<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
BAXTER INTERNATIONAL INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
Baxter International Inc. 708.948.2000
One Baxter Parkway
Deerfield, Illinois 60015
[BAXTER INTERNATIONAL INC. LOGO]
March 24, 1995
TO ALL BAXTER INTERNATIONAL INC. STOCKHOLDERS
The Board of Directors joins me in inviting you to attend
the 1995 annual meeting of stockholders. The meeting will be
held in the Geneen Auditorium in the Fuqua School of
Business at Duke University in Durham, North Carolina, on
Monday, May 8, 1995. The meeting will begin at 10:00 a.m.
EDT. Registration will begin at 9:00 a.m. Refreshments will
be served before the meeting. After the meeting, box lunches
will be available for you to enjoy in connection with your
visit to the campus.
In addition to the matters described in the attached proxy
statement, I will report on the business and progress of
Baxter during 1994 and Baxter's future. Baxter's performance
is discussed in the enclosed 1994 Annual Report to
Stockholders. The enclosed Annual Report will give you
greater insight into our plans for 1995 and beyond.
We are extremely pleased to have the opportunity to hold the
1995 annual meeting at Duke University. Holding the meeting
at Duke University allows us to showcase the important new
partnering approach we are taking with health care providers
that could become a national model for taking costs out of
the health care system. The unique way in which Baxter and
the Duke University Medical Center are working together is
explained in the enclosed Annual Report.
I hope you will be able to attend the meeting and look
forward to seeing you there.
Sincerely,
[SIGNATURE OF VERNON R. LOUCKS JR.]
Vernon R. Loucks Jr.
Chairman of the Board of Directors
and Chief Executive Officer
<PAGE>
Baxter International Inc. 708.948.2000
One Baxter Parkway
Deerfield, Illinois 60015
[Baxter International Inc. Logo]
March 24, 1995
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The 1995 annual meeting of stockholders of Baxter
International Inc. ("Company") will be held in the Geneen
Auditorium in the Fuqua School of Business at Duke
University in Durham, North Carolina, on Monday, May 8, 1995
at 10:00 a.m. EDT, for the following purposes:
1. To elect five directors to hold office for three
years (page 3);
2. To ratify the appointment of Price Waterhouse LLP as
independent accountant for the Company in 1995 (page
20);
3. To authorize the issuance of 10,000,000 additional
shares of the Company's common stock for sale to
employees under the Company's Employee Stock Purchase
Plan (page 21);
4. To act on the stockholder proposal relating to
cumulative voting in the election of directors (page
22); and
5. To transact any other business which is properly
presented at the meeting.
Only holders of record of the Company's common stock at the
close of business on March 10, 1995 will be entitled to vote
at the meeting. A list of the stockholders entitled to vote
at the meeting will be kept at Wachovia Bank of North
Carolina, 2116 Angier Avenue, Durham, North Carolina, for
the ten-day period before the meeting.
Please mark and sign the enclosed proxy card and return it
promptly in the enclosed envelope, even if you plan to
attend the meeting, to ensure that your vote is counted. If
you attend the meeting and vote by ballot at the meeting,
your proxy will be revoked automatically and only your vote
at the meeting will be counted.
By order of the Board of Directors,
[signature of A. Gerard Sieck]
A. Gerard Sieck
Secretary
<PAGE>
--------------------------------------------------------------------------------
LOGO
BAXTER INTERNATIONAL INC., ONE BAXTER PARKWAY, DEERFIELD, ILLINOIS 60015,
708.948.2000
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The Board of Directors of Baxter International Inc. ("Company") solicits your
proxy for the annual meeting of stockholders to be held on May 8, 1995. This
proxy statement and the accompanying proxy card are being mailed to
stockholders beginning approximately March 24, 1995.
