change the percentage of the Commitments or of the
aggregate unpaid principal amount of the Notes, or the number of Banks, which
shall be required for the Banks or any of them to take any action hereunder, or
amend the definition herein of "MAJORITY BANKS," or (f) amend this SECTION 10.01
or the last sentence of SECTION 10.06(a). No amendment, waiver or consent
shall, unless in writing and signed by the Administrative Agent or the Swing-
Line Bank, in addition to the Banks required hereinabove to take such action,
affect the rights or duties of the Administrative Agent or the Swing-Line Bank,
as the case may be, under this Agreement or any Note.

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SECTION 10.02. NOTICES, ETC. All notices and other communications
provided for hereunder shall, unless otherwise stated herein, be in writing
(including by telex, telegram or telecopier) and mailed or sent or delivered, if
to the Borrower, at the address set forth for the Borrower on the signature
pages hereof; if from the Borrower to the Administrative Agent or any Bank, to
the Administrative Agent at the address set forth for the Administrative Agent
on the signature pages hereof; if from the Administrative Agent to any Bank, at
the address of such Bank's Domestic Lending Office; if to the Swing-Line Bank,
at the address set forth for the Swing-Line Bank on the signature pages hereof;
or, in any case, at such other address as shall be designated by such party in a
written notice to the other parties hereto (except in the case of the Borrower,
as to which a change of address may be made by notice to the Administrative
Agent on behalf of the Banks). Subject to the next sentence, all such notices
and communications shall be effective, in the case of written notice, when
deposited in the mails, air mail, postage prepaid, and, in the case of notice by
telex, telecopy, telegram or cable, when sent addressed as set forth above. All
notices and communications pursuant to ARTICLES II, III, VIII and IX shall not
be effective until they are received by the addressee. The Administrative Agent
agrees to deliver promptly to each Bank copies of each report, document,
certificate, notice and request, or summaries thereof, which the Borrower is
required to, and does in fact, deliver to the Administrative Agent in accordance
with the terms of this Agreement, including, without limitation, copies of the
reports to be delivered by the Borrower pursuant to SECTION 7.01(g). The
Administrative Agent shall notify each of the Banks when all of the documents
required to be delivered to the Administrative Agent pursuant to SECTION 5.01
shall have been received by the Administrative Agent. Any agreement of the
Administrative Agent and the Banks herein to receive certain notices by
telephone or facsimile is solely for the convenience and the request of the
Borrower. The Administrative Agent and each Bank shall be entitled to rely on
the authority of any Person purporting to be, and believed in good faith by the
Administrative Agent or such Bank to be, a Person authorized by the Borrower to
give such notice and the Administrative Agent and the Banks shall not have any
liability to the Borrower or any other Person on account of any action taken or
not taken in good faith by the Administrative Agent or the Banks in reliance
upon such telephonic or facsimile notice. The obligation of the Borrower to
repay the Advances shall not be affected in any way or to any extent by any
failure by the Administrative Agent and the Banks to receive written
confirmation of any telephonic or facsimile notice or the receipt by the
Administrative Agent and the Banks of a confirmation which is at variance with
the terms reasonably understood by the Administrative Agent and the Banks to be
contained in the telephonic or facsimile notice.

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SECTION 10.03. NO WAIVER; CUMULATIVE REMEDIES. No failure on the
part of the Administrative Agent or any Bank to exercise, and no delay in
exercising, any right hereunder or under any Note shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right preclude any
other or further exercise thereof or the exercise of any other right. The
remedies herein provided are cumulative and not exclusive of any remedies
provided by law.

SECTION 10.04. COSTS AND EXPENSES; INDEMNIFICATION. (a) The
Borrower agrees to pay on demand all reasonable out-of-pocket costs and expenses
incurred by the Administrative Agent and Arranger in connection with the
preparation, execution, delivery, administration, modification and amendment of
this Agreement, the Notes and the other documents to be delivered hereunder
(other than any such modification or amendment requested by and for the benefit
of any of the Banks), including the reasonable fees and out-of-pocket expenses
of one firm of attorneys retained as counsel for the Administrative Agent with
respect to advising the Administrative Agent as to its rights and
responsibilities under this Agreement (or, alternatively, in the case of any
discrete project, the reasonable allocated costs and expenses of the
Administrative Agent's in-house counsel). Upon the occurrence and during the
continuance of any Event of Default, the Borrower further agrees to pay on
demand all direct out-of-pocket losses, and reasonable out-of-pocket costs and
expenses, if any (including reasonable Attorney Costs) of any Bank in connection
with the enforcement (whether by legal proceedings, negotiation or otherwise) of
this Agreement, the Notes and the other documents delivered hereunder.

(b) If, due to payments made by the Borrower due to acceleration of
the maturity of the Notes pursuant to SECTION 8.01 or due to any other reason,
any Bank receives payments of principal of any Fixed Rate Advance or, in the
case of the Swing-Line Bank, any Swing-Line Advance, other than on the last day
of the Interest Period for such Advance, the Borrower shall, upon demand by such
Bank (with a copy of such demand to the Administrative Agent), pay to the
Administrative Agent for the account of such Bank any amounts required to
compensate such Bank for any additional direct out-of-pocket losses, costs or
expenses which it may reasonably incur as a result of such payment, including,
without limitation, any such loss, cost or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by any Bank to
fund or maintain such Advance. For purposes of calculating amounts payable by
the Borrower to the Banks or the Swing-Line Bank under this SECTION 10.04(b),
each Fixed Rate Advance made by a Bank and each Swing-Line Advance made by the
Swing-Line Bank shall be conclusively deemed to have been funded at the
Eurodollar Rate or IBOR Rate

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used in determining the interest rate for such Advance by a matching deposit or
other borrowing in the interbank market for a comparable amount and for a
comparable period, whether or not such Advance is in fact so funded.

(c) Subject to the next sentence, the Borrower agrees to indemnify
and hold harmless each Agent-Related Person, each Bank and each of their
respective directors, officers and employees from and against any and all
claims, damages, liabilities and expenses (including, without limitation,
reasonable Attorney Costs) which may be incurred by or asserted against such
Agent-Related Person or such Bank or any such director, officer or employee in
connection with or arising out of any investigation, litigation, or proceeding
(i) related to any transaction or proposed transaction (whether or not
consummated) in which any proceeds of any Borrowing are applied or proposed to
be applied, directly or indirectly, by the Borrower, whether or not such Agent-
Related Person or such Bank or any such director, officer or employee is a party
to such transactions or (ii) related to the Borrower's entering into this
Agreement, or to any actions or omissions of the Borrower, any of its
Subsidiaries or affiliates or any of its or their respective officers, directors
or employees in connection therewith. The Borrower shall not be required to
indemnify any such indemnified Person from or against any portion of such
claims, damages, liabilities or expenses (a) arising out of the gross negligence
or willful misconduct of such indemnified Person or (b) that result from the
violation by such indemnified Person of any law or judicial order.

SECTION 10.05. RIGHT OF SET-OFF. Upon (i) the occurrence and during
the continuance of any Event of Default and (ii) the making of the request or
the granting of the consent specified by SECTION 8.01 to authorize the
Administrative Agent to declare the Notes due and payable pursuant to the
provisions of SECTION 8.01, each Bank (and each of its Affiliates) is hereby
authorized at any time and from time to time, to the fullest extent permitted by
law, to set off and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held and other indebtedness at any
time owing by such Bank (or any of its Affiliates) to or for the credit or the
account of the Borrower against any and all of the obligations of the Borrower
now or hereafter existing under this Agreement and the Notes held by such Bank,
irrespective of whether or not such Bank shall have made any demand under this
Agreement and such Notes and of whether or not such obligations may be matured.
Each Bank agrees promptly to notify the Borrower after any such set-off and
application made by such Bank, but the failure to give such notice shall not
affect the validity of such set-off and application. The rights of each Bank
under this

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Section are in addition to other rights and remedies (including, without
limitation, other rights of set-off) which such Bank may have.

SECTION 10.06. BINDING EFFECT; ASSIGNMENTS AND PARTICIPATIONS. (a)
This Agreement shall become effective when it shall have been executed by the
Borrower and the Administrative Agent and when the Administrative Agent shall
have been notified by each Bank that such Bank has executed it and thereafter
shall be binding upon and inure to the benefit of the Borrower, the
Administrative Agent and each Bank and their respective successors and assigns.
Notwithstanding the foregoing, the Borrower shall not have the right to assign
its rights hereunder or any interest herein without the prior written consent of
all of the Banks.

(b) Any Bank may assign, participate or otherwise transfer all or any
part of, or interest in, such Bank's rights and obligations hereunder and under
the Notes issued to it hereunder; PROVIDED that (i) in the case of any transfer
to a Person that is not an Affiliate of the transferring Bank, unless the
Borrower, the Administrative Agent and the Swing-Line Bank shall have expressly
agreed in writing, no Bank shall, by reason of any such transfer, be relieved of
any of its obligations or responsibilities to the Borrower hereunder, including
without limitation the obligation to make Advances in accordance with the
provisions of ARTICLE II and III, if any, or under any Note issued to it
hereunder; PROVIDED, FURTHER, that during the continuance of any Event of
Default hereunder, the consent of the Borrower to any such assignment shall not
be required; (ii) in the case of any assignment of less than all of a Bank's
rights and obligations hereunder, the amount of the Commitment being assigned
pursuant thereto shall in no event be less than $10,000,000; and (iii) except in
the case of an assignment of all or any portion of a Bank's Commitment which is
permitted hereunder and which is effected in accordance with the terms of
SUBSECTION (c) below (a "PERMITTED COMMITMENT ASSIGNMENT"), the Borrower, the
Administrative Agent and each other party hereto shall for all purposes be
permitted to deal, and shall continue to deal, exclusively with the transferring
Bank after giving effect to any purported sale of a participation interest or
other transfer of all or any part of such transferring Bank's interest under
this Agreement. To the extent of any Permitted Commitment Assignment (but not
in the event of any such participation or other transfer) the applicable
assignee shall have the same rights and benefits against the Borrower as it
would have had if it were a Bank hereunder. Nothing contained herein shall
impair the ability of any Bank, in its discretion, to agree, solely as between
itself and its assignees, participants and other

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transferees, upon the manner in which such Bank shall exercise its rights under
this Agreement and the Notes made to such Bank.

(c) In order to effect any assignment permitted hereunder by a Bank
of all or any portion of its Commitment hereunder, the parties to each such
assignment shall execute and deliver to the Administrative Agent, for its
acceptance and recording in the Register (as defined below), an agreement
substantially in the form of EXHIBIT 10.06 hereto (an "ASSIGNMENT AND
ACCEPTANCE"), together with any Note or Notes subject to such assignment and a
processing and recordation fee of $2,500. Upon such execution, delivery,
acceptance and recording, from and after the effective date specified in each
Assignment and Acceptance, (x) the assignee thereunder shall be a party hereto
and, to the extent that rights and obligations hereunder have been assigned to
it pursuant to such Assignment and Acceptance, have the rights and obligations
of a Bank hereunder and (y) the Bank assignor thereunder shall, to the extent
that rights and obligations hereunder have been assigned by it pursuant to such
Assignment and Acceptance, relinquish its rights and be released from its
obligations under this Agreement (and, in the case of an Assignment and
Acceptance covering all or the remaining portion of an assigning Bank's rights
and obligations under this Agreement, such Bank shall cease to be a party
hereto).

(d) By executing and delivering an Assignment and Acceptance, the
Bank assignor thereunder and the assignee thereunder confirm to and agree with
each other and the other parties hereto as follows: (i) other than as provided
in such Assignment and Acceptance, such assigning Bank makes no representation
or warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement or
the execution, legality, validity, enforceability, genuineness, sufficiency or
value of this Agreement or any other instrument or document furnished pursuant
hereto; (ii) such assigning Bank makes no representation or warranty and assumes
no responsibility with respect to the financial condition of the Borrower or the
performance or observance by the Borrower of any of its obligations under this
Agreement or any other instrument or document furnished pursuant hereto; (iii)
such assignee confirms that it has received a copy of this Agreement, together
with a copy of the Information Statement issued by the Borrower in connection
with the filing of the Form 10 (and any later statements delivered pursuant to
SECTION 7.01(g)(ii)) and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
Assignment and Acceptance; (iv) such assignee will, independently and without
reliance upon the Administrative Agent, such assigning Bank or any other Bank
and based on such documents and information as it shall deem

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appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Agreement; (v) such assignee appoints and
authorizes the Administrative Agent to take such action as agent on its behalf
and to exercise such powers under this Agreement as are delegated to the
Administrative Agent by the terms hereof, together with such powers as are
reasonably incidental thereto; and (vi) such assignee agrees that it will
perform in accordance with their terms all of the obligations which by the terms
of this Agreement are required to be performed by it as a Bank.

(e) The Administrative Agent shall maintain at its address referred
to in SECTION 10.02 a copy of each Assignment and Acceptance delivered to and
accepted by it and a register for the recordation of the names and addresses of
the Banks and the Commitment of, and principal amount of the Advances owing to,
each Bank from time to time (the "REGISTER"). The entries in the Register shall
be conclusive and binding for all purposes, absent manifest error, and the
Borrower, the Administrative Agent and the Banks may treat each Person whose
name is recorded in the Register as a Bank hereunder for all purposes of this
Agreement. The Register shall be available for inspection by the Borrower or
any Bank at any reasonable time and from time to time upon reasonable prior
notice.

(f) Notwithstanding anything contained herein to the contrary, each
Bank may pledge its right, title and interest under this Agreement and any Note
made to it to the Board of Governors of the Federal Reserve System, or any other
governmental authority, as security for financial accommodations or privileges
being provided or extended to such Bank by such governmental authority.

SECTION 10.07. GOVERNING LAW. This Agreement and the Notes shall be
governed by, and construed in accordance with, the internal laws (as
distinguished from the conflicts of laws rules) of the State of Illinois.

SECTION 10.08. EXECUTION IN COUNTERPARTS. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute but one and the same
agreement.

SECTION 10.09. SEVERABILITY. Wherever possible, each provision of
this Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidat-

-76-

<PAGE>

ing the remainder of such provisions or the remaining provisions of this
Agreement.

SECTION 10.10. ENTIRE AGREEMENT. This Agreement, taken together with
all of the other documents, instruments and certificates contemplated herein
(including the agreements referred to in SECTION 4.04(c)) to be delivered by the
Borrower, embodies the entire agreement and supersedes all prior agreements,
written and oral, relating to the subject matter hereof as among the Borrower,
the Banks parties hereto and the Administrative Agent.

The duly authorized parties hereto have caused this Agreement to be
executed by their respective officers or agents, as of the date of this
Agreement.

ALLEGIANCE CORPORATION

By
---------------------------
Title: Corporate Vice President
and Treasurer

Address for Notice Purposes:
1430 Waukegan Road
McGaw Park, Illinois 60085
Attention: Treasurer
Telephone: (847)
Telecopy: (847)

-77-

<PAGE>

THE ADMINISTRATIVE AGENT

BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION,
as Administrative Agent

By
-------------------------------------
Title:

Address for Notice Purposes:

Credit/Documentation Issues:

231 South LaSalle Street
Chicago, Illinois 60697
Attention: William Sweeney

Administrative Issues:

1455 Market Street, 12th Floor
San Francisco, California 94103
Attention: Agency Administrative
Services Unit #5596

THE SWING-LINE BANK

BANK OF AMERICA ILLINOIS,
as Swing-Line Bank

By
-------------------------------------
Title:

Address for Notice Purposes:

200 West Jackson Boulevard, 9th Fl.
Chicago, Illinois 60697
Attention: Pam Quebbeman
Account Administration

-78-

<PAGE>

COMMITMENTS: THE BANKS

U.S. $109,600,000 BANK OF AMERICA ILLINOIS

By
-------------------------------
Title:

U.S. $96,800,000 THE FIRST NATIONAL BANK
OF CHICAGO, individually and
as Syndication Agent and
Co-Arranger

By
-------------------------------
Title:

U.S. $96,800,000 MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, individually and
as Syndication Agent and
Co-Arranger

By
-------------------------------
Title:

U.S. $96,800,000 NATIONSBANK OF TEXAS, N.A.,
individually and
as Documentation Agent and
Co-Arranger

By
-------------------------------
Title:

-79-

<PAGE>

COMMITMENTS:

U.S. $60,000,000 THE CHASE MANHATTAN BANK,
individually and as Co-Agent

By
-------------------------------
Title:

U.S. $60,000,000 CREDIT LYONNAIS CHICAGO BRANCH,
individually and as Co-Agent

By
-------------------------------
Title:

U.S. $60,000,000 CREDIT SUISSE, individually and
as Co-Agent

By
-------------------------------
Title:

U.S. $60,000,000 DEUTSCHE BANK AG
CHICAGO AND/OR CAYMAN ISLANDS
BRANCHES, individually and
as Co-Agent

By
-------------------------------
Title:

-80-

<PAGE>

COMMITMENTS:

U.S. $60,000,000 THE SUMITOMO BANK, LIMITED,
CHICAGO BRANCH
individually and as Co-Agent

By
-------------------------------
Title:

U.S. $60,000,000 TORONTO DOMINION (TEXAS), INC.,
individually and as Co-Agent

By
-------------------------------
Title:

U.S. $40,000,000 THE BANK OF TOKYO-MITSUBISHI, LTD.
CHICAGO BRANCH

By
-------------------------------
Title:

U.S. $40,000,000 CITIBANK, N.A.

By
-------------------------------
Title:

U.S. $40,000,000 CAISSE NATIONALE DE CREDIT
AGRICOLE

By
-------------------------------
Title:

-81-

<PAGE>

COMMITMENTS:

U.S. $40,000,000 THE FUJI BANK, LIMITED

By
-------------------------------
Title:

U.S. $40,000,000 THE INDUSTRIAL BANK OF JAPAN, LIMITED
CHICAGO BRANCH

By
-------------------------------
Title:

U.S. $40,000,000 MELLON BANK, N.A.

By
-------------------------------
Title:

U.S. $40,000,000 THE NORTHERN TRUST COMPANY

By
-------------------------------
Title:

U.S. $40,000,000 PNC BANK, NATIONAL ASSOCIATION

By
-------------------------------
Title:

-82-

<PAGE>

COMMITMENTS:

U.S. $40,000,000 UNION BANK OF SWITZERLAND,
NEW YORK BRANCH

By
-------------------------------
Title:

U.S. $40,000,000 WACHOVIA BANK OF GEORGIA, N.A.

By
-------------------------------
Title:

U.S. $40,000,000 WELLS FARGO BANK, N.A.

By
-------------------------------
Title:

- -------------------
- -------------------

U.S. $1,200,000,000 TOTAL

-83-

<PAGE>

Exhibit 2.02 to
Credit Agreement dated
as of September 23, 1996

FORM OF
NOTICE OF SYNDICATED BORROWING

FACILITY A

Bank of America National Trust
and Savings Association,
as Administrative Agent for the
Banks parties to the Credit
Agreement referred to below
1455 Market Street, 12th Floor
San Francisco, California 94103
Attention: Agency Administration Services
Unit #5596

Ladies and Gentlemen:

The undersigned, Allegiance Corporation, refers to the Credit
Agreement, dated as of September 23, 1996 (the "Credit Agreement," the terms
defined therein being used herein as therein defined), among Allegiance
Corporation, the Banks parties thereto and Bank of America National Trust and
Savings Association, as Administrative Agent, and hereby gives you notice,
irrevocably, pursuant to SECTION 2.02 of the Credit Agreement that the
undersigned hereby requests a Syndicated Borrowing under the Credit Agreement,
and in that connection sets forth below the information relating to such
Syndicated Borrowing (the "Proposed Syndicated Borrowing") as required by
SECTION 2.02 of the Credit Agreement:

(i) The Business Day of the Proposed Syndicated Borrowing is
, 19 .

(ii) The Type of Syndicated Advances comprising the Proposed
Syndicated Borrowing is [Base Rate Advances] [Eurodollar Rate Advances].

(iii) The aggregate amount of the Proposed Syndicated Borrowing is $
.

(iv) The Interest Period for each Syndicated Advance made as part of
the Proposed Syndicated Borrowing is months] [ days].

(v) The proceeds of the Proposed Syndicated Borrowing [will not be
used, directly or indirectly, to purchase or carry Margin Stock] [will be used
to purchase or carry Margin Stock. A

<PAGE>

duly completed Form FR U-l (OMB No. 7100-0115), executed by a duly authorized
officer of the undersigned, accompanies this Notice of Syndicated Borrowing and
sets forth thereon the relevant information with respect to the use of the
proceeds of the Proposed Syndicated Borrowing].

Very truly yours,

ALLEGIANCE CORPORATION

By
-------------------------------
Title:

<PAGE>

Exhibit 2.03 to
Credit Agreement dated
as of September 23, 1996

FORM OF
NOTICE OF INTEREST RATE ELECTION

FACILITY A

Ladies and Gentlemen:

The undersigned, Allegiance Corporation, refers to the Credit
Agreement, dated as of September 23, 1996 (the "Credit Agreement," the terms
defined therein being used herein as therein defined), among Allegiance
Corporation, the Banks parties thereto and Bank of America National Trust and
Savings Association, as Administrative Agent, and hereby gives you notice,
irrevocably, pursuant to SECTION 2.03 of the Credit Agreement of an interest
rate election, and in that connection sets forth below the information relating
to the affected Syndicated Borrowing (the "Affected Syndicated Borrowing") as
required by SECTION 2.03 of the Credit Agreement:

(i) The Affected Syndicated Borrowing is the following:

(a) Type:
---------------------------------------------
(b) Last Day of Present Interest Period:
--------------
(c) Aggregate Amount: $
-------------------------------

(ii) The portion of such Affected Syndicated Borrowing to be
Converted is: $ .

(iii) Business Day of the Conversion in respect of the Affected
Syndicated Borrowing is , 19 .

<PAGE>

(iv) Upon giving effect to the Conversion,

(a) the portion of the Affected Syndicated Borrowing that is
Converted shall be comprised of [Base Rate Advances] [Eurodollar Rate
Advances], each having an Interest Period of ; and

(b) the portion of the balance of the Affected Syndicated Borrowing
shall continue to have the Type and Interest Period specified in clause (i)
above.

Very truly yours,

ALLEGIANCE CORPORATION

By:
-------------------------------
Title:

<PAGE>

Exhibit 2.04 to
Credit Agreement dated
as of September 23, 1996

FORM OF
NOTICE OF SWING-LINE BORROWING

FACILITY A

Bank of America Illinois,
as Swing-Line Bank
200 West Jackson Boulevard, 9th Floor
Chicago, Illinois 60697
Attention: Pam Quebbeman, Account Administration

Ladies and Gentlemen:

The undersigned, Allegiance Corporation, refers to the Credit
Agreement, dated as of September 23, 1996 (the "Credit Agreement," the terms
defined therein being used herein as therein defined), among Allegiance
Corporation, the Banks parties thereto and Bank of America National Trust and
Savings Association, as Administrative Agent, and hereby gives you notice,
irrevocably, pursuant to SECTION 2.04 of the Credit Agreement that the
undersigned hereby requests a Swing-Line Advance under the Credit Agreement, and
in that connection sets forth below the information relating to such Swing-Line
Advance (the "Proposed Swing-Line Advance") as required by SECTION 2.04 of the
Credit Agreement:

(i) The Business Day of the Proposed Swing-Line Advance is
, 19 .

(ii) The aggregate amount of the Proposed Swing-Line Advance is $
.

(iii) The Interest Period for the Swing-Line Advance is days.

(iv) The proceeds of the Proposed Swing-Line Advance [will not be
used, directly or indirectly, to purchase or carry Margin Stock] [will be used
to purchase or carry Margin Stock. A duly completed Form FR U-l (OMB No. 7100-
0115), executed by a

<PAGE>

duly authorized officer of the undersigned, accompanies this Notice of Swing-
Line Borrowing and sets forth thereon the relevant information with respect to
the use of the proceeds of the Proposed Swing-Line Advance].

Very truly yours,

ALLEGIANCE CORPORATION

By:
-------------------------------
Title:

<PAGE>

Exhibit 3.02 to
Credit Agreement dated
as of September 23, 1996

FORM OF COMPETITIVE BID QUOTE REQUEST

FACILITY A

Ladies and Gentlemen:

The undersigned, Allegiance Corporation, refers to the Credit
Agreement, dated as of September 23, 1996 (the "Credit Agreement," the terms
defined therein being used herein as therein defined), among Allegiance
Corporation, the Banks parties thereto and Bank of America National Trust and
Savings Association, as Administrative Agent, and hereby gives you notice
pursuant to SECTION 3.02 of the Credit Agreement that the undersigned requests
Competitive Bid Quotes for the following proposed Competitive Bid Borrowing(s)
(the "Proposed Borrowings"):

(i) The Business Day of the Proposed Borrowings is ,
19 .

(ii) The Type of Advances with respect to which Competitive Bid
Quotes are hereby requested are:

Aggregate Principal Type of Interest Period
Amount of Borrowing Advances for Advances
------------------- -------- ---------------

(iii) Where the Type of Advance is specified to be a Eurodollar Bid
Rate Advance, each quoting Bank is requested to quote a Competitive Bid Margin
in relation to the Eurodollar Rate to be determined for the applicable Interest
Period. Where the Type of Advance is specified to be an Absolute Rate Advance,
each quoting Bank is requested to quote an Absolute Rate.

(iv) The Administrative Agent is hereby requested to advise [all of
the Banks] [the Banks specified below] of the request for Competitive Bid Quotes
set forth herein.

<PAGE>

(v) The proceeds of the Proposed Borrowing [will not be used,
directly or indirectly, to purchase or carry Margin Stock] [will be used to
purchase or carry Margin Stock. A pro forma draft of the Form FR U-l (OMB
No. 7100-0015) which will be executed and delivered by a duly authorized officer
of the undersigned in the event that the undersigned issues a Notice of
Competitive Bid Borrowing in connection with this Competitive Bid Quote Request
accompanies this Competitive Bid Quote Request and sets forth thereon the
relevant information with respect to the use of the proceeds of the Proposed
Borrowing].

ALLEGIANCE CORPORATION

By:
-------------------------------
Title:

<PAGE>

Exhibit 3.04 to
Credit Agreement dated
as of September 23, 1996

FORM OF COMPETITIVE BID QUOTE

FACILITY A

Ladies and Gentlemen:

The undersigned refers to the Credit Agreement, dated as of
September 23, 1996 (the "Credit Agreement," the terms defined therein being used
herein as therein defined), among Allegiance Corporation, the Banks parties
thereto and Bank of America National Trust and Savings Association, as
Administrative Agent, and hereby notifies you of, and requests that you forward
to Allegiance Corporation, on our behalf, pursuant to SECTION 3.04 of the Credit
Agreement, the following Competitive Bid Quotes on the following terms:

(i) Quoting Bank: .
--------------------------

(ii) Person to contact at the Quoting Bank:

Name:
----------------
Telephone:
------------
Telecopy:
------------
Telex:
----------------

(iii) Proposed Borrowing Date: .
----------------

(iv) We hereby offer to make Competitive Bid Advances in the
following principal amounts, for the following Interest Periods and at the
following rates:

Principal Interest [Competitive [Absolute
Amount Period Bid Margin*] Rate ]
--------- ------- ----------- ----------

- ---------------------
* Specify whether the Competitive Bid Margin is to be added to or subtracted
from the Eurodollar Rate applicable to such Interest Period.

<PAGE>

PROVIDED that the aggregate principal amount with respect to which the Company
may accept offers in connection with this Competitive Bid Quote shall not exceed
$ .

We understand and agree that the offer(s) set forth above, subject to
the satisfaction of the applicable conditions set forth in the Credit Agreement,
irrevocably obligate(s) us to make the Competitive Bid Advance(s) for which any
such offer is accepted, in whole or in part.

[NAME OF BANK]

Dated: By:
------------------- --------------------------------
Authorized Officer

<PAGE>

Exhibit 3.06 to
Credit Agreement dated
as of September 23, 1996

FORM OF NOTICE OF COMPETITIVE BID BORROWING

FACILITY A

Ladies and Gentlemen:

The undersigned, Allegiance Corporation, refers to the Credit
Agreement, dated as of September 23, 1996 (the "Credit Agreement," the terms
defined therein being used herein as therein defined), among Allegiance
Corporation, the Banks parties thereto and Bank of America National Trust and
Savings Association, as Administrative Agent, and hereby gives you notice,
irrevocably, pursuant to SECTION 3.06 of the Credit Agreement that the
undersigned requests a Competitive Bid Borrowing under the Credit Agreement and
in that connection sets forth below the information relating to such Competitive
Bid Borrowing (the "Proposed Borrowing") as required by SECTION 3.06 of the
Credit Agreement:

(i) The Business Day of the Proposed Borrowing is ,
19 .

(ii) The aggregate principal amount of Competitive Bid Advances, the
Types thereof and the Interest Periods therefor that have been offered to the
undersigned by Banks submitting Competitive Bid Quotes and that by this notice
are hereby accepted, subject to the terms and conditions of the Credit
Agreement, are set forth below:

Aggregate Principal Type of Interest
Amount of Borrowing Advance Period
------------------- ------- --------

(iii) The undersigned acknowledges and agrees that, by this notice,
it irrevocably accepts the offers made by the Banks which shall have submitted
Competitive Bid Quotes to the extent that the principal amount offered by each
such Bank, together with the principal amount offered by all other such Banks in
connection therewith, does not exceed the respective amounts set

<PAGE>

forth above. As among such Banks, the offers made are accepted in the ascending
order of Competitive Bid Margin or Absolute Rate, as the case may be.

(iv) The proceeds of the Proposed Borrowing [will not be used,
directly or indirectly, to purchase or carry Margin Stock] [will be used to
purchase or carry Margin Stock. A duly completed Form FR U-l (OMB No. 7100-
0115), executed by a duly authorized officer of the undersigned, accompanies
this Notice of Competitive Bid Borrowing and sets forth thereon the relevant
information with respect to the use of the proceeds of the Proposed Borrowing].

ALLEGIANCE CORPORATION

By:
-------------------------------
Title:

<PAGE>

Exhibit 4.16(a) to
Credit Agreement dated
as of September 23, 1996

FORM OF SYNDICATED NOTE

FACILITY A

$ , 1996

FOR VALUE RECEIVED, the undersigned, Allegiance Corporation, a
Delaware corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order of
(the "Bank") for the account of its Applicable Lending Office (as
defined in the Credit Agreement, as hereinafter defined) on the Termination Date
(as defined in the Credit Agreement) the principal amount of each Syndicated
Advance (as defined below) made by the Bank to the Borrower pursuant to the
Credit Agreement. The Borrower promises to pay interest on the unpaid principal
amount of each Syndicated Advance from the date of such Syndicated Advance until
such principal amount is paid in full, at such interest rates, and payable at
such times, as are specified in the Credit Agreement.

Both principal and interest are payable in lawful money of the United
States of America to Bank of America National Trust and Savings Association, as
Administrative Agent, not later than 12:00 noon (Chicago time) on the date when
due at 1850 Gateway Boulevard, Concord, California 94520, in same day funds.
All Syndicated Advances made by the Bank to the Borrower, the respective
Interest Periods therefor, all Conversions thereof, and all payments made on
account of principal thereof, shall be recorded by the Bank and shall be
endorsed on the grid attached hereto (which is part of this Syndicated Note)
prior to any transfer of this Syndicated Note. Failure by the Bank to record on
this Syndicated Note any Syndicated Advance or payment shall not relieve the
Borrower of any obligation with respect to such Syndicated Advance or payment.

This Syndicated Note is one of the Notes referred to in, and is
entitled to the benefits of, the Credit Agreement (the "Credit Agreement") dated
as of September 23, 1996 among the Borrower, the Bank, the other banks referred
to therein and Bank of America National Trust and Savings Association, as
Administrative Agent. The Credit Agreement, among other things, (i) provides in
ARTICLE II thereof for the making and maintaining of advances ("Syndicated
Advances") by the Bank to the Borrower from time to time in an aggregate amount
not to exceed at any time outstanding the Bank's Commitment (as defined in the
Credit Agreement) and (ii) contains provisions for acceleration of the maturity
hereof upon the happening of certain stated events and also for prepayments on
account of principal hereof prior to the maturity hereof upon the terms and
conditions therein specified.

<PAGE>

This Syndicated Note shall be governed by, and construed in accordance
with, the internal laws (as distinguished from the conflicts of laws rules) of
the State of Illinois.

ALLEGIANCE CORPORATION

By:
-------------------------------
Title:

<PAGE>

Syndicated Note Grid

ADVANCES, MATURITIES AND PAYMENTS OF PRINCIPAL

- --------------------------------------------------------------------------------
Amount of
Amount Conversion Principal Unpaid
of Type of of Paid or Principal Notation
Date Advance Advance Advance Prepaid Balance Made by
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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- --------------------------------------------------------------------------------
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- --------------------------------------------------------------------------------
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- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

<PAGE>

Exhibit 4.16(b) to
Credit Agreement dated
as of September 23, 1996

FORM OF COMPETITIVE BID NOTE

FACILITY A

, 1996

FOR VALUE RECEIVED, the undersigned, Allegiance Corporation, a
Delaware corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order of
(the "Bank") for the account of its Applicable Lending Office (as
defined in the Credit Agreement, as hereinafter defined) the principal amount of
each Competitive Bid Advance (as defined below) made by the Bank to the Borrower
pursuant to the Credit Agreement on the last day of the Interest Period (as
defined in the Credit Agreement) for such Competitive Bid Advance. The Borrower
promises to pay interest on the unpaid principal amount of each Competitive Bid
Advance from the date of such Competitive Bid Advance until such principal
amount is paid in full, at such interest rates, and payable at such times, as
are specified in the Credit Agreement.

Both principal and interest are payable in lawful money of the United
States of America to Bank of America National Trust and Savings Association, as
Administrative Agent, not later than 12:00 noon (Chicago time) on the date when
due at 1850 Gateway Boulevard, Concord, California 94520, in same day funds.
All Competitive Bid Advances made by the Bank to the Borrower, and the
respective maturities thereof, and all payments made on account of principal
thereof, shall be recorded by the Bank and shall be endorsed on the grid
attached hereto (which is part of this Competitive Bid Note) prior to any
transfer of this Competitive Bid Note. Failure by the Bank to record on this
Competitive Bid Note any Competitive Bid Advance or payment shall not relieve
the Borrower of any obligation with respect to such Competitive Bid Advance or
payment.

This Competitive Bid Note is one of the Notes referred to in, and is
entitled to the benefits of, the Credit Agreement (the "Credit Agreement") dated
as of September 23, 1996, among the Borrower, the Bank, the other banks referred
to therein and Bank of America National Trust and Savings Association, as
Administrative Agent. The Credit Agreement, among other things, (i) provides in
ARTICLE III thereof for the making and maintaining of advances ("Competitive Bid
Advances") by the Bank to the Borrower from time to time in an aggregate amount
not to exceed at any time outstanding the aggregate Commitment (as defined in
the Credit Agreement) of all banks parties to the Credit Agreement and
(ii) contains provisions for acceleration of the maturity hereof upon the
happening of certain stated events

<PAGE>

and also for prepayments on account of principal hereof prior to the maturity
hereof upon the terms and conditions therein specified.

This Competitive Bid Note shall be governed by, and construed in
accordance with, the internal laws (as distinguished from the conflicts of laws
rules) of the State of Illinois.

ALLEGIANCE CORPORATION

By:
-------------------------------
Title:

<PAGE>

Competitive Note Grid

ADVANCES, MATURITIES AND PAYMENTS OF PRINCIPAL

- --------------------------------------------------------------------------------
Amount of
Amount Maturity Principal Unpaid
of Type of of Paid or Principal Notation
Date Advance Advance Advance Prepaid Balance Made by
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

<PAGE>

Exhibit 4.16(c) to
Credit Agreement dated
as of September 23, 1996

$ , 1996

FORM OF SWING-LINE NOTE

FACILITY A

FOR VALUE RECEIVED, the undersigned, Allegiance Corporation, a
Delaware corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order of
BANK OF AMERICA ILLINOIS (the "Swing-Line Bank") for the account of its
Applicable Lending Office (as defined in the Credit Agreement, as hereinafter
defined) the principal amount of each Swing-Line Advance (as defined below) made
by the Bank to the Borrower pursuant to the Credit Agreement on the last day of
the Interest Period (as defined in the Credit Agreement) for such Swing-Line
Advance. The Borrower promises to pay interest on the unpaid principal amount
of each Swing-Line Advance from the date of such Swing-Line Advance until such
principal amount is paid in full, at such interest rates, and payable at such
times, as are specified in the Credit Agreement.

Both principal and interest are payable in lawful money of the United
States of America to Bank of America National Trust and Savings Association, as
Administrative Agent, not later than 12:00 noon (Chicago time) on the date when
due at 200 West Jackson Street, Chicago, Illinois 60697, in same day funds. All
Swing-Line Advances made by the Swing-Line Bank to the Borrower, and the
respective maturities thereof, and all payments made on account of principal
thereof, shall be recorded by the Swing-Line Bank and shall be endorsed on the
grid attached hereto (which is part of this Swing-Line Note) prior to any
transfer of this Swing-Line Note. Failure by the Swing-Line Bank to record on
this Swing-Line Note any Swing-Line Advance or payment shall not relieve the
Borrower of any obligation with respect to such Swing-Line Advance or payment.

This Swing-Line Note is one of the Notes referred to in, and is
entitled to the benefits of, the Credit Agreement (the "Credit Agreement") dated
as of September 23, 1996, among the Borrower, the Swing-Line Bank, the other
banks referred to therein and Bank of America National Trust and Savings
Association, as Administrative Agent. The Credit Agreement, among other things,
(i) provides in SECTION 2.04 thereof for the making and maintaining of advances
("Swing-Line Advances") by the Bank to the Borrower from time to time and
(ii) contains provisions for acceleration of the maturity hereof upon the
happening

<PAGE>

of certain stated events and also for prepayments on account of principal hereof
prior to the maturity hereof upon the terms and conditions therein specified.

This Swing-Line Note shall be governed by, and construed in accordance
with, the internal laws (as distinguished from the conflicts of laws rules) of
the State of Illinois.

ALLEGIANCE CORPORATION

By:
-------------------------------
Title:

<PAGE>

Swing-Line Note Grid

ADVANCES, MATURITIES AND PAYMENTS OF PRINCIPAL

<PAGE>

Exhibit 5.01(a)(v)(A) to
Credit Agreement dated
as of September 23, 1996

FORM OF
OPINION OF COUNSEL FOR THE BORROWER

FACILITY A

[Date]

To each of the Banks parties
to the Credit Agreement
described below, and to
Bank of America National
Trust and Savings Association,
as Administrative Agent

Ladies and Gentlemen:

This opinion is furnished to you pursuant to Section 5.01(a)(v)(A) of
the Credit Agreement dated as of September 23, 1996 (the "Credit Agreement")
among Allegiance Corporation (the "Borrower"), the Banks parties thereto, and
Bank of America National Trust and Savings Association, as Administrative Agent.
Terms defined in the Credit Agreement are used herein as therein defined.

I am General Counsel of the Borrower. I have acted as counsel for the
Borrower in connection with the preparation, execution and delivery of the
Credit Agreement.

In that connection I have examined:

(1) The Credit Agreement.

(2) The Certificate of Incorporation of the Borrower and all
amendments thereto (the "Charter").

(3) The by-laws of the Borrower and all amendments thereto (the "By-
laws").

(4) Certificates of the Secretaries of State of Delaware, dated
, 1996, and Illinois, dated , 1996, each attesting to
the continued corporate existence and good standing of the Borrower in such
State.

(5) All of the other documents furnished by the Borrower pursuant to
Section 5.01 of the Credit Agreement.

<PAGE>

I have also examined the originals, or copies certified to my
satisfaction, of the documents listed in a certificate of the chief financial
officer of the Borrower, dated the date hereof (the "Certificate") and attached
hereto as Exhibit A, certifying that the documents listed in such certificate
are all of the indentures, loan or credit agreements, leases, mortgages,
security agreements, bonds, notes and other agreements or instruments, and all
of the orders, writs, judgments, awards, injunctions and decrees, which affect
or purport to affect the Borrower's right to borrow money or the Borrower's
obligations under the Credit Agreement or the Notes. In addition, I have
examined the originals, or copies certified to my satisfaction, of such other
corporate records of the Borrower, certificates of public officials and of
officers of the Borrower, and agreements, instruments and documents, as I have
deemed necessary as a basis for the opinions hereinafter expressed. As to
questions of fact material to such opinions, I have, when relevant facts were
not independently established by me, relied upon certificates of the Borrower or
its officers or of public officials. I have assumed the due execution and
delivery, pursuant to due authorization, of the Credit Agreement by the Banks
and the Administrative Agent. Based upon the foregoing, I am of the opinion
that:

1. The Borrower is a corporation duly incorporated, validly existing
and in good standing under the laws of its jurisdiction of incorporation and has
all requisite authority to conduct its business in each jurisdiction in which
the failure so to qualify would have a material adverse effect on the business,
properties, assets, operations or condition (financial or otherwise) of the
Borrower.

2. The execution, delivery and performance by the Borrower of the
Credit Agreement and the Notes are within the Borrower's corporate powers, have
been duly authorized by all necessary corporate action, and do not contravene
(i) the Charter or the By-laws or (ii) any law, rule or regulation applicable to
the Borrower or (iii) any contractual or legal restriction binding on or
affecting the Borrower contained in any document, order, writ, judgment, award,
injunction or decree listed in the Certificate or, to the best of my knowledge,
contained in any other similar document or any other order, writ, judgment,
award, injunction or decree. The Credit Agreement and the Notes have been duly
executed and delivered on behalf of the Borrower. If a Borrowing were to occur
on this date in accordance with the terms of the Credit Agreement, and assuming
the statements made in SECTION 6.01(h) of the Credit Agreement remained true and
correct after giving effect to the application of the proceeds of such
Borrowing, such Borrowing would not violate Regulation U or X of the Board of
Governors of the Federal Reserve System.

3. No authorization, approval or other action by, and no notice to or
filing with, any governmental authority or regulatory body or any other Person
is required for the due execution, delivery and performance by the Borrower of
the Credit Agreement and the Notes.

<PAGE>

4. There is no pending or, to the best of my knowledge, threatened
action or proceeding against the Borrower or any of its Subsidiaries before any
court, governmental agency or arbitrator which is likely to have a materially
adverse effect upon the financial condition or operations of the Borrower or any
of its Subsidiaries or which purports to affect the legality, validity or
enforceability of the Credit Agreement or the Notes.

5. The Borrower is not (i) an "investment company," (ii) a company
"controlled" by an "investment company" which is registered under the Investment
Company Act of 1940, as amended, or (iii) to the best of my knowledge, a company
"controlled" by any other "investment company" within the meaning of the
Investment Company Act of 1940, as amended.

I express no opinion as to (i) Sections 4.17 and 10.05 of the Credit
Agreement insofar as they provide that any Bank purchasing a participation from
another Bank pursuant thereto may exercise set-off or similar rights with
respect to such participation or that any Affiliate of a Bank may exercise
set-off or similar rights with respect to such Bank's claims under the Credit
Agreement or the Notes, (ii) Section 4.15(c) or 10.04(c) insofar as those
Sections may be construed as requiring that the Borrower indemnify any Bank or
the Administrative Agent with respect to any claim, damage, liability or expense
incurred as a result of any violation of law by such Bank or the Administrative
Agent, and (iii) the effect of the law of any jurisdiction other than the State
of Illinois wherein any Bank may be located or wherein enforcement of the Credit
Agreement or the Notes may be sought which limits the rates of interest legally
chargeable or collectible.

<PAGE>

I am aware that Sidley & Austin will rely upon this opinion in
rendering their opinion furnished pursuant to Section 5.01 of the Credit
Agreement.

This opinion is limited to the matters expressly set forth herein, and
no opinion is implied or may be inferred beyond the matters expressly set forth
herein. This opinion speaks as of the date hereof and I assume no obligation to
supplement the foregoing opinion if any applicable laws change after the date
hereof or if I become aware of any facts which might change such opinion after
the date hereof. The opinions expressed herein are being delivered to you in
connection with the transactions described hereinabove and are solely for your
benefit in connection with the transactions described hereinabove and may not be
relied on in any manner or for any purpose by any other person, nor any copies
published, communicated or otherwise made available in whole or in part to any
other person or entity without my specific prior written consent, except that
you may furnish copies thereof (i) to any of your permitted successors and
assigns (including prospective assignees and participants) in respect of the
Credit Agreement and the Syndicated Notes, (ii) to your independent auditors and
attorneys, (iii) upon the request of any state or federal authority or official
having regulatory jurisdiction over you, and (iv) pursuant to order or legal
process of any court or governmental agency.

Very truly yours,

<PAGE>

Exhibit 5.01(a)(v)(B)
Credit Agreement dated as
of September 23, 1996

FORM OF
OPINION OF SIDLEY & AUSTIN

FACILITY A

[Date]

To the Banks parties to the Credit
Agreement and Listed on Schedule I hereto:

Ladies and Gentlemen:

We have acted as special counsel to Allegiance Corporation (the
"Borrower") in connection with the preparation, execution and delivery of the
Credit Agreement dated as of September 23, 1996 (the "Credit Agreement") among
the Borrower, the banks parties thereto (the "Banks"), and Bank of America
National Trust and Savings Association, as Administrative Agent (the
"Administrative Agent"). All capitalized terms used in this opinion shall have
the meanings attributed to them in the Credit Agreement.

In that connection we have reviewed the following documents:

(1) Counterparts of the Credit Agreement, purportedly executed by
each of the parties thereto;

(2) The Syndicated Notes, executed by the Borrower and payable to the
order of each of the Banks;

(3) The Competitive Bid Notes, executed by the Borrower and payable
to the order of each of the Banks;

(4) The Swing-Line Note, executed by the Borrower and payable to Bank
of America National Trust and Savings Association; and

(5) The opinion of William Feather, General Counsel of the Borrower,
and the other documents furnished by the Borrower pursuant to Section 5.01 of
the Credit Agreement.