Because many of the Company's stockholders are unable to attend the annual
meeting in person, the board solicits proxies by mail to give each stockholder
an opportunity to vote on all matters presented at the meeting. Stockholders
are urged to:
(1) read this proxy statement carefully;
(2) specify their choices on each matter by marking the appropriate box on
the enclosed proxy card; and
(3) sign, date and return the card in the enclosed envelope.
There is a place on the enclosed proxy card for stockholders to request
confidential treatment of their votes. If a stockholder requests, inspectors of
election and tabulators will keep the stockholder's vote permanently
confidential and not disclose the vote to anyone other than another inspector
or tabulator. Confidential treatment will not apply when it would not comply
with law or during a proxy contest (neither of which is applicable to this
proxy solicitation).
Only holders of record of the Company's common stock, $1 par value, ("Common
Stock") at the close of business on March 10, 1995, will be entitled to vote.
On that date, approximately 282,851,308 shares of Common Stock were
outstanding. The holders of the Common Stock are entitled to vote as a single
class with each share entitled to one vote. Any stockholder signing a proxy
card may revoke or revise it at any time before the meeting by submitting a new
proxy card to the secretary of the Company or by voting in person at the
meeting. Either action will automatically cancel any proxy card previously
signed.
If no specific instructions are given and the proxy card is properly signed
and returned, all shares covered by the proxy card will be voted by the
Company's chairman of the board and chief executive officer or the senior vice
president and general counsel for the election of all of the board's nominees
for directors, for ratification of Price Waterhouse LLP as independent
accountant for 1995, for authorization of the issuance of the shares for sale
to employees under the Company's employee stock purchase plan and against the
stockholder proposal relating to cumulative voting. Unless otherwise indicated
by the stockholder, proxy cards also give the Company's chairman and chief
executive officer and senior vice president and general counsel discretionary
authority to vote all shares of Common Stock represented by the proxy on any
other matter that is properly presented for action at the meeting.
Common Stock credited to a participant in either the Company's Stockholder
Investment Service (dividend reinvestment plan) or an uncertificated share
account of the employee stock purchase plans will be voted in the same manner
as the participant votes the Common Stock standing in his or her name. If a
participant is not a stockholder of record, the custodian, The First Chicago
Trust Company of New York, will vote shares of Common Stock held in such
accounts only in accordance with the participant's instructions.
1
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Determination of whether a matter specified in the Notice of Annual Meeting
of Stockholders has been approved will be determined as follows. Those persons
will be elected directors who receive a plurality of the shares of Common Stock
present at the annual meeting in person or by proxy and entitled to vote on the
election. Accordingly, directions to withhold authority will have no effect on
the outcome of the vote. For each other matter specified in the Notice of
Annual Meeting of Stockholders, the affirmative vote of a majority of the
shares of Common Stock present at the annual meeting in person or by proxy and
entitled to vote on such matter is required for approval. Abstentions will be
considered shares present in person or by proxy and entitled to vote and will,
therefore, have the effect of a vote against the matter. Broker non-votes will
be considered shares not present for this purpose and will have no effect on
the outcome of the vote. Directions to withhold authority to vote for
directors, abstentions and broker non-votes will be counted for purposes of
determining if a quorum is present for the annual meeting.
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BOARD OF DIRECTORS
The Company's certificate of incorporation divides the Board of Directors
into three classes. Each year, the directors in one class are elected to serve
a three-year term. The Company's bylaws allow the directors to increase (and
decrease) the size of the board, to elect directors to fill the vacancies
created by the increase and to assign the elected directors to a class.
Pursuant to that authority, in November 1994 and February 1995, the Board of
Directors elected Arnold J. Levine and Monroe E. Trout, respectively, to serve
as directors of the Company until the 1995 annual meeting of stockholders.
The Board of Directors has nominated Mary Johnston Evans, Frank R. Frame,
William B. Graham, Arnold J. Levine and Monroe E. Trout for election as
directors at the 1995 annual meeting. All of the nominees are currently
directors of the Company. Each director elected will serve a three-year term.