<PAGE>

that our opinions expressed below involve conclusions as to the matters set
forth in the opinion of counsel referred to in item (4) above, we have assumed
without independent investigation the correctness of the opinions set forth
therein (other than the opinion set forth in paragraph 4 thereof). In addition,
we have assumed that there are no written or oral terms or conditions agreed to
by the Borrower, and any or all of the Administrative Agent and/or any of the
Banks which could vary the truth, completeness, correctness, validity or effect
of the Credit Agreement or the Notes.

Based upon the foregoing examination of documents and the assumptions
set forth herein and upon such investigation as we have deemed necessary, we are
of the opinion that, under the law of the State of Illinois, the Credit
Agreement and the Notes are the legal, valid and binding obligations of the
Borrower, enforceable against the Borrower in accordance with their respective
terms.

Our opinion is subject to the following qualifications:

(a) Our opinion is subject to the effect of applicable bankruptcy,
insolvency, moratorium, receivership, reorganization or similar laws affecting
the enforcement of creditors' rights generally and to the effect of general
equitable principles (whether considered in a proceeding in equity or at law).
In applying such principles, a court, among other things, might not allow a
creditor to accelerate the maturity of a debt upon the occurrence of a default
deemed immaterial or might decline to order a debtor to perform covenants. Such
principles applied by a court might include a requirement that a creditor act
with reasonableness and in good faith.

(b) Our opinion is limited to the internal (as opposed to conflicts
of laws) laws of the State of Illinois, and we do not express any opinion herein
concerning any other law. Without limiting the generality of the forgoing, we
express no opinion as to the effect upon the obligations of the Borrower of (i)
any law of any jurisdiction other than the State of Illinois wherein any Bank
may be located or wherein enforcement of the Credit Agreement or the Notes may
be sought or (ii) the legal or regulatory status of any of the Banks or the
authority of any of the Banks to conduct business in any jurisdiction.

(d) We express no opinion as to (i) Sections 4.17 and 10.05 of the
Credit Agreement, insofar as they provide that any Bank purchasing a
participation from another Bank pursuant thereto may exercise set-off or similar
rights with respect to such participation or that any Affiliate of a Bank may
exercise set-off or similar rights with respect to such Bank's claims under the
Credit Agreement or the Notes or (ii) Section 4.15(c) or 10.04(c), insofar as
those Sections may be construed as requiring that the Borrower indemnify any
Bank or the Administrative Agent with respect to any claim, damage, liability or
expense incurred as a result of any violation of law by such Bank or the
Administrative Agent.

<PAGE>

This opinion is limited to the matters expressly set forth herein, and
no opinion is implied or may be inferred beyond the matters expressly set forth
herein. This opinion speaks as of the date hereof and we assume no obligation
to supplement the foregoing opinion if any applicable laws change after the date
hereof or if we become aware of any facts which might change such opinion after
the date hereof. The opinions expressed herein are being delivered to you in
connection with the transactions described hereinabove and are solely for your
benefit in connection with the transactions described hereinabove and may not be
relied on in any manner or for any purpose by any other person, nor any copies
published, communicated or otherwise made available in whole or in part to any
other person or entity without our specific prior written consent, except that
you may furnish copies thereof (i) to any of your permitted successors and
assigns (including prospective assignees and participants) in respect of the
Credit Agreement and the Syndicated Notes, (ii) to your independent auditors and
attorneys, (iii) upon the request of any state or federal authority or official
having regulatory jurisdiction over you, and (iv) pursuant to order or legal
process of any court or governmental agency.

Very truly yours,

[Sidley & Austin]

<PAGE>

Exhibit 7.01(g)(ii) to
Credit Agreement dated
as of September 23, 1996

FORM OF
CERTIFICATE OF INDEPENDENT ACCOUNTANTS

FACILITY A

[Date]

Allegiance Corporation
1430 Waukegan Road
McGaw Park, Illinois 60085

Gentlemen:

We have examined the consolidated balance sheet of Allegiance
Corporation and subsidiaries as of December 31, 19 , and the related
consolidated statements of income, stockholders' equity and cash flows for the
year then ended, and have issued our report thereon dated , 19 . Our
examination was made in accordance with generally accepted auditing standards
and, accordingly, included such tests of the accounting records and such other
auditing procedures as we considered necessary in the circumstances.

In connection with our examination, nothing came to our attention that
caused us to believe that Allegiance Corporation is not in compliance with the
covenants of Section 7.01(i) or 7.02(b) of the Credit Agreement dated as of
September 23, 1996 among Allegiance Corporation, the Banks parties thereto, and
Bank of America National Trust and Savings Association, as Administrative Agent.
However, it should be noted that our examination was not directed primarily
toward obtaining knowledge of such noncompliance.

Very truly yours,

[Price Waterhouse]

<PAGE>

Exhibit 10.06 to
Credit Agreement dated
as of September 23, 1996

FORM OF ASSIGNMENT AND ACCEPTANCE AGREEMENT

[ATTACHED]

<PAGE>

Exhibit 10.06 to
Credit Agreement
dated as of September 23, 1996

FORM OF
ASSIGNMENT AND ACCEPTANCE

Dated , 19

Reference is made to that certain Credit Agreement (Facility A) dated as of
September 23, 1996 (the "Credit Agreement") among Allegiance Corporation, a
Delaware corporation (the "Borrower"), certain "Banks" parties thereto, certain
"Co-Arrangers" parties thereto and Bank of America National Trust and Savings
Association, as administrative agent for the Banks (the "Administrative Agent").
Terms defined in the Credit Agreement are used herein with the same meaning.

(the "Assignor") and (the "Assignee") agree as
follows:

1. The Assignor hereby sells and assigns to the Assignee, and the
Assignee hereby purchases and assumes from the Assignor, that interest in and to
all of the Assignor's rights and obligations under the Credit Agreement as of
the date hereof which represents the percentage interest specified on Schedule 1
of all outstanding rights and obligations under the Credit Agreement, including
without limitation, such interest in the Assignor's Commitment [,] [and] the
[Syndicated] Advances owing to the Assignor [, and the [Syndicated] Note[s] held
by the Assignor]. After giving effect to such sale and assignment, the
Assignee's Commitment and the amount of the Advance owing to the Assignee will
be as set forth in Section 2 of Schedule 1.

2. The Assignor (i) represents and warrants that it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any adverse claim; (ii) makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with the Credit Agreement
or the execution, legality, validity, enforceability, genuineness, sufficiency
or value of the Credit Agreement or any other instrument or document furnished
pursuant thereto; [and] (iii) makes no representation or warranty and assumes no
responsibility with respect to the financial condition of the Borrower or the
performance or observance by the Borrower of any of its obligations under the
Credit Agreement or any other instrument or document furnished pursuant thereto
[; and (iv) attaches the [Syndicated] Note[s] referred to in paragraph 1 above
and requests that the Administrative Agent exchange such [Syndicated] Note[s]
for [a] new Note[s] payable to the order of the Assignee [which, in the case of
the Syndicated Note, shall be

<PAGE>

in an amount equal to the Commitment assumed by the Assignee pursuant hereto or
new Syndicated Notes payable to the order of the Assignee in an amount equal to
the Commitment assumed by the Assignee pursuant hereto and the Assignor in an
amount equal to the Commitment retained by the Assignor under the Credit
Agreement, respectively, as specified on Schedule 1 hereto].

3. The Assignee (i) confirms that it has received a copy of the Credit
Agreement, together with a copy of the Information Statement issued by the
Borrower in connection with the filing of the Form 10, copies of the financial
statements referred to in SECTION 7.01(g)(ii) of the Credit Agreement, and such
other documents and information as it has deemed appropriate to make its own
credit analysis and decision to enter into this Assignment and Acceptance; (ii)
agrees that it will, independently and without reliance upon the Administrative
Agent, the Assignor or any other Bank and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under the Credit Agreement;
(iii) appoints and authorizes the Administrative Agent to take such action as
agent on its behalf and to exercise such powers under the Credit Agreement as
are delegated to the Administrative Agent by the terms thereof, together with
such powers as are reasonably incidental thereto; (iv) agrees that it will
perform in accordance with their terms all of the obligations which by the terms
of the Credit Agreement are required to be performed by it as a Bank [and] (v)
specifies as its Applicable Lending Offices and address for notices the offices
set forth beneath its name on the signature pages hereof [and (vi) attaches the
forms prescribed by the Internal Revenue Service of the United States certifying
as to the Assignee's status for purposes of establishing complete exemption from
United States withholding taxes with respect to all payments to be made to the
Assignee under the Credit Agreement [and the Notes] or such other documents as
are necessary to indicate that none of such payments shall be subject to United
States withholding taxes by reason of the applicable tax treaty].(1)

4. Following the execution of this Assignment and Acceptance by the
Assignor and the Assignee, it will be delivered to the Administrative Agent for
acceptance and recording by the Administrative Agent. The effective date (the
"Effective Date") of this Assignment and Acceptance shall be the later to occur
of the date of acceptance hereof by the Administrative Agent and the date that
is specified in Section 3 of Schedule 1.

5. Upon such acceptance and recording by the Administrative Agent, as of
the Effective Date, (i) the Assignee shall be a party to the Credit Agreement
and, to the extent

- -------------------------
(1) If the Assignee is organized under the laws of a jurisdiction outside the
United States.

<PAGE>

provided in this Assignment and Acceptance, have the rights and obligations of a
Bank thereunder and (ii) the Assignor shall, to the extent provided in this
Assignment and Acceptance, relinquish its rights and be released from its
obligations under the Credit Agreement.

6. Upon such acceptance and recording by the Administrative Agent, from
and after the Effective Date, the Administrative Agent shall make all payments
under the Credit Agreement [and the Notes] in respect of the interest assigned
hereby (including, without limitation, all payments of principal, interest and
facility and utilization fees with respect thereto) to the Assignee. The
Assignor and Assignee shall make all appropriate adjustments in payments under
the Credit Agreement [and the Notes] for periods prior to the Effective Date
directly between themselves.

7. This Assignment and Acceptance shall be governed by, and construed in
accordance with, the laws of the State of Illinois.

IN WITNESS WHEREOF, the parties hereto have caused this Assignment and
Acceptance to be executed by their respective officers thereunto duly
authorized, as of the date first above written, such execution being made on
Schedule 1 hereto.

<PAGE>

[NAME OF ASSIGNEE]

By
-------------------------------
Title:

APPLICABLE LENDING OFFICES:

[Specify]

ADDRESSES FOR PURPOSES OF
NOTICE:

[Specify]

Accepted this day
of , 19

BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as
Administrative Agent

By:
--------------------
Title:

Acknowledged and Agreed this
day of , 19

BANK OF AMERICA ILLINOIS,
as Swing-Line Bank

By:
--------------------
Title:

[ALLEGIANCE CORPORATION

By:
--------------------
Title:

- -------------------------
(3) If required by the terms of the Credit Agreement.

<PAGE>

Schedule 1.01 to
Credit Agreement dated
as of September 23, 1996

LENDING OFFICE ADDRESSES
- --------------------------------------------------------------------------------

Domestic Lending Eurocurrency Lending
Bank Office Office
- ---------------- ---------------- --------------------

Bank of America 200 W. Jackson Blvd. 200 W. Jackson Blvd.
Illinois 9th Floor 9th Floor
Chicago, IL 60697 Chicago, IL 60697

The Bank of Tokyo- 227 W. Monroe Street 227 W. Monroe Street
Mitsubishi, Ltd. Suite 2300 Suite 2300
Chicago Branch Chicago, IL 60606 Chicago, IL 60606

Caisse Nationale 55 E. Monroe Street 55 E. Monroe Street
de Credit Agricole Suite 4700 Suite 4700
Chicago, IL 60603 Chicago, IL 60603

The Chase 270 Park Avenue 270 Park Avenue
Manhattan Bank New York, NY 10017 New York, NY 10017

Citibank, N.A. 1 Court Square 1 Court Square
7th Floor 7th Floor
Long Island, NY 11120 Long Island, NY 11120

Credit Lyonnais 227 W. Monroe Street 227 W. Monroe Street
Chicago Branch Suite 3800 Suite 3800
Chicago, IL 60606 Chicago, IL 60606

Credit Suisse 12 E. 49th Street 12 E. 49th Street
New York, NY 10017 New York, NY 10017

Deutsche Bank AG 227 W. Monroe 31 W. 52nd Street
Chicago and/or Suite 4350 New York, NY 10019
Cayman Islands Chicago, IL 60606
Branches

The First National One First National One First National
Bank of Chicago Plaza Plaza
Chicago, IL 60670 Chicago, IL 60670

The Fuji Bank, 225 W. Wacker Drive 225 W. Wacker Drive
Limited Suite 2000 Suite 2000
Chicago, IL 60606 Chicago, IL 60606

The Industrial 227 W. Monroe Street 227 W. Monroe Street
Bank of Japan, Suite 2600 Suite 2600
Limited Chicago, IL 60606 Chicago, IL 60606
Chicago Branch

<PAGE>

Mellon Bank, N.A. 3 Mellon Bank Center 3 Mellon Bank Center
Mail Code 153-2305 Mail Code 153-2305
Pittsburgh, PA 15258 Pittsburgh, PA 15258

Morgan Guaranty Trust 60 Wall Street 60 Wall Street
Company of New York New York, NY 10260 New York, NY 10260

NationsBank of 901 Main Street 901 Main Street
Texas, N.A. Dallas, TX 75202 Dallas, TX 75202

The Northern Trust 50 S. LaSalle Street 50 S. LaSalle Street
Company Chicago, IL 60675 Chicago, IL 60675

PNC Bank, 500 W. Madison Street 500 W. Madison Street
National Suite 3140 Suite 3140
Association Chicago, IL 60661 Chicago, IL 60661

The Sumitomo Bank, 233 S. Wacker Drive 233 S. Wacker Drive
Limited, Chicago Suite 4800 Suite 4800
Branch Chicago, IL 60606 Chicago, IL 60606

Toronto Dominion 909 Fannin Street 909 Fannin Street
(Texas), Inc. 17th Floor 17th Floor
Houston, TX 77010 Houston, TX 77010

Union Bank of 299 Park Avenue 299 Park Avenue
Switzerland, New New York, NY 10171 New York, NY 10171
York Branch

Wachovia Bank of 191 Peachtree Street, 191 Peachtree Street
Georgia, N.A. N.E. N.E.
Atlanta, GA 30303 Atlanta, GA 30303

Wells Fargo Bank, 201 Third Street 201 Third Street
N.A. MAC 0187-081 MAC 0187-081
San Francisco, CA 94103 San Francisco, CA 94103

<PAGE>

U.S. $300,000,000

---------------------

CREDIT AGREEMENT

(FACILITY B)
----------------------

Dated as of September 23, 1996

among

ALLEGIANCE CORPORATION
as Borrower

THE FINANCIAL INSTITUTIONS NAMED HEREIN
as Banks

THE FIRST NATIONAL BANK OF CHICAGO
as Syndication Agent

NATIONSBANK OF TEXAS, N.A.
as Documentation Agent

MORGAN GUARANTY TRUST COMPANY OF NEW YORK
as Syndication Agent

and

BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION
as Administrative Agent

Arranged by

BA SECURITIES, INC.

<PAGE>
TABLE OF CONTENTS

Section PAGE
- ------- ----
ARTICLE I
DEFINITIONS

SECTION 1.01. Defined Terms.........................................1
SECTION 1.02. Computation of Time Periods..........................14
SECTION 1.03. Accounting Terms and Principles......................14

ARTICLE II
THE SYNDICATED BORROWING FACILITY

SECTION 2.01. The Syndicated Borrowing Facility....................14
SECTION 2.02. Making the Syndicated Advances.......................15
SECTION 2.03. Method of Electing Interest Rates....................15

ARTICLE III
THE COMPETITIVE BID BORROWING FACILITY

SECTION 3.01. The Competitive Bid Facility.........................17
SECTION 3.02. Competitive Bid Quote Request........................18
SECTION 3.03. Invitation for Competitive Bid Quotes................19
SECTION 3.04. Submission and Contents of Competitive Bid
Quotes...............................................19
SECTION 3.05. Notice to the Borrower...............................21
SECTION 3.06. Acceptance and Notice by the Borrower................21
SECTION 3.07. Allocation by Administrative Agent...................22
SECTION 3.08. Notification of Acceptances to the
Affected Banks.......................................22
SECTION 3.09. Funding of Competitive Bid Advances..................23

ARTICLE IV
GENERAL TERMS

SECTION 4.01. Illegality; Interest Rate Inadequate
or Unfair............................................23
SECTION 4.02. Effect of Notice of Borrowing;
Maximum Number of Borrowings.........................25
SECTION 4.03. Effect of Failure to Borrow or Fund..................25
SECTION 4.04. Facility Fees........................................26
SECTION 4.05. Reduction of the Commitments.........................29
SECTION 4.06. Repayment............................................29
SECTION 4.07. Interest.............................................29
SECTION 4.08. Additional Interest on Eurodollar
Rate Advances........................................31
SECTION 4.09. Interest on Overdue Principal........................31
SECTION 4.10. Interest Rate Determinations.........................31
SECTION 4.11. Performance of Banks' Obligations....................32
SECTION 4.12. Optional Prepayments.................................32
SECTION 4.13. Increased Costs......................................33

<PAGE>

PAGE
----

SECTION 4.14. Payments and Computations............................34
SECTION 4.15. Taxes................................................36
SECTION 4.16. The Notes............................................38
SECTION 4.17. Sharing of Payments, Etc.............................39
SECTION 4.18. Termination and Prepayment with
Respect to Any Bank..................................41
SECTION 4.19. Extensions of the Commitments........................44

ARTICLE V
CONDITIONS OF LENDING

SECTION 5.01. Conditions Precedent to the First
Borrowing............................................45
SECTION 5.02. Conditions Precedent to Each
Borrowing............................................47

ARTICLE VI
REPRESENTATIONS AND WARRANTIES

SECTION 6.01. Representations and Warranties
of the Borrower.....................................48

ARTICLE VIICOVENANTS

SECTION 7.01. Affirmative Covenants of the Borrower................49
SECTION 7.02. Negative Covenants of the Borrower...................54

ARTICLE VIII
EVENTS OF DEFAULT

SECTION 8.01. Events of Default....................................58

ARTICLE IX
THE ADMINISTRATIVE AGENT

SECTION 9.01. Appointment and Authorization;
"Administrative Agent"...............................62
SECTION 9.02. Delegation of Duties.................................62
SECTION 9.03. Liability of Administrative Agent....................63
SECTION 9.04. Reliance by Administrative Agent.....................63
SECTION 9.05. Notice of Default....................................64
SECTION 9.06. Credit Decision......................................64
SECTION 9.07. Indemnification of Administrative
Agent................................................65
SECTION 9.08. Administrative Agent in Individual
Capacity.............................................66
SECTION 9.09. Successor Administrative Agent.......................66
SECTION 9.10. Other Agents.........................................66

<PAGE>

PAGE
----

ARTICLE X
MISCELLANEOUS

SECTION 10.01. Amendments, Etc.....................................67
SECTION 10.02. Notices, Etc........................................67
SECTION 10.03. No Waiver; Cumulative Remedies......................68
SECTION 10.04. Costs and Expenses; Indemnification.................68
SECTION 10.05. Right of Set-Off....................................70
SECTION 10.06. Binding Effect; Assignments and
Participations......................................70
SECTION 10.07. Governing Law.......................................73
SECTION 10.08. Execution in Counterparts...........................73
SECTION 10.09. Severability........................................73
SECTION 10.10. Entire Agreement....................................73

<PAGE>

EXHIBIT AND SCHEDULES

Exhibit 2.02 Form of Notice of Syndicated Borrowing
Exhibit 2.03 Form of Notice of Interest Rate Election
Exhibit 3.02 Form of Competitive Bid Quote Request
Exhibit 3.04 Form of Competitive Bid Quote
Exhibit 3.06 Form of Notice of Competitive Bid
Borrowing
Exhibit 4.16(a) Form of Syndicated Note
Exhibit 4.16(C) Form of Competitive Bid Note
Exhibit 5.01(a)(v)(A) Form of Opinion of Borrower's
General Counsel
Exhibit 5.01(a)(v)(B) Form of Opinion of Borrower's Special
Counsel
Exhibit 7.01(g)(ii) Form of Certificate of Independent
Accountants
Exhibit 10.06 Form of Assignment and Acceptance

Schedule 1.01 Applicable Lending Offices

<PAGE>

CREDIT AGREEMENT

(FACILITY B)

Dated as of September 23, 1996

This CREDIT AGREEMENT (FACILITY B) (this "AGREEMENT") dated as of
September 23, 1996 is made by and among the following parties:

(i) ALLEGIANCE CORPORATION, a Delaware corporation (the "BORROWER"),

The parties hereto agree as follows:

ARTICLE I
DEFINITIONS

SECTION 1.01. DEFINED TERMS. As used in this Credit Agreement
(Facility B) (this "AGREEMENT"), the following terms shall have the following
meanings (such meanings to be equally applicable to both the singular and plural
forms of the terms defined):

"ABSOLUTE RATE" means, with respect to an Absolute Rate Advance made
by a given Bank for the relevant Interest Period,

<PAGE>

the rate of interest per annum (rounded to the nearest 1/100 of 1%) offered by
such Bank and accepted by the Borrower with respect to such Absolute Rate
Advance.

"ABSOLUTE RATE AUCTION" means a solicitation of Competitive Bid Quotes
setting forth Absolute Rates for Absolute Rate Advances to be extended pursuant
to ARTICLE III.

"ADVANCE" means a Syndicated Advance and/or a Competitive Bid Advance,
as the context requires.

"AFFILIATE" means, as to any Person, any other Person that, directly
or indirectly, controls, is controlled by or is under common control with such
Person.

"AGENT-RELATED PERSONS" means BofA and any successor administrative
agent arising under SECTION 9.09, together with their respective Affiliates
(including, in the case of BofA, the Arranger), and the officers, directors,
employees, agents and attorneys-in-fact of such Persons and Affiliates.

"ANNIVERSARY" means, with respect to any calendar year, the date in
such year which is the anniversary of the Closing Date.

"APPLICABLE LENDING OFFICE" means, with respect to each Bank, such
Bank's Domestic Lending Office in the case of a Base

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Rate Advance, such Bank's Eurodollar Lending Office in the case of a Eurodollar
Rate Advance, and such Bank's Competitive Bid Lending Office in the case of a
Competitive Bid Advance.

"ARRANGER" means BA Securities, Inc., a Delaware corporation.

"ATTORNEY COSTS" means and includes all fees and disbursements of any
law firm or other external counsel, the allocated cost of internal legal
services and all disbursements of internal counsel.

"AVAILABLE COMMITMENT" means, with respect to any Bank at any time, an
amount equal to (i) such Bank's Commitment at such time MINUS (ii) an amount
equal to such Bank's ratable share, determined on the basis that such Bank's
Commitment bears to all Commitments at such time, of the aggregate principal
amount of all Competitive Bid Advances outstanding at such time.

"BASE RATE" means, for any day, the higher of (i) the Reference Rate
for such day and (ii) the sum of the latest Federal Funds Rate PLUS 0.50%.

"BASE RATE ADVANCE" means (i) an Advance made or to be made by a Bank
pursuant to SECTION 2.01, as a Base Rate Advance in accordance with the
applicable Notice of Syndicated Borrowing, or pursuant to SECTION 4.01, as a
Base Rate Advance in substitution for a Fixed Rate Advance, and (ii) any Advance
Converted into a Base Rate Advance in accordance with SECTION 2.03 or 4.01.
Each Base Rate Advance shall bear interest as provided in SECTION 4.07(a).

"BAXTER" means Baxter International Inc., a Delaware corporation.

"BORROWING" means a Syndicated Borrowing and/or a Competitive Bid
Borrowing, as the context requires.

"BORROWING DATE" means a date on which an Advance is, or is proposed
to be, made hereunder.

"CLOSING DATE" means September 23, 1996.

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"COMPETITIVE BID BORROWING FACILITY" has the meaning assigned to that
term in SECTION 3.01.

"COMPETITIVE BID NOTE" has the meaning assigned to that term in
SECTION 4.16(b).

"COMPETITIVE BID QUOTE REQUEST" means a Competitive Bid Quote Request
substantially in the form of EXHIBIT 3.02 hereto,

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completed by the Borrower and delivered by the Borrower to the Administrative
Agent in accordance with SECTION 3.02.

AGGREGATE
FROM AND INCLUDING TO BUT EXCLUDING WRITE-OFFS
- ------------------ ---------------- ----------
Closing Date Anniversary in 1997 $750,000,000
Anniversary in 1997 Anniversary in 1998 $650,000,000
Anniversary in 1998 Anniversary in 1999 $550,000,000
Anniversary in 1999 Anniversary in 2000 $450,000,000
Anniversary in 2000 Anniversary in 2001 $350,000,000

"CREDIT RATING" has the meaning assigned to that term in SECTION
4.04(a).

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the Borrower and its Consolidated Subsidiaries as lessee under leases that, in
accordance with generally accepted accounting principles, are recorded as
capital leases, (iii) obligations of the Borrower and its Consolidated
Subsidiaries under direct or indirect guaranties in respect of, and obligations
(contingent or otherwise) to purchase or otherwise acquire, or otherwise to
assure a creditor against loss in respect of indebtedness or obligations of
others of the kinds referred to in clauses (i) and (ii) above (other than Debt
of any Subsidiary, to the extent such Debt is included in the calculation of
Debt as a result of clause (i) or (ii) above) in excess of $25,000,000 in the
aggregate (provided that for purposes of SECTION 8.01(e), the $25,000,000
threshold above shall not apply) and (iv) indebtedness or obligations of the
kinds referred to in clauses (i), (ii) or (iii) above of the Borrower's
unconsolidated Subsidiaries in excess of $200,000,000 in the aggregate. The
term "Debt" shall not include the undrawn face amount of any letter of credit
issued for the account of the Borrower or any of its Consolidated Subsidiaries
in the ordinary course of the Borrower's or such Subsidiary's business, but
shall include the reimbursement obligation owing from time to time by the
Borrower or any of its Consolidated Subsidiaries in respect of drawings made
under any letter of credit in the event reimbursement is not made immediately
following the applicable drawing.

"DISTRIBUTION" means the distribution by Baxter to its stockholders of
all of the outstanding shares of common stock of
the Borrower, which shall be a wholly-owned subsidiary of Baxter prior to giving
effect thereto.

"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.

"EUROCURRENCY LIABILITIES" has the meaning assigned to that term in
Regulation D of the Board of Governors of the Federal Reserve System, as in
effect from time to time.

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<PAGE>

"EURODOLLAR ADVANCE" means any Eurodollar Rate Advance or Eurodollar
Bid Rate Advance.

"EURODOLLAR MARGIN" has the meaning assigned to that term in SECTION
4.07(b).

"EURODOLLAR RATE" means, for the Interest Period for each Eurodollar
Advance comprising part of the same Borrowing, an interest rate per annum equal
to the average (rounded upward to the nearest whole multiple of 1/100 of 1% per
annum, if such average is not such a multiple) of the rate per annum at which
deposits in U.S. dollars are offered to the principal office of each of the
Reference Banks in London, England by prime banks in the London interbank market
at 11:00 a.m. (London time) two Business Days before the first day of such
Interest Period for a period approximately equal to such Interest Period and in
an amount approximately equal (i) in the case of a Eurodollar Rate Advance, to
the principal amount of such Reference Bank's Eurodollar Rate Advance comprising
part of such Borrowing and (ii) in the case of a Eurodollar Bid Rate Advance, to
the Syndicated Reduction to occur in such Reference Bank's Available Commitment
as a result of the Competitive Bid Borrowing to which such Eurodollar Bid Rate
Advance relates. The Eurodollar Rate for the Interest Period for each
Eurodollar Advance comprising part of the same Borrowing shall be determined by
the Administrative

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<PAGE>

Agent on the basis of applicable rates furnished to and received by the
Administrative Agent from the Reference Banks two Business Days before the first
day of such Interest Period, SUBJECT, HOWEVER, to the provisions of
SECTION 4.10.

"EVENTS OF DEFAULT" has the meaning assigned to that term in
SECTION 8.01.

"FEDERAL FUNDS RATE" means, for any day, the rate set forth in the
weekly statistical release designated as H.15(519), or any successor
publication, published by the Federal Reserve Bank of New York on the preceding
Business Day opposite the caption "Federal Funds (Effective)"; or, if for any
relevant day such rate is not so published on any such preceding Business Day,
the rate for such day will be the arithmetic mean as determined by the
Administrative Agent of the rates for the last transaction in overnight Federal
funds arranged prior to 9:00 a.m. (New York City time) on that day by each of
three leading brokers of Federal funds transactions in New York City selected by
the Administrative Agent.

"FIRST BORROWING" means the initial Borrowing made by the Borrower
hereunder.

"FIXED RATE ADVANCES" means Eurodollar Rate Advances or Competitive
Bid Advances (excluding Competitive Bid Advances

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bearing interest at the Base Rate pursuant to SECTION 4.01) or any combination
of the foregoing.

"FORM 10" means the Registration Statement on Form 10 filed by the
Borrower under the Securities Exchange Act of 1934, File No. 1-11885, as it
became effective as of September 20, 1996.

"INTEREST EXPENSE" means, with respect to any period, the sum (without
duplication) of (i) Consolidated interest expense of the Borrower and its
Consolidated Subsidiaries for such period before the effect of interest income,
as reflected on the Consolidated statements of income for the Borrower and its
Consolidated Subsidiaries for such period and (ii) Consolidated yield or
discount accrued during such period on the aggregate outstanding investment or
claim held by purchasers, assignees or other transferees of (or of interests in)
receivables of the Borrower and its Consolidated Subsidiaries in connection with
a revolving Securitization Transaction (regardless of the accounting treatment
of such Securitization Transaction).

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<PAGE>

Rate Advance, a number of days not less than 7 days and not more than 180 days,
in each case as the Borrower may select pursuant to SECTION 2.02, 2.03 or 3.02,
as applicable; PROVIDED, that:

(i) The duration of any Interest Period which would otherwise
end after the Termination Date shall end on the Termination Date;

(ii) Interest Periods commencing on the same day for Advances
comprising the same Borrowing shall be of the same duration;

(iii) Whenever the last day of any Interest Period would
otherwise occur on a day other than a Business Day, the last day of
such Interest Period shall be extended to occur on the next succeeding
Business Day, unless, in the case of any Interest Period for a
Eurodollar Advance, such extension would cause the last day of such
Interest Period to occur in the next following calendar month, in
which case the last day of such Interest Period shall occur on the
immediately preceding Business Day; and

(iv) If an Interest Period (other than a one, two or three week
Interest Period) for a Eurodollar Advance begins on the last Business
Day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period), such Interest Period shall end on the last Business Day of a
calendar month.

"LOAN DOCUMENT" has the meaning assigned to that term in SECTION 9.01.

"MARGIN STOCK" has the meaning assigned to that term under
Regulation U issued by the Board of Governors of the Federal Reserve System.

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<PAGE>

the six month period ended June 30, 1996 set forth in the Form 10.

"MOODY'S" means Moody's Investors Service, Inc., or its successor.

"NOTES" has the meaning assigned to that term in SECTION 4.16(b).

"NOTICE OF BORROWING" means a Notice of Competitive Bid Borrowing
and/or a Notice of Syndicated Borrowing, as the context requires.

"NOTICE OF COMPETITIVE BID BORROWING" has the meaning assigned to that
term in SECTION 3.06.

"NOTICE OF INTEREST RATE ELECTION" has the meaning assigned to that
term in SECTION 2.03.

"NOTICE OF SYNDICATED BORROWING" has the meaning assigned to that term
in SECTION 2.02.

"REFERENCE BANKS" means BofA, The First National Bank of Chicago and
Morgan Guaranty Trust Company of New York, and

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<PAGE>

each successor financial institution that shall be designated as a Reference
Bank hereunder pursuant to SECTION 4.10(c) or otherwise in accordance with this
Agreement.

"S&P" means Standard & Poor's Ratings Group, or its successor.

"SECURED DEBT" means any Debt or other obligation or liability of the
Borrower or any of its Material Subsidiaries the payment of which is secured by
a Security Interest.

"SECURITIZATION TRANSACTION" has the meaning assigned to that term in
SECTION 7.02(a)(12).

"STATED TERMINATION DATE" means September 22, 1997 or such later date
to which the Stated Termination Date shall have been extended pursuant to
SECTION 4.19.

"SYNDICATED ADVANCE" means an advance by a Bank to the Borrower
pursuant to SECTION 2.02, as the same may be converted or continued from time to
time pursuant to SECTION 2.03. At any time, depending upon the interest rate
selected therefor or otherwise applicable thereto in accordance with SECTION
2.03 and

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<PAGE>

4.01, a Syndicated Advance shall be either a Base Rate Advance or a Eurodollar
Rate Advance.

"SYNDICATED BORROWING FACILITY" has the meaning assigned to that term
in SECTION 2.01.

"SYNDICATED NOTE" has the meaning assigned to that term in
SECTION 4.16(a).

"TERMINATION DATE" means, with respect to any Bank, the earlier of (i)
the Stated Termination Date then in effect for such Bank and (ii) the date on
which the Commitments shall have been reduced to zero or terminated in whole
pursuant to the terms hereof.

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<PAGE>

multi-employer pension benefit plan, the withdrawal liability of the Borrower
and its Subsidiaries.

"UNMATURED EVENT OF DEFAULT" means any event that would constitute an
Event of Default but for the requirement that notice be given or time elapse or
both.

SECTION 1.03. ACCOUNTING TERMS AND PRINCIPLES. All accounting terms
used herein shall be interpreted, all accounting determinations hereunder shall
be made, and all financial statements required to be delivered hereunder shall
be prepared in accordance with generally accepted accounting principles as in
effect from time to time, consistently applied (except for changes concurred in
by the Borrower's independent accountants or, in the case of the financial
statements required to be delivered pursuant to SECTION 7.01(g)(i), as
determined by the Borrower to be required in accordance with then existing
generally accepted accounting principles). If any change after the date hereof
in accounting principles would have a material effect upon the results of any
calculation required by or in compliance with any provision of this Agreement,
then such calculation shall be made or compliance with such provision shall be
determined using accounting principles in effect on the date hereof.

ARTICLE II
THE SYNDICATED BORROWING FACILITY

SECTION 2.01. THE SYNDICATED BORROWING FACILITY. Each Bank severally
agrees, on the terms and conditions provided herein, to make Syndicated Advances
to the Borrower from time to time on any Business Day during the period from the
date hereof to the Termination Date in an aggregate amount not to exceed at any
time outstanding the amount of such Bank's Available Commitment (the "SYNDICATED
BORROWING FACILITY"). Subject to SECTION 4.01, each Syndicated Borrowing (i)
shall be in an aggregate amount not less than $10,000,000 (and in integral
multiples of $1,000,000 in excess thereof), (ii) shall be made on the same day
from the Banks ratably according to their respective Commitments and (iii) shall
consist of Syndicated Advances of the same Type. Within the limits of each
Bank's Available Commitment, the Borrower may borrow Syndicated Advances under
this SECTION 2.01, maintain Syndicated Advances outstanding by Converting such
Syndicated Advances pursuant to SECTION 2.03, or prepay

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Syndicated Advances pursuant to SECTION 4.12, and reborrow Syndicated Advances
under this SECTION 2.01.

SECTION 2.02. MAKING THE SYNDICATED ADVANCES. Each Syndicated
Borrowing shall be requested by telephone (to be confirmed immediately in
writing), telecopier or telex notice given by the Borrower to the Administrative
Agent not later than (i) 10:00 a.m. (Chicago time) three Business Days prior to
the proposed Borrowing Date, in the case of a Borrowing comprised of Eurodollar
Rate Advances, and (ii) 10:00 a.m. (Chicago time) on the proposed Borrowing
Date, in the case of a Borrowing comprised of Base Rate Advances. Each notice
of Syndicated Borrowing pursuant to this SECTION 2.02 (a "NOTICE OF SYNDICATED
BORROWING") shall be in substantially the form of EXHIBIT 2.02 hereto,
specifying the proposed Borrowing Date, Type of Syndicated Advances, aggregate
amount of the proposed Syndicated Borrowing and the Interest Period for each
such Syndicated Advance, and shall include such information as shall be required
by SECTION 7.01(h). The Administrative Agent shall in turn promptly notify each
Bank by telephone (to be confirmed immediately in writing), telecopier or telex
of the date, applicable interest rate and aggregate amount of such Syndicated
Borrowing and such Bank's ratable portion of such Syndicated Borrowing. Each
Bank, for the account of its Applicable Lending Office, shall before 12:00 Noon
(Chicago time) on the Borrowing Date specified in the notice received from the
Administrative Agent pursuant to the preceding sentence, deposit such Bank's
ratable portion of such Syndicated Borrowing in same day funds to the
Administrative Agent's Clearing Account No. 12331-15202 (unless another account
is designated by the Administrative Agent for such purpose), Reference:
Allegiance Corporation, maintained at 1850 Gateway Boulevard, Concord,
California 94520. After the Administrative Agent's receipt of such funds and
upon fulfillment of the applicable conditions set forth in ARTICLE V, the
Administrative Agent shall promptly make same day funds in the amount of such
funds available to the Borrower, at the Administrative Agent's address provided
in SECTION 10.02.

(i) if such Advances are Base Rate Advances, the Borrower may
elect to (A) convert such Advances to Eurodollar Rate Advances or (B)
continue such Advances

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as Base Rate Advances, in each case effective as of any Business Day; and

(ii) if such Advances are Eurodollar Rate Advances, the Borrower
may elect to (A) convert such Advances to Base Rate Advances or (B)
continue such Advances as Eurodollar Rate Advances for an additional
Interest Period, in each case effective on the last day of the then
current Interest Period applicable to such Advances.

Each such election shall be made by delivering a notice (a "NOTICE OF INTEREST
RATE ELECTION") to the Administrative Agent at least three Business Days before
the conversion or continuation selected in such notice is to be effective. If
the Borrower shall fail to issue a Notice of Interest Rate Election within three
Business Days prior to the end of any Interest Period (unless the Borrower shall
have issued a notice of prepayment in respect of the applicable Borrowing in
accordance with SECTION 4.12), the Advances comprising such Borrowing shall be,
as applicable, converted into or continued as Base Rate Advances having an
Interest Period of 30 days. A Notice of Interest Rate Election may, if it so
specifies, apply to only a portion of the aggregate principal amount of the
relevant Borrowing; PROVIDED that (i) such portion is allocated ratably among
the Advances comprising such Borrowing and (ii) the portion to which such Notice
of Interest Rate Election applies, and the remaining portion to which it does
not apply, are each $10,000,000 or any larger multiple of $1,000,000.

(b) Each Notice of Interest Rate Election shall be substantially in
the form of EXHIBIT 2.03 hereto and shall specify:

(i) the Borrowing (or portion thereof) to which such notice
applies;

(ii) the date on which the conversion or continuation selected
in such notice is to be effective, which shall comply with the
applicable clause of SUBSECTION (a) above;

(iii) if the Advances comprising such Borrowing are to be
converted, the next Type of Advances; and

(iv) the duration of the new Interest Period.

Each Interest Period specified in a Notice of Interest Rate Election shall
comply with the provisions of the definition of

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Interest Period. Each Notice of Interest Rate Election shall be irrevocable
when given by the Borrower.

(c) Upon receipt of a Notice of Interest Rate Election from the
Borrower pursuant to SUBSECTION (a) above, the Administrative Agent shall
promptly notify each Bank of the contents thereof.

(d) Upon the occurrence, and during the continuance, of an Event of
Default, the Administrative Agent may (and, at the direction of the Majority
Banks, the Administrative Agent shall) suspend the ability of the Borrower to
obtain Conversions of Syndicated Borrowings into Eurodollar Rate Advances, and
each Conversion proposed to occur during any such period of suspension shall be
a Conversion into Base Rate Advances. Upon the occurrence, and during the
continuance, of an Unmatured Event of Default, the Administrative Agent may
(and, at the direction of the Majority Banks, the Administrative Agent shall)
suspend the ability of the Borrower to obtain Conversions of Syndicated
Borrowings into Eurodollar Rate Advances having Interest Periods in excess of
one month in duration, and each Conversion into any Eurodollar Rate Advance
proposed to occur during any such period of suspension and proposed to have any
longer Interest Period shall be a Conversion to a Eurodollar Rate Advance having
an Interest Period of one month. In each case, such suspension shall become
effective upon notice thereof to the Borrower and each of the Banks, and shall
remain in effect until the Event of Default or Unmatured Event of Default giving
rise to such notice is cured or waived.

ARTICLE III
THE COMPETITIVE BID BORROWING FACILITY

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principal amount of Syndicated Advances outstanding at such time, shall not
exceed the aggregate Commitments at such time. Within the limits and on the
conditions set forth in this ARTICLE III, the Borrower may from time to time
borrow, repay and reborrow under this ARTICLE III.

(a) the proposed Borrowing Date, which shall be a Business Day,
for the proposed Competitive Bid Advances,

(b) the aggregate principal amount of such Competitive Bid
Advances, which aggregate principal amount shall be not less than
$2,000,000 or an integral multiple of $500,000 in excess thereof;

(d) the Interest Period applicable thereto, and

(e) if fewer than all Banks are to be solicited, the names of
the Banks to be solicited; PROVIDED that the Borrower shall not
specify fewer than all of the Banks, and the Administrative Agent
shall reject any Competitive Bid Quote Request that specifies fewer
than all of the Banks, if the aggregate principal amount of all
Competitive Bid Advances which will be outstanding after giving effect
to the Competitive Bid Advances requested in such Competitive Bid
Quote Request and which shall have been made in response to one or
more Competitive Bid Quote Requests that specified fewer than all of
the Banks exceeds $500,000,000.

The Borrower may request offers to make Competitive Bid Advances for
more than one Interest Period, but not more than 19

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five Interest Periods, in a single Competitive Bid Quote Request. No
Competitive Bid Quote Request shall be given within five Business Days (or such
other number of days as the Borrower and the Administrative Agent may agree) of
any other Competitive Bid Quote Request. A Competitive Bid Quote Request that
does not conform substantially to the format of EXHIBIT 3.02 hereto shall be
rejected, and the Administrative Agent shall promptly notify the Borrower of
such rejection by telephone, telex, or telecopy.

SECTION 3.04. SUBMISSION AND CONTENTS OF COMPETITIVE BID QUOTES. (a)
Each Bank receiving notice of a Competitive Bid Quote Request from the
Administrative Agent pursuant to SECTION 3.03 may, in its sole discretion,
submit a Competitive Bid Quote containing an offer or offers to make Competitive
Bid Advances in response to such Competitive Bid Quote Request. Each
Competitive Bid Quote must comply with the requirements of this SECTION 3.04 and
must be submitted to the Administrative Agent by telex or telecopy at its
offices specified in or pursuant to SECTION 10.02 not later than (x) 11:00 a.m.
(Chicago time) at least three Business Days prior to the proposed Borrowing
Date, in the case of a Eurodollar Auction or (y) 9:00 a.m. (Chicago time) on the
proposed Borrowing Date, in the case of an Absolute Rate Auction (or, in either
case upon reasonable prior notice to the Banks, such other time and date as the
Borrower and the Administrative Agent may agree); PROVIDED that Competitive Bid
Quotes submitted by BofA or any Affiliate thereof may be submitted, and may only
be submitted, if the Administrative Agent or BofA or such Affiliate notifies the
Borrower of the terms of the offer or offers contained therein not later
than fifteen minutes prior to the time all other Banks are required hereunder to
submit Competitive Bid Quotes to the Administrative Agent.

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Subject to ARTICLES V and VIII, any Competitive Bid Quote so made shall be
irrevocable except with the written consent of the Administrative Agent and the
Borrower.

(b) Each Competitive Bid Quote shall be in substantially the form of
EXHIBIT 3.04 hereto and shall in any case specify:

(i) the proposed Borrowing Date, which shall be the same as
that set forth in the applicable Competitive Bid Quote Request;

(ii) the principal amount of the Competitive Bid Advance for
which each such offer is being made, which principal amount (1) may be
greater than, less than or equal to the Commitment of the quoting
Bank, (2) must be at least $2,000,000 or an integral multiple of
$500,000 in excess thereof, (3) may not exceed the aggregate principal
amount of Competitive Bid Advances for which offers were requested and
(4) must be identified with an Interest Period specified in the
applicable Competitive Bid Quote Request;

(iii) in the case of a Eurodollar Auction, the Competitive Bid
Margin offered for each such Competitive Bid Advance;

(iv) in the case of an Absolute Rate Auction, the Absolute Rate
offered for each such Competitive Bid Advance;

(v) the identity of the quoting Bank; and

(vi) if the quoting Bank shall therein make offers with respect
to more than one Type of Competitive Bid Advance, or at several rates
or for several Interest Periods, in each case as shall have been
requested by the Borrower in the applicable Competitive Bid Quote
Request, the maximum aggregate principal amount with respect to all
such Competitive Bid Advances that such Bank shall be willing to
extend to the Borrower on such proposed Borrowing Date.

(i) is not substantially in the form of EXHIBIT 3.04 hereto or
does not specify all of the information required by SECTION 3.04(b);

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(ii) contains qualifying, conditional or similar language,
other than any such language contained in EXHIBIT 3.04;

(iii) proposes terms other than or in addition to those set
forth in the applicable Competitive Bid Quote Request; or

(iv) arrives after the time set forth in SECTION 3.04(a).

If any Competitive Bid Quote shall be rejected pursuant to this SECTION 3.04(c),
the Administrative Agent shall notify the relevant Bank of such rejection as
soon as practical.