If any nominee for director becomes unavailable for election, the number of
directors will be reduced. No other candidates are eligible for election as
directors at the 1995 annual meeting. Stockholders who want to nominate
candidates for election as directors at future annual meetings must comply with
procedures in the Company's bylaws. A copy of the bylaws may be obtained from
the secretary of the Company.
James D. Ebert and David C.K. Chin, directors of the Company since 1989 and
1992, respectively, are not standing for re-election when their terms expire at
the 1995 annual meeting. Dr. Ebert is not eligible to stand for re-election
under the Company's bylaws. Dr. Chin became a principal in the firm of Coopers
& Lybrand in 1994, and that firm's policy relating to directorships does not
permit Dr. Chin to stand for re-election. The board expresses its appreciation
for their contributions to the Company.
The chairman and chief executive officer and the senior vice president and
general counsel intend to vote the shares represented by proxies for all of the
board's nominees, except to the extent authority to vote for the nominees is
withheld.
Directors will be elected by a plurality of the votes cast FOR the election
of directors at the annual meeting. This means that the five individuals who
receive the largest number of votes cast will be elected as directors.
The Board of Directors recommends a vote FOR the election of all of the
nominees for directors.
2
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ELECTION OF DIRECTORS
(ITEM 1 ON PROXY CARD)
Information Concerning Nominees for Election as Directors
Mary Johnston Evans--Age 65 Director since 1986
Mrs. Evans is a director of Household International, Inc., Sun Company, Delta
Air Lines, Inc., The Dun & Bradstreet Corporation and Scudder New Europe Fund.
Frank R. Frame--Age 65 Director since 1992
Mr. Frame is an adviser to the board of directors of HSBC Holdings plc., a
financial institution. Between 1976 and 1990, Mr. Frame held various senior
management positions in The Hongkong and Shanghai Banking Corporation Limited,
a financial institution from which he retired in 1990, including group legal
adviser, executive director and deputy chairman. Mr. Frame also serves as
chairman of Wallem Group Limited, deputy chairman of Time Products plc and a
director of Edinburgh Dragon Trust plc and of HSBC Global Investment Funds.
William B. Graham--Age 83 Director since 1945
Mr. Graham has been senior chairman of the Board of Directors since 1985. Mr.
Graham became president of the Company in 1953 and chief executive officer in
1960 and continued in these positions until 1971. From 1971 to 1980 he was
chairman of the board and chief executive officer, and thereafter he served as
chairman until he became senior chairman.
Arnold J. Levine--Age 55 Director since 1994
Dr. Levine has been a professor of biology and the chairman of the molecular
biology department at Princeton University since 1984. From 1979 to 1983, Dr.
Levine was a professor of biology and the chairman of the molecular biology
department at State University of New York. Since 1982, Dr. Levine has been the
chairman of the Company's scientific advisory board.
Monroe E. Trout, M.D.--Age 63 Director since 1995
Dr. Trout was chairman of the board, president and chief executive officer of
American Healthcare Systems, a network of integrated health care systems, from
1987 to 1994 when he retired. He was elected president and chief executive
officer of American Healthcare Systems in 1986. Dr. Trout also serves as a
director of Cytyc Corporation, Science Applications International Corporation
(SAIC), Gensia, Inc. and The West Company, Inc.
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Information Concerning Directors Continuing in Office
Silas S. Cathcart--Age 68 Director since 1990
Term expires 1996
Mr. Cathcart is a director of General Electric Company, Illinois Tool Works,
Inc. and The Quaker Oats Company. Mr. Cathcart is also a trustee of Northern
Funds Mutual Fund. From 1985 to 1987, Mr. Cathcart served as a director of the
Company; 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.