SECTION 3.06. ACCEPTANCE AND NOTICE BY THE BORROWER. Not later than
(x) 12:00 noon (Chicago time) at least three Business Days prior to the proposed
Borrowing Date, in the case of Eurodollar Auction or (y) 10:00 a.m. (Chicago
time) on the proposed Borrowing Date, in the case of an Absolute Rate Auction
(or, in either case upon reasonable prior notice to the Banks, such other time
and date as the Borrower and the Administrative Agent may agree), the Borrower
shall notify the Administrative Agent of its acceptance or non-acceptance of any
or all of the offers so notified to it pursuant to SECTION 3.05; PROVIDED,
however, that the failure by the Borrower to give such notice to the
Administrative Agent with respect to any such offer shall be deemed to be a
rejection of such offer. In the case of acceptance, such notice (a "NOTICE OF
COMPETITIVE BID BORROWING") shall be substantially in the form of EXHIBIT 3.06
hereto and shall specify the aggregate principal amount of offers for each
Interest Period

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that are accepted. The Borrower may accept any Competitive Bid Quote in whole
or in part; PROVIDED that:

(a) the aggregate principal amount of Competitive Bid Advances
may not exceed the applicable amount set forth in the related
Competitive Bid Quote Request,

(b) acceptance of offers may only be made on the basis of
ascending Competitive Bid Margins or Absolute Rates, as the case may
be, starting with the lowest and continuing with the next lowest until
offers in the aggregate amount specified by the Borrower for
acceptance shall have been accepted, and

(c) the Borrower may not accept any offer that is described in
SECTION 3.04(c) or that otherwise fails to comply with the
requirements of this Agreement.

SECTION 3.08. NOTIFICATION OF ACCEPTANCES TO THE AFFECTED BANKS.
The Administrative Agent shall (a) promptly following its receipt of a Notice of
Competitive Bid Borrowing and in any event not later than (x) 12:30 p.m.
(Chicago time), in the case of a Eurodollar Auction or (y) 10:30 a.m. (Chicago
time), in the case of an Absolute Rate Auction, on the date of its receipt of
such Notice of Competitive Bid Borrowing, provide notice by telephone to each
Bank that has made a Competitive Bid Quote of the extent to which its offer or
offers have been accepted, specifying in such notice the principal amount of
each Competitive Bid Advance in respect of which such Competitive Bid Quote has
been accepted, the Interest Period therefor and the Competitive Bid Margin or
Absolute Rate therefor, as applicable and (b) promptly thereafter provide notice
to such Banks by telex or telecopy confirming the same. If, pursuant to
SECTION 3.06, the Borrower and the Administrative Agent shall agree as to times

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for the delivery of a Notice of Competitive Bid Borrowing other than those set
forth in SECTION 3.06, and shall notify the Banks thereof, such notice to the
Banks shall set forth in addition any changes in the times set forth in this
SECTION 3.08.

ARTICLE IV
GENERAL TERMS

SECTION 4.01. ILLEGALITY; INTEREST RATE INADEQUATE OR UNFAIR. The
obligation of each Bank to extend an Advance on the date therefor is subject to
the following:

(a) If, after the date of this Agreement, the adoption of any
applicable law, rule or regulation, or any change therein, or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by any Bank (or its Eurodollar Lending Office) with any
request or directive (whether or not having the force of law) of any such
authority, central bank or comparable agency shall make it unlawful or
impossible for any Bank (or its Eurodollar Lending Office) to make, maintain or
fund its Eurodollar Advances, such Bank shall so notify the Administrative
Agent. The Administrative Agent and such Bank shall forthwith give notice
thereof to the other Banks and the Borrower, whereupon until such Bank notifies
the Borrower and the Administrative Agent that the circumstances giving rise to
such suspension no longer exist, the obligation of such Bank to make (or to
Convert other Advances into) Eurodollar Advances shall be suspended and

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<PAGE>

each Eurodollar Advance which such Bank shall thereafter be required to make
hereunder (or Convert into) shall be made as (or Converted into) a Base Rate
Advance, which Base Rate Advance shall be made (or Converted) on the same day
and have the same Interest Period as the Eurodollar Advances made (or Converted
into) by the other Banks and comprising the balance of such Borrowing. If such
Bank (A) shall determine that it may not lawfully continue to maintain and fund
any of its outstanding Eurodollar Advances to the last day of the Interest
Period therefor and (B) shall so specify in a written notice to the Borrower and
the Administrative Agent, the Borrower shall immediately Convert in full the
then outstanding principal amount of each such Eurodollar Advance into a Base
Rate Advance in an equal principal amount (on which interest and principal shall
be payable contemporaneously with the related Eurodollar Advances of the other
Banks).

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<PAGE>

the Administrative Agent and the Borrower (setting forth in writing the reasons
therefor) that the Eurodollar Rate for Eurodollar Advances comprising such
Borrowing will not adequately reflect the cost to such Banks of making or
funding their respective Eurodollar Advances for such Borrowing or Conversion,
the right of the Borrower to select Eurodollar Advances for such Borrowing or
Conversion and any subsequent Borrowing or Conversion shall be suspended until
the Administrative Agent shall notify the Borrower and the Banks that the
circumstances causing such suspension no longer exist. The obligation of the
Banks to make Eurodollar Advances in connection with such Notice of Borrowing
shall thereupon terminate and each Bank obligated to participate in such
Borrowing shall extend a Base Rate Advance to the Borrower in lieu of the
originally requested Eurodollar Advance, which Base Rate Advance shall be made
on the date specified in the original Notice of Borrowing and shall have an
Interest Period which is co-extensive with the Interest Period originally
requested. In the case of an outstanding Notice of Interest Rate Election at
the time any such suspension shall occur, such Notice shall be deemed amended,
without any further action on the part of the Borrower, to request that the
Syndicated Advances specified therein be Converted to Base Rate Advances.

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<PAGE>

direct out-of-pocket losses and reasonable expenses incurred by such Bank as a
result of any failure by the Borrower to borrow, continue or convert such
Borrowing or Advance in the manner specified in the applicable notice or to
fulfill on or before the date specified for such Borrowing the applicable
conditions set forth in ARTICLE V to the extent of all direct out-of-pocket
losses and reasonable expenses incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by such Bank to fund the
Advance to be made by such Bank as part of such Borrowing when such Advance, as
a result of such failure, is not made on such date. The Borrower shall not be
liable to any Bank under this SECTION 4.03(a) with respect to consequential
damages arising or incurred by such Bank in connection with the Borrower's
failure to fulfill timely the applicable conditions set forth in ARTICLE V.

(b) Unless the Administrative Agent shall have received notice from a
Bank prior to the date of any Borrowing (or, in the case of any Borrowing
comprised of Base Rate Advances, prior to 12:00 Noon (Chicago time) on the date
of such Borrowing) that such Bank will not make available to the Administrative
Agent such Bank's ratable portion of such Borrowing, the Administrative Agent
may assume that such Bank has made such portion available to the Agent on the
date of such Borrowing in accordance with the terms of SECTION 2.02 or
SECTION 3.09, as applicable, and the Administrative Agent may, in reliance upon
such assumption make available to the Borrower on such date a corresponding
amount. If and to the extent that such Bank shall not have so made such ratable
portion available to the Administrative Agent, such Bank and the Borrower
severally agree to repay to the Administrative Agent forthwith on demand such
corresponding amount together with interest thereon, for each day from the date
such amount is made available to the Borrower until the date such amount is
repaid to the Administrative Agent, at (i) in the case of the Borrower, the
interest rate applicable at the time to Advances comprising such Borrowing and
(ii) in the case of such Bank, at the Federal Funds Rate, for each of the first
three days such amount is owed, and at the Base Rate thereafter. If such Bank
shall repay to the Administrative Agent such corresponding amount, such amount
so repaid shall constitute such Bank's Advance as part of such Borrowing for
purposes of this Agreement.

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<PAGE>

Level Credit Ratings Facility Fee
- ----- -------------- ------------
1. Credit Ratings are A3 or
better by Moody's or A- or
better by S&P .06%

2. Level 1 shall not apply, and
Credit Ratings are Baa1 or
better by Moody's or BBB+
or better by S&P .08%

3. Neither Level 1 nor Level 2
shall apply, and Credit Ratings
are Baa2 or better by Moody's
or BBB or better by S&P .09%

4. None of Levels 1, 2 or 3
shall apply, and Credit
Ratings are Baa3 or better by
Moody's or BBB- or better by
S&P .10%

5. Credit Ratings are below Baa3
by Moody's and BBB- by S&P .20%

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<PAGE>

and, in the case of each Bank, on the date such Bank's Commitment shall be
reduced to zero.

(b) CREDIT RATING DETERMINATIONS. For purposes of determining the
applicable facility fee with respect to any period and the Eurodollar Margin
with respect to any Interest Period:

(i) Any change in a Credit Rating shall be deemed to become
effective on the date of public announcement thereof (or, in the case
of indicative ratings, the date of issuance thereof) and shall remain
in effect until the date of public announcement that such rating shall
no longer be in effect (or, in the case of any indicative rating, the
issuance of other evidence of the revocation thereof or a change
therein by the applicable rating agency);

(ii) If, during any period, only one of Moody's and S&P shall
have announced a Credit Rating, the Level immediately below (i.e.,
resulting in higher pricing for the Borrower) the Level in which such
Credit Rating falls shall apply;

(iii) If, during any period, neither Moody's nor S&P shall have
announced a Credit Rating, the Credit Rating shall (subject to CLAUSE
(V) below) be deemed to be below Baa3 (Moody's) and BBB- (S&P),
respectively, during such period;

(iv) If, during any period that both Moody's and S&P have announced
a Credit Rating, such Credit Ratings (subject to CLAUSE (v) below) fall
within different Levels under SECTION 4.04(a) or SECTION 4.07(b), then (A)
in the case of a differential of one Level, the Level resulting in the
lower pricing for the Borrower shall apply (unless one of the Credit
Ratings is BB or lower or Ba2 or lower, in which case Level 5 will apply)
and (B) in the case of a differential of two or more Levels, the Level
immediately following the Level that would have resulted in the lower
pricing shall apply; and

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<PAGE>

agency that shall have issued the lower of the two ratings then in effect
from Moody's and S&P; and (B) at any other time with the prior written
consent of the Majority Banks. Any Credit Rating assigned by a substitute
credit rating agency, prior to the determination of the facility fee for
the period during which such Credit Rating shall be in effect or the
determination of the Eurodollar Margin with respect to any Interest Period,
shall be converted to the nationally recognized equivalent thereof under
the rating system employed by Moody's or S&P, as applicable.

SECTION 4.06. REPAYMENT. Each Syndicated Advance shall mature, and
the principal amount thereof shall be due and payable, on the Termination Date.
Each Competitive Bid Advance shall mature, and the principal amount thereof
shall be due and payable, on the last day of the Interest Period therefor.

(b) EURODOLLAR RATE ADVANCES. If such Advance is a Eurodollar Rate
Advance, a rate per annum equal at all times

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<PAGE>

during the Interest Period for such Advance to the Eurodollar Rate for such
Interest Period PLUS the Eurodollar Margin as in effect from time to time,
payable on the last day of such Interest Period and, if such Interest Period has
a duration of more than three months, on the date during such Interest Period
which occurs three months after the first day of such Interest Period.

Eurodollar
Level Credit Ratings Margin
- ----- -------------- ------
1. Credit Ratings are A3 or
better by Moody's or A- or
better by S&P .170%

2. Level 1 shall not apply, and
Credit Ratings are Baa1 or
better by Moody's or BBB+
or better by S&P .220%

3. Neither Level 1 nor Level 2
shall apply, and Credit Ratings
are Baa2 or better by Moody's
or BBB or better by S&P .235%

4. None of Levels 1, 2 or 3
shall apply, and Credit
Ratings are Baa3 or better by
Moody's or BBB- or better by
S&P .275%

5. Credit Ratings are below Baa3
by Moody's and BBB- by S&P .450%

PROVIDED, that if at any time one Credit Rating is Baa3 or BBB- and the other
Credit Rating is Ba1 or BB+, then the applicable Eurodollar Margin at such time
for Level 4 shall be .325%.

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<PAGE>

(ii) in the case of a Eurodollar Bid Rate Advance, to the Eurodollar Bid Rate
calculated on the basis of the Competitive Bid Margin that shall have been
offered by such Bank pursuant to SECTION 3.04 in its Competitive Bid Quote
related thereto and accepted by the Borrower pursuant to SECTION 3.06 in its
Notice of Competitive Bid Borrowing related thereto, in each case payable on the
last day of the applicable Interest Period and, if such Interest Period has a
duration of more than 90 days or three months, as the case may be, on each day
which occurs during such Interest Period every 90 days or three months, as the
case may be, from the first day of such Interest Period.

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<PAGE>

interest rate on the basis of timely information furnished by the remaining
Reference Banks.

(b) The Administrative Agent shall give prompt notice to (i) the
Borrower and the Banks, of any applicable interest rate determined by the
Administrative Agent for purposes of SECTION 4.07 and the applicable rate, if
any, furnished by each Reference Bank for determining the applicable interest
rate under SECTION 4.07(b) and (ii) the Borrower and each Bank that is to make a
Eurodollar Bid Rate Advance in connection with any Notice of Competitive Bid
Borrowing, of the applicable rate, if any, furnished by each Reference Bank for
determining the applicable Eurodollar Bid Rate with respect to such Eurodollar
Bid Rate Advance.

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<PAGE>

SECTION 4.12. OPTIONAL PREPAYMENTS. (a) The Borrower may, upon
notice to the Administrative Agent, given not later than (x) in the case of a
Eurodollar Rate Advance, 10:00 a.m. (Chicago time) on the third Business Day
prior to the proposed 33 date of prepayment and (y) in the case of a Base Rate
Advance, not later than 9:00 a.m. (Chicago time) on the proposed date of
prepayment, in each case by telephone (to be confirmed immediately in writing),
telecopier or telex, stating in such notice the proposed date and aggregate
principal amount of the prepayment, and if such notice is given the Borrower
shall, prepay the outstanding principal amount of the Syndicated Advances made
as part of the same Syndicated Borrowing in whole or, in the case of a
Syndicated Borrowing comprised solely of Base Rate Advances, ratably in part, in
each case by paying the principal amount to be prepaid together with accrued
interest thereon and other amounts then due and owing, if any, hereunder to the
date of prepayment; PROVIDED that each partial prepayment shall be in an amount
not less than $10,000,000 and in an integral multiple of $1,000,000. Each such
optional prepayment of a Syndicated Borrowing shall be applied to prepay ratably
the Syndicated Advances of the several Banks included in such Syndicated
Borrowing. If the Borrower prepays any Syndicated Borrowing consisting of
Eurodollar Rate Advances on any day other than the last day of an Interest
Period for such Syndicated Borrowing, the Borrower shall reimburse each Bank for
the losses, costs and expenses contemplated in SECTION 10.04(b). The Borrower
may not, unless otherwise required hereunder, prepay any Competitive Bid Advance
without the consent of the Bank which shall have extended such Competitive Bid
Advance.

SECTION 4.13. INCREASED COSTS. Subject to SECTION 4.11, if:

(a) due to either (i) the introduction of or any change (other
than any change by way of imposition or increase of reserve
requirements included in the Eurodollar Rate Reserve Percentage) in or
in the interpretation of any law or regulation or (ii) the compliance
with any guideline or request from any central bank or other
governmental authority (whether or not having the force of law), there
shall be any

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<PAGE>

increase in the cost to any Bank of agreeing or committing to make or
making, funding or maintaining any Advances hereunder; or

(b) either (i) the introduction of or any change in or in the
interpretation of any law, rule, regulation or guideline adopted after
the date hereof and arising out of the July 1988 report of the Basle
Committee on Banking Regulation and Supervisory Practices entitled
"International Convergence of Capital Measurement and Capital
Standards" or (ii) compliance by any Bank with any law or regulation,
or with any guideline or request from any central bank or other
governmental authority (whether or not having the force of law),
affects or would affect the amount of capital required or expected to
be maintained by such Bank or any corporation controlling such Bank
and such Bank determines that the amount of such capital is increased
by or based upon the existence of such Bank's commitment to lend
hereunder and other commitments of this type, or upon the making or
funding of its Advances hereunder,

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<PAGE>

Administrative Agent is hereby authorized to charge the Borrower's account with
the Administrative Agent, after notice to the Borrower of the amount to be
charged, for each payment of principal, interest and fees as such payment
becomes due. The Administrative Agent will promptly thereafter (but in no event
later than the next Business Day) cause such funds to be distributed ratably
(unless otherwise contemplated herein) to the Banks for the account of their
respective Applicable Lending Offices, in each case to be applied in accordance
with the terms of this Agreement.

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<PAGE>

repay to the Administrative Agent forthwith on demand such amount distributed to
such Bank together with interest thereon, for each day from the date such amount
is distributed to such Bank until the date such Bank repays such amount to the
Administrative Agent, at the Federal Funds Rate, for each of the first three
days such amount is owed, and at the Base Rate thereafter.

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<PAGE>

detail, the circumstances concerning the imposition of, and the calculations
used to determine, such Taxes or Other Taxes.

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<PAGE>

No amount that shall be required to be paid by the Borrower pursuant
to SUBSECTION (a), (b) or (c) of this SECTION 4.15 shall be payable by the
Borrower to any Bank that (i) is not, on the date such Person becomes party to
this Agreement as a "Bank", either (x) required to submit Form 1001 (relating to
such Bank and entitling it to a complete exemption from withholding on all
amounts to be received by such Bank at any Applicable Lending Office designated
by such Bank, including fees, pursuant to this Agreement and the Advances) or
Form 4224 (relating to all amounts to be received by such Bank at any Applicable
Lending Office designated by such Bank, including fees, pursuant to this
Agreement and the Advances) or (y) a United States person (as such term is
defined in Section 7701(a)(30) of the Code), or (ii) shall have failed to submit
to the Borrower any form or certificate that such Bank shall have been required
to file pursuant to this subsection and shall have been entitled to file under
applicable law.

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<PAGE>

Syndicated Advances of the relevant Type. Each reference in this Agreement or
the Notes to the "Notes" or the "Syndicated Notes" of such Bank shall mean and
be deemed to refer to and include any or all of such substituted promissory
notes, as the context may require.

(b) The indebtedness of the Borrower resulting from the Competitive
Bid Advances made by each Bank to the Borrower shall be evidenced by a
promissory note of the Borrower payable to the order of such Bank substantially
in the form of EXHIBIT 4.16(b) hereto (sometimes called a "COMPETITIVE BID NOTE"
and together with the Syndicated Notes, the "NOTES"). Each Bank may, by notice
to the Administrative Agent and the Borrower to be given not later than three
Business Days prior to the First Borrowing, request that its Absolute Rate
Advances and Eurodollar Bid Rate Advances be evidenced by separate promissory
notes. Each such promissory note shall be substantially in the form of
EXHIBIT 4.16(b), with appropriate modifications to reflect the fact that each
such promissory note evidences solely Competitive Bid Advances of the relevant
Type. Each reference in this Agreement or the Notes to the "Notes" or the
"Competitive Bid Notes" of such Bank shall mean and be deemed to refer to and
include either or both of such substituted promissory notes, as the context may
require.

(c) Each Bank shall maintain records of all Advances made by such
Bank to the Borrower, the interest rate for such Advances and all payments made
on account of principal thereof and, prior to any transfer of any Note, such
Bank shall endorse a record of the Advances evidenced by such Note held by such
Bank on the grid attached thereto and forming a part of such Note. Failure by a
Bank to record on the appropriate Note any Advance or payment shall not relieve
the Borrower of any obligation with respect to such Advance or payment.

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<PAGE>

under SECTION 4.04(a), ratably among the Banks in accordance with the amount of
such fees owed to each Bank; and FOURTH, to the payment of any other amount
payable under this Agreement, ratably among the Banks in accordance with the
aggregate amount owed to each Bank.

(b) The Administrative Agent shall promptly advise each Bank
following its receipt of any Payment Sharing Notice. After the Administrative
Agent has received a Payment Sharing Notice, and for so long thereafter as any
Event of Default exists, all payments received by the Administrative Agent to be
distributed to the Banks shall be distributed to the Banks (and for purposes of
this Agreement shall be deemed to have been applied by the Banks,
notwithstanding the fact that any Bank may have made a different application in
its books and records) in the following order: FIRST, to the payment of amounts
payable under SECTION 10.04, ratably among the Administrative Agent and the
Banks in accordance with the aggregate amount owed to each party; PROVIDED that
if any such amount payable is then being contested in good faith by the
Borrower, application of payment thereto under this clause FIRST shall not occur
without the prior written consent of the Borrower; SECOND, to the payment of
facility fees then due and payable under SECTION 4.04(a), ratably among the
Banks in accordance with the amount of such fees owed to each Bank; THIRD, to
the payment of interest then due and payable on the Advances, ratably among the
Banks in accordance with the amount of such interest owed to each Bank; FOURTH,
to the payment of the principal amount of all Borrowings regardless of whether
any such amount is then due and payable, ratably among the Banks in accordance
with the aggregate principal amount owed to each Bank; and FIFTH, to the payment
of any other amount payable under this Agreement, ratably among the Banks in
accordance with the aggregate amount owed to each Bank.

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<PAGE>

the order of payments set forth therein); PROVIDED that if all or any portion of
such excess payment or other recovery is thereafter recovered from the
purchasing Bank, such purchase shall to that extent be rescinded and each other
Bank shall repay to the purchasing Bank the purchase price paid therefor,
together with an amount equal to such paying Bank's ratable share (according to
the proportion of (i) the amount of such paying Bank's required repayment to
(ii) the total amount so recovered from the purchasing Bank) of any interest or
other amount paid or payable by the purchasing Bank in respect of the total
amount so recovered. The Borrower agrees that any Bank so purchasing a
participation from another Bank pursuant to this SECTION 4.17(c) may, to the
fullest extent permitted by law, exercise all its rights of payment (including
the right of set-off, but subject to SECTION 10.05) with respect to such
participation as fully as if such Bank were the direct creditor of the Borrower
in the amount of such participation. The Administrative Agent will keep records
(which shall be conclusive and binding in the absence of manifest error) of
participations purchased under this Section and will in each case notify the
Banks following any such purchases or repayments. Nothing contained herein
shall require any Bank to exercise any right of set-off, bankers' lien,
counterclaim or similar right or shall affect the right of any Bank to exercise,
and retain the benefits of exercising, any such right with respect to any other
indebtedness or obligation of the Borrower not evidenced by this Agreement or
the Notes. If under any applicable bankruptcy, insolvency or other similar law,
any Bank obtains a secured claim in lieu of a set-off or other payment to which
this SECTION 4.17 would apply, such Bank shall, to the extent practicable,
exercise its rights in respect of such secured claim in a manner consistent with
the rights of the Banks entitled under this SECTION 4.17 to share in the
benefits of any recovery on such secured claim.

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<PAGE>

(b) Upon receipt by the Borrower of a Special Notice from any Bank,
the Borrower may elect to terminate the unused portion of the Commitment of such
Bank by giving notice thereof (a "TERMINATION NOTICE") to such Bank and to the
Administrative Agent on or before the thirtieth day following the date of such
Special Notice, specifying therein (i) the name of such Bank ("TERMINATED
BANK"), (ii) the proposed effective date of termination ("BANK TERMINATION
DATE") of the unused portion of such Terminated Bank's Commitment, which date
shall not in any event be less than five Business Days following the date of
such Termination Notice, (iii) one or more commercial banks (each, a "SUCCESSOR
BANK"), each such Successor Bank having a combined capital, surplus (or its
equivalent) and undivided profits in an amount not less than U.S. $500,000,000
(or its equivalent in another currency), which Successor Bank or Successor Banks
shall have agreed, in the aggregate, to succeed to the entire Commitment of such
Terminated Bank on the Bank Termination Date.

(d) If the Borrower shall have elected, as evidenced by its
Termination Notice, to prepay all the Advances made by a Terminated Bank
outstanding as of the Bank Termination Date, the Successor Bank or Successor
Banks shall in the aggregate extend to the Borrower, on the Bank Termination
Date, Advances (with interest at a rate to be agreed upon by the Borrower and
each

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<PAGE>

Successor Bank) corresponding in respective amounts to each Advance being
prepaid as of such date, each of which Advances shall have an Interest Period
beginning on the Bank Termination Date and ending on the last day of the
Interest Period of the Advance being prepaid to which it corresponds; PROVIDED
that, upon the mutual agreement of the Borrower and the Successor Bank (or
Successor Banks, as applicable) and notice thereof to the Administrative Agent,
the Borrower may elect not to require the Successor Bank (or Successor Banks, as
applicable) to extend Competitive Bid Advances in substitution for the
Competitive Bid Advances extended by the Terminated Bank.

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<PAGE>

shall not relieve or satisfy the obligations of the Borrower to make any such
prepayments free and clear of all Taxes, to reimburse such Bank for all Other
Taxes and for all increased costs pursuant to SECTION 4.13, or to comply with
all other terms and conditions of this Agreement (including, without limitation,
SECTION 10.04). A Successor Bank shall be subject to the Syndicated Reduction
(or, in the case of more than one Successor Bank, its ratable share of the
Syndicated Reduction) of the Terminated Bank it succeeds upon the Bank
Termination Date applicable to such successor.

SECTION 4.19. EXTENSIONS OF THE COMMITMENTS. (a) The Borrower may,
by written notice (an "EXTENSION REQUEST") given to the Administrative Agent
during the period commencing 60 days preceding, and ending 30 days preceding,
the Stated Termination Date then in effect, request that the Stated Termination
Date then in effect be extended. Each such Extension Request shall contemplate
an extension of such Stated Termination Date to a date that is a Business Day
not more than 364 days after such Stated Termination Date.

(b) The Administrative Agent shall promptly advise each Bank of its
receipt of any Extension Request. Each Bank may, in its sole discretion,
consent to a requested extension by giving written notice thereof to the
Administrative Agent by not later than the date (the "EXTENSION CONFIRMATION
DATE") that is the later to occur of (i) 30 days prior to the Stated Termination
Date then in effect and (ii) 5 days following the issuance by the Borrower of
the Extension Request. Failure on the part of any Bank to respond to an
Extension Request by the applicable Extension Confirmation Date shall be deemed
to be a denial of such request by such Bank. If Banks having at least 66-2/3%
of the Commitments at the time of the issuance of any Extension Request shall
consent in writing to the requested extension, such request shall be granted
with respect to each consenting Bank. Promptly following the opening of
business on the first Business Day following the applicable Extension
Confirmation Date, the Administrative Agent shall notify the Borrower in writing
as to whether the requested extension has been granted (such written notice
being an "EXTENSION CONFIRMATION NOTICE"), and shall promptly thereafter provide
a copy of such Extension Confirmation Notice to each Bank. The agreement on the
part of each consenting Bank to make any requested extension shall be (i)
revocable by such Bank at all times prior to the issuance by the Administrative
Agent of an Extension Confirmation Notice and (ii) irrevocable and binding upon
such consenting Bank at all times

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from and after the issuance by the Administrative Agent of an Extension
Confirmation Notice.

(c) Each permitted extension shall become effective on the Stated
Termination Date then otherwise in effect. Each Extension Confirmation Notice
shall, if applicable, specify therein the new Stated Termination Date in respect
of each of the consenting Banks. The Stated Termination Date with respect to
(i) any Banks which shall have denied such requested extension in writing, or
which shall have failed to respond to the applicable Extension Request, and (ii)
all Banks, in the event that fewer than the minimum number of Banks specified
above shall consent in writing to such Extension Request, shall continue to be
the then existing Stated Termination Date. Notwithstanding the agreement of any
number of Banks to extend the Stated Termination Date as provided in this
SECTION 4.19, the Administrative Agent shall not have any obligation to continue
as the "Administrative Agent" under this Agreement without its prior written
consent.

(d) If fewer than all of the Banks agree to any extension of the
Stated Termination Date which shall become effective as provided in this
SECTION 4.19, (i) no Advance made or to be made prior to the Stated Termination
Date in effect immediately prior to the request by the Borrower for such
extension (the "EARLIER TERMINATION DATE"), other than a Competitive Bid Advance
made by a Bank which shall have agreed to such extension (an "EXCEPTED
ADVANCE"), shall have an Interest Period which ends after the Earlier
Termination Date and (ii) all Advances (other than Excepted Advances) and all
other obligations of the Borrower to the Banks hereunder shall be repaid in full
on the Earlier Termination Date (whether from proceeds of Borrowings made on the
Earlier Termination Date from the Banks having agreed to such extension or from
other sources).

ARTICLE V
CONDITIONS OF LENDING

(i) (A) The Syndicated Notes payable to the order of the Banks,
respectively, executed by the Borrower, and (B)

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the Competitive Bid Notes payable to the order of the Banks, respectively,
executed by the Borrower;

(ii) Certified copies of the resolutions of the Board of Directors
of the Borrower approving this Agreement and the Notes, and of all
documents evidencing other necessary corporate action with respect to this
Agreement and the Notes;

(iii) A certificate of the Secretary or an Assistant Secretary of
the Borrower certifying the names and true signatures of the officers of
the Borrower authorized to sign this Agreement and the Notes and the other
documents or certificates to be delivered pursuant to this Agreement;

(iv) A certificate, signed by the chief financial officer or
treasurer of the Borrower, stating that as of the date hereof all
conditions to Borrowing have been satisfied and that no Event of Default or
event which, with notice or the lapse of time or both, would constitute an
Event of Default has occurred and is continuing;

(vi) The Certificate of Incorporation of the Borrower, together
with all amendments thereto, certified by the Secretary of State of
Delaware;

(vii) A Certificate of Good Standing with respect to the Borrower,
from the Secretary of State of Delaware;

(viii) A copy, certified by the Secretary or Assistant Secretary of
the Borrower, of the Borrower's By-Laws; and

(ix) A copy of either (i) a tax ruling from the U.S. Internal
Revenue Service or (ii) an opinion of counsel acceptable to the
Administrative Agent in its reasonable judgment, in each case to the effect
that the receipt of common stock of the Borrower by shareholders of Baxter
in connection with the Distribution will qualify under Section 355 of the
Internal Revenue Code of 1986, as amended;

(b) Immediately before and after giving effect to such Borrowing and
the application of the proceeds therefrom, the

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following statements shall be true (and each of the giving of the applicable
Notice of Borrowing and the acceptance by the Borrower of the proceeds of such
Borrowing shall be deemed to constitute a representation and warranty by the
Borrower to such effect):

(ii) The representations and warranties contained in SECTION 6.01(f)
are correct in all material respects on and as of the date of such
Borrowing as though made on and as of such date;

(c) The Borrower shall have taken all necessary steps to ensure that
the occurrence of the Distribution will be substantially contemporaneous with
the occurrence of the First Borrowing; and

(d) The Borrower shall have paid to the Administrative Agent and each
Co-Arranger all fees that shall have become due and payable to such Persons by
the Borrower on or prior to such date.

(i) The representations and warranties contained in
SECTION 6.01 (other than the last sentence of subsection (f) thereof)
are correct in all material respects on and as of the date of such
Borrowing as though made on and as of such date, and

(ii) No event has occurred and is continuing, or would result
from such Borrowing or from the application of the proceeds therefrom,
which constitutes an Event of Default or which would constitute an
Event of

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Default but for the requirement that notice be given or time elapse or
both,

ARTICLE VI
REPRESENTATIONS AND WARRANTIES

SECTION 6.01. REPRESENTATIONS AND WARRANTIES OF THE BORROWER. The
Borrower represents and warrants as follows:

(a) The Borrower and each Material Subsidiary is a corporation duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has all requisite authority to conduct its
business in each jurisdiction in which the failure so to qualify would have a
material adverse effect on the business, properties, assets, operations or
condition (financial or otherwise) of the Borrower.

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be expected to have a material adverse effect on the financial condition or
operations of the Borrower or which purports to affect the legality, validity or
enforceability of this Agreement or any Note.

ARTICLE VII
COVENANTS

SECTION 7.01. AFFIRMATIVE COVENANTS OF THE BORROWER. So long as any
Note shall remain unpaid or any Bank shall have

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any Commitment, the Borrower will, unless the Majority Banks shall otherwise
consent in writing:

(b) MAINTENANCE OF INSURANCE. Maintain, and cause each Material
Subsidiary to maintain, insurance with responsible and reputable insurance
companies or associations in such amounts and covering such risks as is usually
carried by companies engaged in similar businesses and owning similar properties
in the same general areas in which the Borrower or such Material Subsidiary
operates.

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of the properties, corporate books and financial records of the Borrower and its
Material Subsidiaries, to examine and make copies of the books of account and
other financial records of the Borrower and its Material Subsidiaries, and to
discuss the affairs, finances and accounts of the Borrower and its Material
Subsidiaries with, and to be advised as to the same by, their respective
officers or directors, at such reasonable times during normal business hours and
intervals as the Administrative Agent or any such Bank may reasonably designate.

(g) REPORTING REQUIREMENTS. Furnish to the Administrative Agent in
sufficient copies for distribution to each Bank (or, in the case of clause (ix),
each applicable Bank):

(i) As soon as available and in any event within 55 days after
the end of each of the first three quarters of each fiscal year of the
Borrower, a Consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries as of the end of such quarter and a
Consolidated statement of income and cash flows of the Borrower and
its Consolidated Subsidiaries for the period commencing at the end of
the previous fiscal year and ending with the end of such quarter,
certified by the chief financial officer or treasurer of the Borrower;

(ii) As soon as available and in any event within 100 days after
the end of each fiscal year of the Borrower, a Consolidated balance
sheet of the Borrower and its Consolidated Subsidiaries as of the end
of such year and a Consolidated statement of income and stockholder's
equity and cash flows of the Borrower and its Consolidated
Subsidiaries for such fiscal year and accompanied by (A) a report of
Price Waterhouse, independent public accountants of the Borrower, or
other independent public accountants of nationally recognized
standing, on the results of their examination of the Consolidated
annual financial statements of the Borrower and its Consolidated
Subsidiaries, which report shall be unqualified or shall be otherwise
reasonably acceptable to the Majority Banks; PROVIDED that such report
may set forth qualifications to the extent such qualifications pertain
solely to changes in generally accepted accounting principles from
such principles applied during earlier accounting periods, the
implementation of which changes (with the concurrence of such
accountants) is reflected in the financial statements accompanying
such report, and (B) a certificate of such

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accountants substantially in the form of EXHIBIT 7.01(g)(ii);

(iii) Promptly after the sending or filing thereof, copies of
all reports which the Borrower files with the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as amended,
including, without limitation, Forms 8-K, 10-Q and 10-K and all such
reports that disclose material litigation pending against the Borrower
or any Material Subsidiary or any material noncompliance with any
Environmental Law on the part of the Borrower or any Material
Subsidiary;

(iv) Together with the financial statements required pursuant
to clauses (i) and (ii) above, a certificate signed by the chief
financial officer or treasurer of the Borrower (A) stating that no
Event of Default or event which, with notice or the lapse of time or
both, would constitute an Event of Default exists or, if any does
exist, stating the nature and status thereof and describing the action
the Borrower proposes to take with respect thereto and (B)
demonstrating, in reasonable detail, the calculations used by such
officer to determine compliance with the financial covenants contained
in SECTIONS 7.01(i), 7.02(a), 7.02(b) and 7.02(d);

(v) With respect to each fiscal year for which the Borrower
shall have an aggregate Unfunded Liability of $50,000,000 or more for
all of its single employer pension benefit plans covered by Title IV
of ERISA and all multiemployer pension benefit plans covered by Title
IV of ERISA to which the Borrower has an obligation to contribute, as
soon as available, and in any event within ten months after the end of
such fiscal year, a statement of Unfunded Liabilities of each such
plan, certified as correct by an actuary enrolled in accordance with
regulations under ERISA and a statement of estimated withdrawal
liability as of the most recent plan year end as customarily prepared
by the trustees under the multiemployer plans to which the Borrower
has an obligation to contribute;

(vi) As soon as possible, and in any event within 30 days after
the occurrence of each event the Borrower knows is or may be a
Reportable Event (as defined in Section 4043 of ERISA) with respect to
any Plan with an Unfunded Liability in excess of $50,000,000, a
statement signed by the chief financial officer or treasurer of the
Borrower describing such reportable event and

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the action which the Borrower proposes to take with respect thereto;

(vii) As soon as possible, and in any event within five
Business Days after the Borrower shall become aware of the occurrence
of each Event of Default or event which, with notice or lapse of time
or both, would constitute an Event of Default, which Event of Default
or event is continuing on the date of such statement, a statement of
the chief financial officer or treasurer of the Borrower setting forth
details of such Event of Default or event and the action which the
Borrower proposes to take with respect thereto;

(viii) As soon as possible, and in any event within ten Business
Days of the announcement of a change in a Credit Rating, a notice from
the chief financial officer or treasurer or assistant treasurer of the
Borrower indicating (A) the new Credit Rating and (B) the date of the
announcement of such new Credit Rating; and

(ix) Promptly from time to time, such other information as any Bank
may reasonably request through the Administrative Agent.

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(1) Any Security Interest to secure Debt or any other obligation
or liability of any Material Subsidiary to the Borrower.

(2) Mechanics', materialmen's, carriers' or other like liens
arising in the ordinary course of business (including construction of
facilities) in respect of obligations which are not due or which are
being contested in good faith and for which reasonable reserves have
been established.

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(3) Any Security Interest arising by reason of deposits with, or
the giving of any form of security to, any governmental agency or any
body created or approved by law or governmental regulation which is
required by law or governmental regulation as a condition to the
transaction of any business, or the exercise of any privilege,
franchise or license.

(4) Security Interests for taxes, assessments or governmental
charges or levies not yet delinquent or Security Interests for taxes,
assessments or governmental charges or levies already delinquent but
the validity of which is being contested in good faith and for which
reasonable reserves have been established.

(5) Security Interests (including judgment liens) arising in
connection with legal proceedings so long as such proceedings are
being contested in good faith and, in the case of judgment liens,
execution thereon is stayed.

(6) Landlords' liens on fixtures located on premises leased by
the Borrower or one of its Material Subsidiaries in the ordinary
course of business.

(7) Security Interests arising in connection with contracts and
subcontracts with or made at the request of the United States of
America, any state thereof, or any department, agency or
instrumentality of the United States or any state thereof for
obligations not yet delinquent.

(8) Any Security Interest arising by reason of deposits to
qualify the Borrower or a Subsidiary to conduct business, to maintain
self-insurance, or to obtain the benefit of, or comply with, laws.

(9) Any purchase money Security Interest claimed by sellers of
goods on ordinary trade terms provided that no financing statement has
been filed to perfect such Security Interest.

(10) The extension of any Security Interest existing as of the
date hereof to additions, extensions, or improvements to the property
subject to the Security Interest which does not arise as a result of
borrowing money or the securing of Debt or other obligation or
liability created, assumed or incurred after such date.

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(11) Security Interests on (i) property of a corporation or firm
existing at the time such corporation is merged or consolidated with
the Borrower or any Subsidiary or at the time of a sale, lease or
other disposition of the properties of a corporation or a firm as an
entirety (or the properties of a corporation or firm comprising a
product line or line of business, as an entirety) or substantially as
an entirety to the Borrower or a Subsidiary; or (ii) property
comprising machinery, equipment or real property acquired by the
Borrower or any of its Subsidiaries, which Security Interests shall
have existed at the time of such acquisition and secure obligations
assumed by the Borrower or such Subsidiary in connection with such
acquisition; PROVIDED that the Debt or other obligations or
liabilities secured by Security Interests of the type described in
this PARAGRAPH (11) shall not at any time exceed an aggregate amount
equal to $100,000,000.

(12) Security Interests arising in connection with the sale,
assignment or other transfer by the Borrower or any Material
Subsidiary of accounts receivable, lease receivables or other payment
obligations owing to the Borrower or any Subsidiary or any interest in
any of the foregoing (together in each case with any collections and
other proceeds thereof, any collection or deposit accounts related
thereto, and any collateral, guaranties or other property or claims in
favor of the Borrower or such Subsidiary supporting or securing
payment by the obligor thereon of, or otherwise related to, any such
receivables)(each such sale, assignment or other transfer being a
"SECURITIZATION TRANSACTION"); PROVIDED that the aggregate investment
or claim held at any time by purchasers, assignees or other
transferees of (or of interests in) such receivables shall not exceed
an amount equal to $300,000,000.

(13) Security Interests securing non-recourse obligations in
connection with leveraged or single-investor lease transactions.

(14) Security Interests securing the performance of any contract
or undertaking made in the ordinary course of business (as such
business is currently conducted) other than for the borrowing of
money.

(15) Any Security Interest granted by any Material Subsidiary of
the Borrower; PROVIDED, that (i) the principal business and assets of
such Material

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Subsidiary are located in Puerto Rico or are located outside of the United
States, its other territories and possessions, (ii) the property of such
Material Subsidiary which is subject to such Security Interest is a parcel
of real property, a manufacturing plant, manufacturing equipment, a
warehouse, or an office building hereafter acquired, constructed, developed
or improved by such Material Subsidiary, and (iii) such Security Interest
is created prior to or contemporaneously with, or within 120 days after
(x) in the case of acquisition of such property, the completion of such
acquisition and (y) in the case of the construction, development or
improvement of such property, the later to occur of the completion of such
construction, development or improvement or the commencement of operations,
use or commercial production (exclusive of test and start-up periods) of
such property, and such Security Interest secures or provides for the
payment of all or any part of the acquisition cost of such property or the
cost of construction, development or improvement thereof, as the case may
be.

(16) Any Security Interest in deposits or cash equivalent
investments pledged with a financial institution for the sole purpose
of implementing a hedging or financing arrangement commonly known as a
"back-to-back" loan arrangement, provided in each case that neither
the assets subject to such Security Interest nor the Debt incurred in
connection therewith are reflected on the Consolidated balance sheet
of the Borrower.

(17) Any Security Interest arising out of or continuing in
connection with the extension, renewal or refunding (or successive
extensions, renewals or refundings) in whole or in part of any Debt or
any other obligation or liability secured by any Security Interest
referred to in the foregoing PARAGRAPHS (1) through (16), provided
that the principal amount of Debt or any other obligation or liability
secured by such Security Interest shall not exceed the principal
amount outstanding immediately prior to such extension, renewal or
refunding, and that the Security Interest securing such Debt or other
obligation or liability shall be limited to the property which,
immediately prior to such extension, renewal or refunding secured such
Debt or other obligation or liability and additions to such property.

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(d) LIMITATIONS ON SUBSIDIARY DEBT. Permit the aggregate amount of
Subsidiary Debt (as defined below) at any time to exceed $250,000,000.

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ARTICLE VIII
EVENTS OF DEFAULT

SECTION 8.01. EVENTS OF DEFAULT. If any of the following events
("EVENTS OF DEFAULT") shall occur and be continuing:

(a) The Borrower shall fail to pay (i) any installment of interest on
any Note or any facility fee payable under SECTION 4.04(a), in each case when
due and such default continues for five days, or (ii) any amount of principal of
any Note when due; or

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and any such failure or breach shall remain unremedied for 30 days after written
notice thereof has been given to the Borrower by the Administrative Agent at the
request of any Bank; (ii) fail to perform or observe or shall breach
SECTION 7.02(c); or (iii) fail to perform or observe SECTION 7.01(g)(vii) and
such failure shall remain unremedied for 10 days after the occurrence thereof;
or

(e) The Borrower or any Material Subsidiary shall fail to pay any
amount of principal of, interest on or premium with respect to any Debt (other
than that evidenced by the Notes) of the Borrower or such Subsidiary when due
(whether at scheduled maturity or by required prepayment, acceleration, demand
or otherwise) which Debt is outstanding under one or more instruments or
agreements in an aggregate principal amount (for the Borrower and all Material
Subsidiaries) not less than a Material Default Amount and such failure shall
continue after the applicable grace period, if any, specified in the agreement
or instrument relating to such Debt; or any other event shall occur or condition
shall exist after the applicable grace period specified in such agreement or
instrument, if the effect of such event or condition is to accelerate, or to
permit the acceleration of, the maturity of such Debt; or any such Debt shall be
declared to be due and payable, or required to be prepaid (other than by a
scheduled prepayment), prior to the stated maturity thereof; or any event or
condition shall exist after the applicable grace period specified in any
agreement or instrument relating to a Securitization Transaction if the effect
of such event or condition is to cause or to permit an amount not less than a
Material Default Amount to become immediately due and payable by the Borrower or
any Material Subsidiary under such Securitization Transaction; or

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Default" hereunder unless either (i) the same shall have remained undismissed or
unstayed for a period of 60 days, (ii) an order for relief shall have been
entered against the Borrower or such Material Subsidiary under the federal
bankruptcy laws as now or hereafter in effect or (iii) the Borrower or such
Material Subsidiary shall have taken corporate action consenting to, approving
or acquiescing in the commencement or maintenance of such proceeding; or

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such continuously thereafter or (b) became a member of such Board of Directors
after the Closing Date and whose election or nomination for election was
approved by a vote of at least two-thirds of the Continuing Members then members
of the Borrower's Board of Directors;

then, in any such event but subject to the next sentence, the Administrative
Agent shall at the request, or may with the consent, of the Majority Banks, by
notice to the Borrower, (i) declare the obligation of each Bank to make Advances
to be terminated, whereupon the same shall forthwith terminate, and/or
(ii) declare the entire unpaid principal amount of the Notes, all interest
accrued and unpaid thereon and all other amounts payable under this Agreement to
be forthwith due and payable, whereupon the Notes, all such accrued interest and
all such amounts shall become and be forthwith due and payable, without
presentment, demand, protest or further notice of any kind, all of which are
hereby expressly waived by the Borrower; PROVIDED, that in the case of any
Competitive Bid Note, the unpaid principal amount thereof, and all interest
accrued and unpaid thereon, shall not be declared to be due and payable pursuant
to the foregoing CLAUSE (ii) without the consent of the holder of such
Competitive Bid Note. In the event of the occurrence of an Event of Default
under SECTION 8.01(f), (A) the obligation of each Bank to make Advances shall
automatically be terminated and (B) the Notes, all such interest and all such
amounts shall automatically become and be due and payable, without presentment,
demand, protest or any notice of any kind, all of which are hereby expressly
waived by the Borrower.