3
<PAGE>
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John W. Colloton--Age 64 Director since 1989
Term Expires 1997
From 1971 to 1993, Mr. Colloton served as the director of the University of
Iowa Hospitals and Clinics, and since 1993 he has been vice president of the
University of Iowa for Statewide Health Services. Mr. Colloton also serves as a
director of Iowa State Bank & Trust, OncorMed, Iowa-Illinois Gas and Electric
Company and Iowa-South Dakota Blue Cross and Blue Shield (IASD).
Susan Crown--Age 36 Director since 1993
Term Expires 1997
Since 1984, Ms. Crown has been a vice president of Henry Crown and Company,
which includes diversified manufacturing operations, real estate and
securities. Ms. Crown also serves as a director of Caribbean International News
Corporation, Illinois Tool Works, Inc. and as a trustee of Northern Funds
Mutual Fund.
David W. Grainger--Age 67 Director since 1990
Term expires 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.
Martha R. Ingram--Age 59 Director since 1987
Term expires 1996
Ms. Ingram is the director of public affairs and member of the executive
committee and board of directors of Ingram Industries Inc., a diversified
transportation and energy company and distributor of consumer products. Ms.
Ingram also serves as a director of First American Corporation.
Vernon R. Loucks Jr.--Age 60 Director since 1975
Term Expires 1997
Mr. Loucks has been chairman of the Board of Directors since 1987 and chief
executive officer of the Company since 1980. Mr. Loucks was first elected an
officer of the Company in 1971. Mr. Loucks also serves as a director of
Anheuser-Busch Companies, Inc., The Dun & Bradstreet Corporation, Emerson
Electric Co. and The Quaker Oats Company.
Georges C. St. Laurent, Jr.--Age 58 Director since 1992
Term Expires 1997
Since 1988, Mr. St. Laurent has been chairman of the board and chief
executive officer of Western Bank, a financial institution. He was first
elected a director of Western Bank in 1987.
Fred L. Turner--Age 62 Director since 1982
Term expires 1996
Mr. Turner is senior chairman of the board of directors and chairman of the
executive committee of McDonald's Corporation, a restaurant licensor. Mr.
Turner previously was chairman of the board and chief executive officer of
McDonald's Corporation. He joined McDonald's in 1956. Mr. Turner also serves as
a director of Aon Corporation and W. W. Grainger, Inc.
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4
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OPERATION OF THE BOARD OF DIRECTORS
Pursuant to Delaware law, under which the Company is organized, the Company's
business, property and affairs are managed under the direction of the Board of
Directors. During 1994, there were eight meetings of the board. Each current
director attended 75% or more of the meetings of the board held when he or she
was a director and the board committees to which he or she was assigned as a
regular member, except Arnold J. Levine. Dr. Levine was first elected a
director in November 1994. There was one special meeting of the Finance
Committee in December 1994 which he was unable to attend.
Committees of the Board
The Board of Directors has six committees established in the Company's
bylaws.
The Executive Committee consists of four directors, a majority of whom are
not employees of the Company. The committee may exercise most of the powers of
the Board of Directors, except those reserved to the Board of Directors by the
Company's bylaws or Delaware law. The Executive Committee did not meet in 1994.
The current members of the Executive Committee are Vernon R. Loucks Jr.
(chairman), Silas S. Cathcart, William B. Graham and Fred L. Turner.
The Audit Committee consists of three directors who are not employees of the
Company. The committee assists the Board of Directors in fulfilling its
responsibility for the Company's accounting and financial reporting practices
and provides a channel of communication between the Board of Directors and the
Company's independent accountant. The Audit Committee met four times in 1994.
The current members of the Audit Committee are Georges C. St. Laurent, Jr.
(chairman), Silas S. Cathcart and Frank R. Frame.
The Compensation Committee consists of four directors who are not employees
of the Company. The committee determines compensation for officers, and makes
recommendations to the Board of Directors concerning compensation for the
chairman of the board and chief executive officer. It also exercises the
authority of the Board of Directors relating to the Company's employee benefit
plans. The Compensation Committee met six times in 1994. The current members of
the Compensation Committee are Silas S. Cathcart (chairman), John W. Colloton,
Mary Johnston Evans and Georges C. St. Laurent, Jr.