ARTICLE IX
THE ADMINISTRATIVE AGENT

SECTION 9.01. APPOINTMENT AND AUTHORIZATION; "ADMINISTRATIVE AGENT".
Each Bank hereby irrevocably (subject to SECTION 9.09) appoints, designates and
authorizes the Administrative Agent to take such action on its behalf under the
provisions of this Agreement, the Notes and any other instrument, document or
agreement executed in connection herewith (each a "LOAN DOCUMENT") and to
exercise such powers and perform such duties as are expressly delegated to it by
the terms of this Agreement or any other Loan Document, together with such
powers as are reasonably incidental thereto. Notwithstanding any provision to
the contrary contained elsewhere in this Agreement or in any other Loan
Document, the Administrative Agent shall not have any duties or
responsibilities, except those expressly set forth herein, nor shall the
Administrative Agent have or be deemed to have any fiduciary relationship with
any Bank, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or

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any other Loan Document or otherwise exist against the Administrative Agent.
Without limiting the generality of the foregoing sentence, the use of the term
"agent" in this Agreement with reference to the Administrative Agent is not
intended to connote any fiduciary or other implied (or express) obligations
arising under agency doctrine of any applicable law. Instead, such term is used
merely as a matter of market custom, and is intended to create or reflect only
an administrative relationship between independent contracting parties.

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Person or Persons, and upon advice and statements of legal counsel (including
counsel to the Borrower), independent accountants and other experts selected by
the Administrative Agent. As between the Administrative Agent and the Banks,
(i) the Administrative Agent shall be fully justified in failing or refusing to
take any action under this Agreement or any other Loan Document unless it shall
first receive such advice or concurrence of the Majority Banks as it deems
appropriate and, if it so requests, it shall first be indemnified to its
satisfaction by the Banks against any and all liability and expense which may be
incurred by it by reason of taking or continuing to take any such action and
(ii) the Administrative Agent shall in all cases be fully protected in acting,
or in refraining from acting, under this Agreement or any other Loan Document in
accordance with a request or consent of the Majority Banks and such request and
any action taken or failure to act pursuant thereto shall be binding upon all of
the Banks.

SECTION 9.05. NOTICE OF DEFAULT. The Administrative Agent shall not
be deemed to have knowledge or notice of the occurrence of any Event of Default
or Unmatured Event of Default, except with respect to defaults in the payment of
principal, interest and fees required to be paid to the Administrative Agent for
the account of the Banks, unless the Administrative Agent shall have received
written notice from a Bank or the Borrower referring to this Agreement,
describing such Event of Default or Unmatured Event of Default and stating that
such notice is a "notice of default". The Administrative Agent will notify the
Banks of its receipt of any such notice. The Administrative Agent shall take
such action with respect to such Event of Default or Unmatured Event of Default
as may be requested by the Majority Banks in accordance with SECTION 10.01;
PROVIDED, HOWEVER, that unless and until the Administrative Agent has received
any such request, the Administrative Agent may (but shall not be obligated to)
take such action, or refrain from taking such action, with respect to such Event
of Default or Unmatured Event of Default as it shall deem advisable or in the
best interest of the Banks.

SECTION 9.06. CREDIT DECISION. Each Bank acknowledges that none of
the Agent-Related Persons has made any

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representation or warranty to it, and that no act by the Administrative Agent
hereinafter taken, including any review of the affairs of the Borrower and its
Subsidiaries, shall be deemed to constitute any representation or warranty by
any Agent-Related Person to any Bank. Each Bank represents to the
Administrative Agent that it has, independently and without reliance upon any
Agent-Related Person and based on such documents and information as it has
deemed appropriate, made its own appraisal of and investigation into the
business, prospects, operations, property, financial and other condition and
creditworthiness of the Borrower and its Subsidiaries, and all applicable bank
regulatory laws relating to the transactions contemplated hereby, and made its
own decision to enter into this Agreement and to extend credit to the Borrower
hereunder. Each Bank also represents that it will, independently and without
reliance upon any Agent-Related Person and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking action under
this Agreement and the other Loan Documents, and to make such investigations as
it deems necessary to inform itself as to the business, prospects, operations,
property, financial and other condition and creditworthiness of the Borrower.
Except for notices, reports and other documents expressly herein required to be
furnished to the Banks by the Administrative Agent, the Administrative Agent
shall not have any duty or responsibility to provide any Bank with any credit or
other information concerning the business, prospects, operations, property,
financial and other condition or creditworthiness of the Borrower which may come
into the possession of any of the Agent-Related Persons.

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Person's gross negligence or willful misconduct or from the violation by such
Person of any law or judicial order. Without limitation of the foregoing, each
Bank shall reimburse the Administrative Agent upon demand for its ratable share
of any costs or out-of-pocket expenses (including Attorney Costs) incurred by
the Administrative Agent in connection with the preparation, execution,
delivery, administration, modification, amendment or enforcement (whether
through negotiations, legal proceedings or otherwise) of, or legal advice in
respect of rights or responsibilities under, this Agreement, any other Loan
Document, or any document contemplated by or referred to herein, to the extent
that the Administrative Agent is not reimbursed for such expenses by or on
behalf of the Borrower. The undertaking in this Section shall survive the
payment of all Advances and the resignation or replacement of the Administrative
Agent.

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resignation hereunder as Administrative Agent, the provisions of this ARTICLE IX
and SECTION 10.04 shall inure to its benefit as to any actions taken or omitted
to be taken by it while it was Administrative Agent under this Agreement. If no
successor agent has accepted appointment as Administrative Agent by the date
which is 30 days following a retiring Administrative Agent's notice of
resignation, the retiring Administrative Agent's resignation shall nevertheless
thereupon become effective and the Banks shall perform all of the duties of the
Administrative Agent hereunder until such time, if any, as the Majority Banks
appoint a successor agent as provided for above.

SECTION 9.10. OTHER AGENTS. None of the Banks identified on the cover
page of this Agreement or otherwise herein as being "syndication agent,"
"documentation agent, "co-syndication agent," or a "Co-Arranger" (collectively,
the "OTHER AGENTS") shall have any right, power, obligation, liability,
responsibility or duty under this Agreement other than those applicable to all
Banks as such or, in the case of the Co-Arrangers, the rights specified in
SECTION 7.01(f). Each Bank acknowledges that it has not relied, and will not
rely, on any of the Other Agents in deciding to enter into this Agreement or in
taking or refraining from taking any action hereunder or pursuant hereto.

ARTICLE X
MISCELLANEOUS

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in addition to the Banks required hereinabove to take such action, affect the
rights or duties of the Administrative Agent, under this Agreement or any Note.

SECTION 10.02. NOTICES, ETC. All notices and other communications
provided for hereunder shall, unless otherwise stated herein, be in writing
(including by telex, telegram or telecopier) and mailed or sent or delivered, if
to the Borrower, at the address set forth for the Borrower on the signature
pages hereof; if from the Borrower to the Administrative Agent or any Bank, to
the Administrative Agent at the address set forth for the Administrative Agent
on the signature pages hereof; if from the Administrative Agent to any Bank, at
the address of such Bank's Domestic Lending Office; or, in any case, at such
other address as shall be designated by such party in a written notice to the
other parties hereto (except in the case of the Borrower, as to which a change
of address may be made by notice to the Administrative Agent on behalf of the
Banks). Subject to the next sentence, all such notices and communications shall
be effective, in the case of written notice, when deposited in the mails, air
mail, postage prepaid, and, in the case of notice by telex, telecopy, telegram
or cable, when sent addressed as set forth above. All notices and
communications pursuant to ARTICLES II, III, VIII and IX shall not be effective
until they are received by the addressee. The Administrative Agent agrees to
deliver promptly to each Bank copies of each report, document, certificate,
notice and request, or summaries thereof, which the Borrower is required to, and
does in fact, deliver to the Administrative Agent in accordance with the terms
of this Agreement, including, without limitation, copies of the reports to be
delivered by the Borrower pursuant to SECTION 7.01(g). The Administrative Agent
shall notify each of the Banks when all of the documents required to be
delivered to the Administrative Agent pursuant to SECTION 5.01 shall have been
received by the Administrative Agent. Any agreement of the Administrative Agent
and the Banks herein to receive certain notices by telephone or facsimile is
solely for the convenience and the request of the Borrower. The Administrative
Agent and each Bank shall be entitled to rely on the authority of any Person
purporting to be, and believed in good faith by the Administrative Agent or such
Bank to be, a Person authorized by the Borrower to give such notice and the
Administrative Agent and the Banks shall not have any liability to the Borrower
or any other Person on account of any action taken or not taken in good faith by
the Administrative Agent or the Banks in reliance upon such telephonic or
facsimile notice. The obligation of the Borrower to repay the Advances shall
not be affected in any way or to any extent by any failure by the Administrative
Agent and the Banks to receive written confirmation of any telephonic or
facsimile notice or the receipt by the Administrative Agent and the Banks of a
confirmation which

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is at variance with the terms reasonably understood by the Administrative Agent
and the Banks to be contained in the telephonic or facsimile notice.

(b) If, due to payments made by the Borrower due to acceleration of
the maturity of the Notes pursuant to SECTION 8.01 or due to any other reason,
any Bank receives payments of principal of any Fixed Rate Advance, other than on
the last day of the Interest Period for such Advance, the Borrower shall, upon
demand by such Bank (with a copy of such demand to the Administrative Agent),
pay to the Administrative Agent for the account of such Bank any amounts
required to compensate such Bank for any additional direct out-of-pocket losses,
costs or expenses which it may reasonably incur as a result of such payment,
including, without limitation, any such loss, cost or expense incurred by reason
of the liquidation or reemployment of deposits or other funds acquired by any
Bank to fund or maintain such Advance. For purposes of calculating amounts
payable by the Borrower to the Banks under this SECTION 10.04(b), each Fixed

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Rate Advance made by a Bank shall be conclusively deemed to have been funded at
the Eurodollar Rate used in determining the interest rate for such Advance by a
matching deposit or other borrowing in the interbank market for a comparable
amount and for a comparable period, whether or not such Advance is in fact so
funded.

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failure to give such notice shall not affect the validity of such set-off and
application. The rights of each Bank under this Section are in addition to
other rights and remedies (including, without limitation, other rights of set-
off) which such Bank may have.

(b) Any Bank may assign, participate or otherwise transfer all or any
part of, or interest in, such Bank's rights and obligations hereunder and under
the Notes issued to it hereunder; PROVIDED that (i) in the case of any transfer
to a Person that is not an Affiliate of the transferring Bank, unless the
Borrower and the Administrative Agent shall have expressly agreed in writing, no
Bank shall, by reason of any such transfer, be relieved of any of its
obligations or responsibilities to the Borrower hereunder, including without
limitation the obligation to make Advances in accordance with the provisions of
ARTICLE II and III, if any, or under any Note issued to it hereunder; PROVIDED,
FURTHER, that during the continuance of any Event of Default hereunder, the
consent of the Borrower to any such assignment shall not be required; (ii) in
the case of any assignment of less than all of a Bank's rights and obligations
hereunder, the amount of the Commitment being assigned pursuant thereto shall in
no event be less than $10,000,000; and (iii) except in the case of an assignment
of all or any portion of a Bank's Commitment which is permitted hereunder and
which is effected in accordance with the terms of SUBSECTION (c) below (a
"PERMITTED COMMITMENT ASSIGNMENT"), the Borrower, the Administrative Agent and
each other party hereto shall for all purposes be permitted to deal, and shall
continue to deal, exclusively with the transferring Bank after giving effect to
any purported sale of a participation interest or other transfer of all or any
part of such transferring Bank's interest under this Agreement. To the extent
of any Permitted Commitment Assignment (but not in the event of any such
participation or other transfer) the applicable assignee shall have the same
rights and benefits against the Borrower as it would have had if it were a Bank
hereunder. Nothing contained herein shall impair the ability of any Bank, in its
discretion, to agree, solely as between

-71-

<PAGE>

itself and its assignees, participants and other transferees, upon the manner in
which such Bank shall exercise its rights under this Agreement and the Notes
made to such Bank.

-72-

<PAGE>

based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under this Agreement; (v) such assignee appoints and authorizes the
Administrative Agent to take such action as agent on its behalf and to exercise
such powers under this Agreement as are delegated to the Administrative Agent by
the terms hereof, together with such powers as are reasonably incidental
thereto; and (vi) such assignee agrees that it will perform in accordance with
their terms all of the obligations which by the terms of this Agreement are
required to be performed by it as a Bank.

-73-

<PAGE>

the extent of such prohibition or invalidity, without invalidating the remainder
of such provisions or the remaining provisions of this Agreement.

The duly authorized parties hereto have caused this Agreement to be
executed by their respective officers or agents, as of the date of this
Agreement.

ALLEGIANCE CORPORATION

By
---------------------------
Title:

Attest:

By
---------------
Title:

Address for Notice Purposes:
1430 Waukegan Road
McGaw Park, Illinois 60085
Attention: Treasurer
Telephone: (847) 689-8410
Telecopy: (847) 578-4019

-74-

<PAGE>

THE ADMINISTRATIVE AGENT

BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION,
as Administrative Agent

By
--------------------------------
Title:

Address for Notice Purposes:

Credit/Documentation Issues:

231 South LaSalle Street
Chicago, Illinois 60697
Attention: William Sweeney

Administrative Issues:

1455 Market Street, 12th Floor
San Francisco, California 94103
Attention: Agency Administrative
Services Unit #5596

-75-

<PAGE>

COMMITMENTS: THE BANKS
----------- ---------

U.S. $27,400,000 BANK OF AMERICA ILLINOIS

By
-------------------------------
Title:

U.S. $24,200,000 THE FIRST NATIONAL BANK
OF CHICAGO, individually and
as Syndication Agent and
Co-Arranger

By
-------------------------------
Title:

U.S. $24,200,000 MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, individually and
as Syndication Agent and
Co-Arranger

By
-------------------------------
Title:

U.S. $24,200,000 NATIONSBANK OF TEXAS, N.A.,
individually and
as Documentation Agent and
Co-Arranger

By
-------------------------------
Title:

-75-

<PAGE>

COMMITMENTS:
-----------

U.S. $15,000,000 THE CHASE MANHATTAN BANK,
individually and as Co-Agent

By
-------------------------------
Title:

U.S. $15,000,000 CREDIT LYONNAIS CHICAGO BRANCH,
individually and as Co-Agent

By
-------------------------------
Title:

U.S. $15,000,000 CREDIT SUISSE, individually and
as Co-Agent

By
-------------------------------
Title:

U.S. $15,000,000 DEUTSCHE BANK AG
CHICAGO AND/OR CAYMAN ISLANDS
BRANCHES, individually and
as Co-Agent

By
-------------------------------
Title:

-77-

<PAGE>

U.S. $15,000,000 THE SUMITOMO BANK, LIMITED,
CHICAGO BRANCH
individually and as Co-Agent

By
-------------------------------
Title:

U.S. $15,000,000 TORONTO DOMINION (TEXAS), INC.,
individually and as Co-Agent

By
-------------------------------
Title:

U.S. $10,000,000 THE BANK OF TOKYO-MITSUBISHI, LTD.
CHICAGO BRANCH

By
-------------------------------
Title:

U.S. $10,000,000 CITIBANK, N.A.

By
-------------------------------
Title:

U.S. $10,000,000 CAISSE NATIONALE DE CREDIT
AGRICOLE

By
-------------------------------
Title:

-78-

<PAGE>

U.S. $10,000,000 THE FUJI BANK, LIMITED

By
-------------------------------
Title:

U.S. $10,000,000 THE INDUSTRIAL BANK OF JAPAN, LIMITED
CHICAGO BRANCH

By
-------------------------------
Title:

U.S. $10,000,000 MELLON BANK, N.A.

By
-------------------------------
Title:

U.S. $10,000,000 THE NORTHERN TRUST COMPANY

By
-------------------------------
Title:

U.S. $10,000,000 PNC BANK, NATIONAL ASSOCIATION

By
-------------------------------
Title:

-79-

<PAGE>

U.S. $10,000,000 UNION BANK OF SWITZERLAND,
NEW YORK BRANCH

By
-------------------------------
Title:

U.S. $10,000,000 WACHOVIA BANK OF GEORGIA, N.A.

-------------------------------
Title:

U.S. $10,000,000 WELLS FARGO BANK, N.A.

By
-------------------------------
Title:

===================

U.S. $300,000,000 TOTAL

-80-

<PAGE>

Exhibit 2.02 to
Credit Agreement dated
as of September 23, 1996

FORM OF
NOTICE OF SYNDICATED BORROWING

FACILITY B

Ladies and Gentlemen:

(i) The Business Day of the Proposed Syndicated Borrowing is
____________ , 19__.

(ii) The Type of Syndicated Advances comprising the Proposed
Syndicated Borrowing is [Base Rate Advances] [Eurodollar Rate Advances].

(iii) The aggregate amount of the Proposed Syndicated Borrowing is $
__________.

(iv) The Interest Period for each Syndicated Advance made as part of
the Proposed Syndicated Borrowing is ____ months] [____ days].

(v) The proceeds of the Proposed Syndicated Borrowing [will not be
used, directly or indirectly, to purchase or carry Margin Stock] [will be used
to purchase or carry Margin Stock. A

<PAGE>

Very truly yours,

ALLEGIANCE CORPORATION

By:
--------------------------------
Title:

<PAGE>

Exhibit 2.03 to
Credit Agreement dated
as of September 23, 1996

FORM OF
NOTICE OF INTEREST RATE ELECTION

FACILITY B

Ladies and Gentlemen:

The undersigned, Allegiance Corporation, refers to the Credit
Agreement, dated as of September 23, 1996 (the "Credit Agreement," the terms
defined therein being used herein as therein defined), among Allegiance
Corporation, the Banks parties thereto and Bank of America National Trust and
Savings Association, as Administrative Agent, and hereby gives you notice,
irrevocably, pursuant to SECTION 2.03 of the Credit Agreement of an interest
rate election, and in that connection sets forth below the information relating
to the affected Syndicated Borrowing (the "Affected Syndicated Borrowing") as
required by SECTION 2.03 of the Credit Agreement:

(i) The Affected Syndicated Borrowing is the following:

(a) Type:_____________________________________________
(b) Last Day of Present Interest Period:______________
(c) Aggregate Amount: $_______________________________

(ii) The portion of such Affected Syndicated Borrowing to be
Converted is: $______________________.

(iii) Business Day of the Conversion in respect of the Affected
Syndicated Borrowing is ____________ , 19__.

<PAGE>

(iv) Upon giving effect to the Conversion,

(a) the portion of the Affected Syndicated Borrowing that is
Converted shall be comprised of [Base Rate Advances] [Eurodollar Rate
Advances], each having an Interest Period of __________________; and

(b) the portion of the balance of the Affected Syndicated Borrowing
shall continue to have the Type and Interest Period specified in clause (i)
above.

Very truly yours,

ALLEGIANCE CORPORATION

By:
--------------------------------
Title:

<PAGE>

Exhibit 3.02 to
Credit Agreement dated
as of September 23, 1996

FORM OF COMPETITIVE BID QUOTE REQUEST

FACILITY B

Ladies and Gentlemen:

The undersigned, Allegiance Corporation, refers to the Credit
Agreement, dated as of September 23, 1996 (the "Credit Agreement," the terms
defined therein being used herein as therein defined), among Allegiance
Corporation, the Banks parties thereto and Bank of America National Trust and
Savings Association, as Administrative Agent, and hereby gives you notice
pursuant to SECTION 3.02 of the Credit Agreement that the undersigned requests
Competitive Bid Quotes for the following proposed Competitive Bid Borrowing(s)
(the "Proposed Borrowings"):

(i) The Business Day of the Proposed Borrowings is
____________, 19__.

(ii) The Type of Advances with respect to which Competitive Bid
Quotes are hereby requested are:

Aggregate Principal Type of Interest Period
Amount of Borrowing Advances for Advances
------------------- -------- ---------------

(iv) The Administrative Agent is hereby requested to advise [all of
the Banks] [the Banks specified below] of the request for Competitive Bid Quotes
set forth herein.

<PAGE>

(v) The proceeds of the Proposed Borrowing [will not
be used, directly or indirectly, to purchase or carry Margin
Stock] [will be used to purchase or carry Margin Stock. A pro
forma draft of the Form FR U-l (OMB No. 7100-0015) which will be
executed and delivered by a duly authorized officer of the
undersigned in the event that the undersigned issues a Notice of
Competitive Bid Borrowing in connection with this Competitive Bid
Quote Request accompanies this Competitive Bid Quote Request and
sets forth thereon the relevant information with respect to the
use of the proceeds of the Proposed Borrowing].

ALLEGIANCE CORPORATION

By:
-------------------------------
Title:

<PAGE>

Exhibit 3.04 to
Credit Agreement dated
as of September 23, 1996

FORM OF COMPETITIVE BID QUOTE

FACILITY B

Ladies and Gentlemen:

The undersigned refers to the Credit Agreement, dated
as of September 23, 1996 (the "Credit Agreement," the terms
defined therein being used herein as therein defined), among
Allegiance Corporation, the Banks parties thereto and Bank of
America National Trust and Savings Association, as Administrative
Agent, and hereby notifies you of, and requests that you forward
to Allegiance Corporation, on our behalf, pursuant to
SECTION 3.04 of the Credit Agreement, the following Competitive
Bid Quotes on the following terms:

(i) Quoting Bank:
---------------------------.

(ii) Person to contact at the Quoting Bank:

Name:
--------------------
Telephone:
---------------
Telecopy:
----------------
Telex:
-------------------

(iii) Proposed Borrowing Date:
----------------------.

(iv) We hereby offer to make Competitive Bid Advances
in the following principal amounts, for the following Interest
Periods and at the following rates:

Principal Interest [Competitive [Absolute
Amount Period Bid Margin*] Rate ]
---------- ---------- ------------- -----------

- -------------------
* Specify whether the Competitive Bid Margin is to be added to
or subtracted from the Eurodollar Rate applicable to such
Interest Period.

<PAGE>

PROVIDED that the aggregate principal amount with respect to
which the Company may accept offers in connection with this
Competitive Bid Quote shall not exceed $____________________.

We understand and agree that the offer(s) set forth
above, subject to the satisfaction of the applicable conditions
set forth in the Credit Agreement, irrevocably obligate(s) us to
make the Competitive Bid Advance(s) for which any such offer is
accepted, in whole or in part.