The Finance Committee consists of six directors who are not employees of the
Company. Within limits established in the Company's bylaws, the committee
exercises the authority of the Board of Directors in connection with financial
transactions and assists and advises the Board of Directors regarding the
financial affairs of the Company. The Finance Committee met nine times in 1994.
The current members of the Finance Committee are William B. Graham (chairman),
David C.K. Chin, Susan Crown, James D. Ebert, David W. Grainger and Arnold J.
Levine.
The Planning and Organization Committee consists of five directors who are
not employees of the Company. The committee assists and advises the Board of
Directors in connection with board membership, board committee structure and
membership as well as general organization and planning matters. The Planning
and Organization Committee considers director candidates. Under guidelines
followed by the committee, it seeks candidates with high integrity, good
judgment and breadth of experience, among other criteria. Stockholders may
nominate director candidates for election at an annual meeting of stockholders
by providing written notice of such nomination to the secretary of the Company.
The Company's bylaws require the notice to be
5
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submitted to the Company 60 to 90 days before the anniversary date of the
previous year's annual meeting. The bylaws also require the notice to include
specified information about the stockholder making the nomination and specified
information about the director candidate, including all information that would
be required to be disclosed in a proxy statement. The Planning and Organization
Committee met five times in 1994. The current members of the Planning and
Organization Committee are Fred L. Turner (chairman), David C.K. Chin, Frank R.
Frame, David W. Grainger and Martha R. Ingram.
The Public Policy Committee consists of five directors who are not employees
of the Company. The committee reviews the policies and practices of the Company
to assure that they are consistent with its social responsibility to employees,
customers and society. The Public Policy Committee met four times in 1994. The
current members of the Public Policy Committee are Martha R. Ingram (chairman),
John W. Colloton, Susan Crown, James D. Ebert and Fred L. Turner.
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COMPENSATION OF DIRECTORS
Compensation of non-employee directors currently consists of an annual
retainer of $25,000 plus a $1,000 fee for each board and each committee meeting
attended. Members of committees receive an additional annual retainer of
$3,000, and chairmen of committees receive an additional annual retainer of
$4,000; except that members of the Executive Committee do not receive the
additional annual retainer for their Executive Committee membership. Directors
may elect to defer payment of all or a part of their cash compensation.
Employee directors are not compensated separately for their board or committee
activities.
Each non-employee director elected in April 1994 received 1,100 restricted
shares of Common Stock pursuant to a restricted stock plan for non-employee
directors ("Director Stock Plan"). The number of shares granted in April 1994
was calculated, in accordance with the Director Stock Plan, to approximate the
value of the $25,000 annual retainer for directors.
Each non-employee director, who retires at age 65 or after, with at least
five years of board service, is entitled to an annual retirement benefit. That
benefit is currently paid in cash, and it is equal to the annual retainer in
effect at the time of the retirement. The retirement benefit is currently paid
for a period of time equal to the director's full years of service as a non-
employee director. Each non-employee director is also eligible for medical
benefits and life insurance benefits. Medical benefit payments in 1994 totaled
$43,230 for all non-employee directors. No non-employee director life insurance
benefits were paid in 1994.
In February 1995, the Board of Directors amended the Director Stock Plan,
effective on the date of the 1995 annual meeting, to provide directors with
less cash compensation and more Common Stock. The amended plan changed the
compensation described in the preceding three paragraphs, as follows.
First, non-employee directors will no longer receive an annual retainer of
$25,000. In lieu of that annual cash retainer, each non-employee director
elected at the 1995 annual meeting will receive, on May 8, 1995, 3,000
restricted shares of Common Stock. The non-employee directors continuing in
office with two years or one year remaining on their current terms will
receive, on the same date, 2,000 or 1,000 restricted shares of Common Stock,
respectively. These restricted shares will vest over the directors' terms of
office. Thereafter, each director will receive 3,000
6
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restricted shares of Common Stock upon his or her re-election to the board.