[NAME OF BANK]

Dated: By:
--------------------- -------------------------------
Authorized Officer

<PAGE>

Exhibit 3.06 to
Credit Agreement dated
as of September 23, 1996

FORM OF NOTICE OF COMPETITIVE BID BORROWING

FACILITY B

Ladies and Gentlemen:

The undersigned, Allegiance Corporation, refers to the
Credit Agreement, dated as of September 23, 1996 (the "Credit
Agreement," the terms defined therein being used herein as
therein defined), among Allegiance Corporation, the Banks parties
thereto and Bank of America National Trust and Savings
Association, as Administrative Agent, and hereby gives you
notice, irrevocably, pursuant to SECTION 3.06 of the Credit
Agreement that the undersigned requests a Competitive Bid
Borrowing under the Credit Agreement and in that connection sets
forth below the information relating to such Competitive Bid
Borrowing (the "Proposed Borrowing") as required by SECTION 3.06
of the Credit Agreement:

(i) The Business Day of the Proposed Borrowing is
_________________, 19__.

(ii) The aggregate principal amount of Competitive Bid
Advances, the Types thereof and the Interest Periods therefor
that have been offered to the undersigned by Banks submitting
Competitive Bid Quotes and that by this notice are hereby
accepted, subject to the terms and conditions of the Credit
Agreement, are set forth below:

Aggregate Principal Type of Interest
Amount of Borrowing Advance Period
------------------- ------- --------

(iii) The undersigned acknowledges and agrees that, by
this notice, it irrevocably accepts the offers made by the Banks
which shall have submitted Competitive Bid Quotes to the extent
that the principal amount offered by each such Bank, together
with the principal amount offered by all other such Banks in
connection therewith, does not exceed the respective amounts set

<PAGE>

forth above. As among such Banks, the offers made are accepted
in the ascending order of Competitive Bid Margin or Absolute
Rate, as the case may be.

(iv) The proceeds of the Proposed Borrowing [will not
be used, directly or indirectly, to purchase or carry Margin
Stock] [will be used to purchase or carry Margin Stock. A duly
completed Form FR U-l (OMB No. 7100-0115), executed by a duly
authorized officer of the undersigned, accompanies this Notice of
Competitive Bid Borrowing and sets forth thereon the relevant
information with respect to the use of the proceeds of the
Proposed Borrowing].

ALLEGIANCE CORPORATION

By:
-------------------------------
Title:

<PAGE>

Exhibit 4.16(a) to
Credit Agreement dated
as of September 23, 1996

FORM OF SYNDICATED NOTE

FACILITY B

$ , 1996
------------ -----------

FOR VALUE RECEIVED, the undersigned, Allegiance
Corporation, a Delaware corporation (the "Borrower"), HEREBY
PROMISES TO PAY to the order of ______________ (the "Bank") for
the account of its Applicable Lending Office (as defined in the
Credit Agreement, as hereinafter defined) on the Termination Date
(as defined in the Credit Agreement) the principal amount of each
Syndicated Advance (as defined below) made by the Bank to the
Borrower pursuant to the Credit Agreement. The Borrower promises
to pay interest on the unpaid principal amount of each Syndicated
Advance from the date of such Syndicated Advance until such
principal amount is paid in full, at such interest rates, and
payable at such times, as are specified in the Credit Agreement.

Both principal and interest are payable in lawful money
of the United States of America to Bank of America National Trust
and Savings Association, as Administrative Agent, not later than
12:00 noon (Chicago time) on the date when due at 1850 Gateway
Boulevard, Concord, California 94520, in same day funds. All
Syndicated Advances made by the Bank to the Borrower, the
respective Interest Periods therefor, all Conversions thereof,
and all payments made on account of principal thereof, shall be
recorded by the Bank and shall be endorsed on the grid attached
hereto (which is part of this Syndicated Note) prior to any
transfer of this Syndicated Note. Failure by the Bank to record
on this Syndicated Note any Syndicated Advance or payment shall
not relieve the Borrower of any obligation with respect to such
Syndicated Advance or payment.

This Syndicated Note is one of the Notes referred to
in, and is entitled to the benefits of, the Credit Agreement (the
"Credit Agreement") dated as of September 23, 1996 among the
Borrower, the Bank, the other banks referred to therein and Bank
of America National Trust and Savings Association, as
Administrative Agent. The Credit Agreement, among other things,
(i) provides in ARTICLE II thereof for the making and maintaining
of advances ("Syndicated Advances") by the Bank to the Borrower
from time to time in an aggregate amount not to exceed at any
time outstanding the Bank's Commitment (as defined in the Credit
Agreement) and (ii) contains provisions for acceleration of the
maturity hereof upon the happening of certain stated events and
also for prepayments on account of principal hereof prior to the
maturity hereof upon the terms and conditions therein specified.

<PAGE>

This Syndicated Note shall be governed by, and
construed in accordance with, the internal laws (as distinguished
from the conflicts of laws rules) of the State of Illinois.

ALLEGIANCE CORPORATION

By:
-----------------------------
Title:

<PAGE>

Syndicated Note Grid

ADVANCES, MATURITIES AND PAYMENTS OF PRINCIPAL

- ------------------------------------------------------------------
Amount of
Amount Conversion Principal Unpaid
of Type of of Paid or Principal Notation
Date Advance Advance Advance Prepaid Balance Made By
- ------------------------------------------------------------------

- ------------------------------------------------------------------
- ------------------------------------------------------------------
- ------------------------------------------------------------------
- ------------------------------------------------------------------
- ------------------------------------------------------------------
- ------------------------------------------------------------------
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<PAGE>

Exhibit 4.16(b) to
Credit Agreement dated
as of September 23, 1996

FORM OF COMPETITIVE BID NOTE

FACILITY B

, 1996
-----------

FOR VALUE RECEIVED, the undersigned, Allegiance
Corporation, a Delaware corporation (the "Borrower"), HEREBY
PROMISES TO PAY to the order of _______________ (the "Bank") for
the account of its Applicable Lending Office (as defined in the
Credit Agreement, as hereinafter defined) the principal amount of
each Competitive Bid Advance (as defined below) made by the Bank
to the Borrower pursuant to the Credit Agreement on the last day
of the Interest Period (as defined in the Credit Agreement) for
such Competitive Bid Advance. The Borrower promises to pay
interest on the unpaid principal amount of each Competitive Bid
Advance from the date of such Competitive Bid Advance until such
principal amount is paid in full, at such interest rates, and
payable at such times, as are specified in the Credit Agreement.

Both principal and interest are payable in lawful money
of the United States of America to Bank of America National Trust
and Savings Association, as Administrative Agent, not later than
12:00 noon (Chicago time) on the date when due at 1850 Gateway
Boulevard, Concord, California 94520, in same day funds. All
Competitive Bid Advances made by the Bank to the Borrower, and
the respective maturities thereof, and all payments made on
account of principal thereof, shall be recorded by the Bank and
shall be endorsed on the grid attached hereto (which is part of
this Competitive Bid Note) prior to any transfer of this
Competitive Bid Note. Failure by the Bank to record on this
Competitive Bid Note any Competitive Bid Advance or payment shall
not relieve the Borrower of any obligation with respect to such
Competitive Bid Advance or payment.

This Competitive Bid Note is one of the Notes referred
to in, and is entitled to the benefits of, the Credit Agreement
(the "Credit Agreement") dated as of September 23, 1996, among
the Borrower, the Bank, the other banks referred to therein and
Bank of America National Trust and Savings Association, as
Administrative Agent. The Credit Agreement, among other things,
(i) provides in ARTICLE III thereof for the making and
maintaining of advances ("Competitive Bid Advances") by the Bank
to the Borrower from time to time in an aggregate amount not to
exceed at any time outstanding the aggregate Commitment (as
defined in the Credit Agreement) of all banks parties to the
Credit Agreement and (ii) contains provisions for acceleration of
the maturity hereof upon the happening of certain stated events

<PAGE>

and also for prepayments on account of principal hereof prior to
the maturity hereof upon the terms and conditions therein
specified.

This Competitive Bid Note shall be governed by, and
construed in accordance with, the internal laws (as distinguished
from the conflicts of laws rules) of the State of Illinois.

ALLEGIANCE CORPORATION

By:
----------------------------------
Title:

<PAGE>

Competitive Note Grid

ADVANCES, MATURITIES AND PAYMENTS OF PRINCIPAL

- ------------------------------------------------------------------------
Amount of
Amount Maturity Principal Unpaid
of Type of of Paid or Principal Notation
Date Advance Advance Advance Prepaid Balance Made by
- ------------------------------------------------------------------------

- ------------------------------------------------------------------------
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<PAGE>

Exhibit 5.01(a)(v)(A) to
Credit Agreement dated
as of September 23, 1996

FORM OF
OPINION OF COUNSEL FOR THE BORROWER

FACILITY B

[Date]

To each of the Banks parties
to the Credit Agreement
described below, and to
Bank of America National
Trust and Savings Association,
as Administrative Agent

Ladies and Gentlemen:

This opinion is furnished to you pursuant to
Section 5.01(a)(v)(A) of the Credit Agreement dated as of
September 23, 1996 (the "Credit Agreement") among Allegiance
Corporation (the "Borrower"), the Banks parties thereto, and Bank
of America National Trust and Savings Association, as
Administrative Agent. Terms defined in the Credit Agreement are
used herein as therein defined.

I am General Counsel of the Borrower. I have acted as
counsel for the Borrower in connection with the preparation,
execution and delivery of the Credit Agreement.

In that connection I have examined:

(1) The Credit Agreement.

(2) The Certificate of Incorporation of the Borrower
and all amendments thereto (the "Charter").

(3) The by-laws of the Borrower and all amendments
thereto (the "By-laws").

(4) Certificates of the Secretaries of State of
Delaware, dated ________________, 1996, and Illinois, dated
__________, 1996, each attesting to the continued corporate
existence and good standing of the Borrower in such State.

(5) All of the other documents furnished by the
Borrower pursuant to Section 5.01 of the Credit Agreement.

<PAGE>

security agreements, bonds, notes and other agreements or
instruments, and all of the orders, writs, judgments, awards,
injunctions and decrees, which affect or purport to affect the
Borrower's right to borrow money or the Borrower's obligations
under the Credit Agreement or the Notes. In addition, I have
examined the originals, or copies certified to my satisfaction,
of such other corporate records of the Borrower, certificates of
public officials and of officers of the Borrower, and agreements,
instruments and documents, as I have deemed necessary as a basis
for the opinions hereinafter expressed. As to questions of fact
material to such opinions, I have, when relevant facts were not
independently established by me, relied upon certificates of the
Borrower or its officers or of public officials. I have assumed
the due execution and delivery, pursuant to due authorization, of
the Credit Agreement by the Banks and the Administrative Agent.
Based upon the foregoing, I am of the opinion that:

1. The Borrower is a corporation duly incorporated,
validly existing and in good standing under the laws of its
jurisdiction of incorporation and has all requisite authority to
conduct its business in each jurisdiction in which the failure so
to qualify would have a material adverse effect on the business,
properties, assets, operations or condition (financial or
otherwise) of the Borrower.

2. The execution, delivery and performance by the
Borrower of the Credit Agreement and the Notes are within the
Borrower's corporate powers, have been duly authorized by all
necessary corporate action, and do not contravene (i) the Charter
or the By-laws or (ii) any law, rule or regulation applicable to
the Borrower or (iii) any contractual or legal restriction
binding on or affecting the Borrower contained in any document,
order, writ, judgment, award, injunction or decree listed in the
Certificate or, to the best of my knowledge, contained in any
other similar document or any other order, writ, judgment, award,
injunction or decree. The Credit Agreement and the Notes have
been duly executed and delivered on behalf of the Borrower. If a
Borrowing were to occur on this date in accordance with the terms
of the Credit Agreement, and assuming the statements made in
SECTION 6.01(h) of the Credit Agreement remained true and correct
after giving effect to the application of the proceeds of such
Borrowing, such Borrowing would not violate Regulation U or X of
the Board of Governors of the Federal Reserve System.

3. No authorization, approval or other action by, and
no notice to or filing with, any governmental authority or
regulatory body or any other Person is required for the due
execution, delivery and performance by the Borrower of the Credit
Agreement and the Notes.

4. There is no pending or, to the best of my
knowledge, threatened action or proceeding against the Borrower
or any of its Subsidiaries before any court, governmental agency
or arbitrator which is likely to have a materially adverse effect
upon the financial condition or operations of the Borrower or any

<PAGE>

of its Subsidiaries or which purports to affect the legality,
validity or enforceability of the Credit Agreement or the Notes.

5. The Borrower is not (i) an "investment company,"
(ii) a company "controlled" by an "investment company" which is
registered under the Investment Company Act of 1940, as amended,
or (iii) to the best of my knowledge, a company "controlled" by
any other "investment company" within the meaning of the
Investment Company Act of 1940, as amended.

I express no opinion as to (i) Sections 4.17 and 10.05
of the Credit Agreement insofar as they provide that any Bank
purchasing a participation from another Bank pursuant thereto may
exercise set-off or similar rights with respect to such
participation or that any Affiliate of a Bank may exercise
set-off or similar rights with respect to such Bank's claims
under the Credit Agreement or the Notes, (ii) Section 4.15(c) or
10.04(c) insofar as those Sections may be construed as requiring
that the Borrower indemnify any Bank or the Administrative Agent
with respect to any claim, damage, liability or expense incurred
as a result of any violation of law by such Bank or the
Administrative Agent, and (iii) the effect of the law of any
jurisdiction other than the State of Illinois wherein any Bank
may be located or wherein enforcement of the Credit Agreement or
the Notes may be sought which limits the rates of interest
legally chargeable or collectible.

I am aware that Sidley & Austin will rely upon this
opinion in rendering their opinion furnished pursuant to
Section 5.01 of the Credit Agreement.

This opinion is limited to the matters expressly set
forth herein, and no opinion is implied or may be inferred beyond
the matters expressly set forth herein. This opinion speaks as
of the date hereof and I assume no obligation to supplement the
foregoing opinion if any applicable laws change after the date
hereof or if I become aware of any facts which might change such
opinion after the date hereof. The opinions expressed herein are
being delivered to you in connection with the transactions
described hereinabove and are solely for your benefit in
connection with the transactions described hereinabove and may
not be relied on in any manner or for any purpose by any other
person, nor any copies published, communicated or otherwise made
available in whole or in part to any other person or entity
without my specific prior written consent, except that you may
furnish copies thereof (i) to any of your permitted successors
and assigns (including prospective assignees and participants) in
respect of the Credit Agreement and the Syndicated Notes, (ii) to
your independent auditors and attorneys, (iii) upon the request
of any state or federal authority or official having regulatory
jurisdiction over you, and (iv) pursuant to order or legal
process of any court or governmental agency.

Very truly yours,

<PAGE>

Exhibit 5.01(a)(v)(B)
Credit Agreement dated as
of September 23, 1996

FORM OF
OPINION OF SIDLEY & AUSTIN

FACILITY B

[Date]

To the Banks parties to the Credit
Agreement and Listed on Schedule I hereto:

Ladies and Gentlemen:

We have acted as special counsel to Allegiance
Corporation (the "Borrower") in connection with the preparation,
execution and delivery of the Credit Agreement dated as of
September 23, 1996 (the "Credit Agreement") among the Borrower,
the banks parties thereto (the "Banks"), and Bank of America
National Trust and Savings Association, as Administrative Agent
(the "Administrative Agent"). All capitalized terms used in this
opinion shall have the meanings attributed to them in the Credit
Agreement.

In that connection we have reviewed the following
documents:

(1) Counterparts of the Credit Agreement, purportedly
executed by each of the parties thereto;

(2) The Syndicated Notes, executed by the Borrower and
payable to the order of each of the Banks;

(3) The Competitive Bid Notes, executed by the
Borrower and payable to the order of each of the Banks; and

(4) The opinion of William Feather, General Counsel of
the Borrower, and the other documents furnished by the Borrower
pursuant to Section 5.01 of the Credit Agreement.

In our examination of the documents referred to above,
we have assumed the authenticity of all such documents submitted
to us as originals, the genuineness of all signatures, the due
authority of the parties executing such documents, and the
conformity to the originals of such documents submitted to us as
copies. We have assumed that each of the Banks, the
Administrative Agent and the Borrower has duly executed and
delivered the Credit Agreement, in each case with all necessary
power and authority (corporate and otherwise). To the extent
that our opinions expressed below involve conclusions as to the
matters set forth in the opinion of counsel referred to in item
(4) above, we have assumed without independent investigation the
correctness of the opinions set forth therein (other than the

<PAGE>

opinion set forth in paragraph 4 thereof). In addition, we have
assumed that there are no written or oral terms or conditions
agreed to by the Borrower, and any or all of the Administrative
Agent and/or any of the Banks which could vary the truth,
completeness, correctness, validity or effect of the Credit
Agreement or the Notes.

Based upon the foregoing examination of documents and
the assumptions set forth herein and upon such investigation as
we have deemed necessary, we are of the opinion that, under the
law of the State of Illinois, the Credit Agreement and the Notes
are the legal, valid and binding obligations of the Borrower,
enforceable against the Borrower in accordance with their
respective terms.

Our opinion is subject to the following qualifications:

(a) Our opinion is subject to the effect of applicable
bankruptcy, insolvency, moratorium, receivership, reorganization
or similar laws affecting the enforcement of creditors' rights
generally and to the effect of general equitable principles
(whether considered in a proceeding in equity or at law). In
applying such principles, a court, among other things, might not
allow a creditor to accelerate the maturity of a debt upon the
occurrence of a default deemed immaterial or might decline to
order a debtor to perform covenants. Such principles applied by
a court might include a requirement that a creditor act with
reasonableness and in good faith.

(b) Our opinion is limited to the internal (as opposed
to conflicts of laws) laws of the State of Illinois, and we do
not express any opinion herein concerning any other law. Without
limiting the generality of the forgoing, we express no opinion as
to the effect upon the obligations of the Borrower of (i) any law
of any jurisdiction other than the State of Illinois wherein any
Bank may be located or wherein enforcement of the Credit
Agreement or the Notes may be sought or (ii) the legal or
regulatory status of any of the Banks or the authority of any of
the Banks to conduct business in any jurisdiction.

(d) We express no opinion as to (i) Sections 4.17 and
10.05 of the Credit Agreement, insofar as they provide that any
Bank purchasing a participation from another Bank pursuant
thereto may exercise set-off or similar rights with respect to
such participation or that any Affiliate of a Bank may exercise
set-off or similar rights with respect to such Bank's claims
under the Credit Agreement or the Notes or (ii) Section 4.15(c)
or 10.04(c), insofar as those Sections may be construed as
requiring that the Borrower indemnify any Bank or the
Administrative Agent with respect to any claim, damage, liability
or expense incurred as a result of any violation of law by such
Bank or the Administrative Agent.

<PAGE>

hereof or if we become aware of any facts which might change such
opinion after the date hereof. The opinions expressed herein are
being delivered to you in connection with the transactions
described hereinabove and are solely for your benefit in
connection with the transactions described hereinabove and may
not be relied on in any manner or for any purpose by any other
person, nor any copies published, communicated or otherwise made
available in whole or in part to any other person or entity
without our specific prior written consent, except that you may
furnish copies thereof (i) to any of your permitted successors
and assigns (including prospective assignees and participants) in
respect of the Credit Agreement and the Syndicated Notes, (ii) to
your independent auditors and attorneys, (iii) upon the request
of any state or federal authority or official having regulatory
jurisdiction over you, and (iv) pursuant to order or legal
process of any court or governmental agency.

Very truly yours,

[Sidley & Austin]

<PAGE>

Exhibit 7.01(g)(ii) to
Credit Agreement dated
as of September 23, 1996

FORM OF
CERTIFICATE OF INDEPENDENT ACCOUNTANTS

FACILITY B

[Date]

Allegiance Corporation
1430 Waukegan Road
McGaw Park, Illinois 60085

Gentlemen:

We have examined the consolidated balance sheet of
Allegiance Corporation and subsidiaries as of December 31, 19__,
and the related consolidated statements of income, stockholders'
equity and cash flows for the year then ended, and have issued
our report thereon dated ________, 19__ . Our examination was
made in accordance with generally accepted auditing standards
and, accordingly, included such tests of the accounting records
and such other auditing procedures as we considered necessary in
the circumstances.

In connection with our examination, nothing came to our
attention that caused us to believe that Allegiance Corporation
is not in compliance with the covenants of Section 7.01(i) or
7.02(b) of the Credit Agreement dated as of September 23, 1996
among Allegiance Corporation, the Banks parties thereto, and Bank
of America National Trust and Savings Association, as
Administrative Agent. However, it should be noted that our
examination was not directed primarily toward obtaining knowledge
of such noncompliance.

Very truly yours,

[Price Waterhouse]

<PAGE>

Exhibit 10.06 to
Credit Agreement
dated as of September 23, 1996

FORM OF
ASSIGNMENT AND ACCEPTANCE

Dated ___________, 19__

Reference is made to that certain Credit Agreement (Facility B) dated as of
September 23, 1996 (the "Credit Agreement") among Allegiance Corporation, a
Delaware corporation (the "Borrower"), certain "Banks" parties thereto, certain
"Co-Arrangers" parties thereto and Bank of America National Trust and Savings
Association, as administrative agent for the Banks (the "Administrative Agent").
Terms defined in the Credit Agreement are used herein with the same meaning.

__________________ (the "Assignor") and ____________ (the "Assignee") agree as
follows:

<PAGE>

5. Upon such acceptance and recording by the Administrative Agent, as of
the Effective Date, (i) the Assignee shall be a party to the Credit Agreement
and, to the extent

- -------------------------
(1) If the Assignee is organized under the laws of a jurisdiction outside the
United States.

<PAGE>

7. This Assignment and Acceptance shall be governed by, and construed in
accordance with, the laws of the State of Illinois.

<PAGE>

Schedule 1
to
Assignment and Acceptance
Dated ______, 1996

SECTION 1.

Percentage Interest:___________%

SECTION 2.

Assignee's Commitment: $_____________
Aggregate Outstanding Principal
Amount of Syndicated Advances
owing to the Assignee $_____________
Aggregate Outstanding Principal
Amount to Competitive Bid Advances
owing to the Assignee $_____________

[A Syndicated Note payable to the order of the Assignee
Dated: __________, 19___
Principal amount: _________]
[A Syndicated Note payable to the order of the Assignor
Dated: __________, 19___
Principal amount: _________]
[A Competitive Bid Note payable to the order of the Assignee
Dated: __________, 19___
Principal amount: _________]

SECTION 3.

Requested Effective Date:(2) ______________________, 19___

[NAME OF ASSIGNOR]

By:
----------------------
Title

- --------------------
(2) The actual Effective Date shall be determined in accordance with Section 4
of the Assignment and Acceptance Agreement.

<PAGE>

[NAME OF ASSIGNEE]

By:
----------------------
Title

APPLICABLE LENDING OFFICES:

[Specify]

ADDRESSES FOR PURPOSES OF
NOTICE:

[Specify]

Accepted this _________ day
of ________, 19___

BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as
Administrative Agent

By:
---------------------------
Title:

[Acknowledge and Agreed this
____ day of ________, 19___

ALLEGIANCE CORPORATION

By:
---------------------------
Title:](3)

- --------------------
(3) If required by the terms of the Credit Agreement.

<PAGE>

Schedule 1.01 to
Credit Agreement dated
as of September 23, 1996

<PAGE>

LENDING OFFICE ADDRESSES

Domestic Lending Eurocurrency Lending
Bank Office Office
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