This amendment has no effect on the current additional annual retainers for
committee membership and chairmanship or on the current meeting fees.
Second, each non-employee director elected at the 1995 annual meeting will
receive, on May 8, 1995, an additional 1,000 restricted shares of Common Stock.
This fixed number of shares replaces the variable number of shares which would
otherwise have been calculated in accordance with the Director Stock Plan
before it was amended. These restricted shares will vest at the expiration of
the director's term of office.
Third, each non-employee director, who retires at age 65 or after, with at
least five years of board service, will no longer be entitled to an annual
retirement benefit payable in cash. Instead, each retiring director will
receive, upon retirement, 1,000 restricted shares for each of the director's
full years of service as a non-employee director. These restricted shares will
vest six months after the grant date.
Grants of restricted stock awarded under the Director Stock Plan vest as
described above, unless specified corporate control changes occur. Until
vested, the restricted stock may not be transferred or sold by the director.
During the restriction period, the director has all of the other rights of a
stockholder, including the right to receive dividends and vote the shares.
The amendments to the Director Stock Plan reflect the directors' commitment
to aligning their interests more closely with the interests of all of the
Company's stockholders.
In lieu of the non-employee director cash compensation and retirement
benefits described above, the Company has consulting and pension agreements
with William B. Graham. Mr. Graham receives $250,000 per year under the
consulting agreement until it is terminated by either party. Under the pension
agreement, Mr. Graham receives a non-qualified supplemental retirement benefit
equal to the benefit he would have received under the Company's pension plan if
he had 10 additional years of pension plan participation.
In addition to the non-employee director compensation and benefits described
above, Dr. Arnold J. Levine receives an annual consulting fee for his services
as chairman of the Company's scientific advisory board. The total consulting
fee paid to Dr. Levine in 1994 was $26,250, and it is expected to be
approximately the same in 1995.
7
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COMPENSATION OF NAMED EXECUTIVE OFFICERS
General
The following table shows, for the years ended December 31, 1994, 1993, and
1992 the compensation provided by the Company and its subsidiaries to the
chairman and chief executive officer and the four next most highly compensated
executive officers in all capacities in which they served.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
--------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------------------- ------------------ -------
OTHER ALL
ANNUAL RESTRICTED OTHER
COMPEN- STOCK LTIP COMPEN-
NAME AND PRINCIPAL SALARY BONUS SATION AWARD(S) OPTIONS PAYOUTS SATION
POSITION YEAR ($)(1) ($)(1) ($)(2) ($)(3) (#)(4) ($)(5) ($)(6)
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
VERNON R. LOUCKS JR. 1994 $580,100 $800,000 $213,195 -0- 350,000 -0- $35,445
Chairman of the Board
and Chief 1993 $693,231 $500,000 $209,311 -0- 88,800 -0- $46,342
Executive Officer 1992 $751,000 $750,000 $218,880 $3,849,500 -0- -0- $50,071
--------------------------------------------------------------------------------------------
TONY L. WHITE 1994 $327,950 $400,000 $ 24,196 $ 237,023 200,000 -0- $20,026
Executive Vice President 1993 $311,908 $325,000 excluded -0- 27,000 -0- $19,557
1992 $287,746 $330,000 excluded $ 657,175 12,700 -0- $13,942
--------------------------------------------------------------------------------------------
LESTER B. KNIGHT 1994 $324,938 $400,000 $ 5,526 $ 288,958 200,000 -0- $17,477
Executive Vice President 1993 $291,114 $250,000 excluded -0- 27,000 -0- $18,789
1992 $264,308 $330,000 excluded $1,009,675 9,900 -0- $13,944
--------------------------------------------------------------------------------------------
MANUEL A. BAEZ 1994 $288,007 $190,000 $ 4,571 -0- 125,000 -0- $14,068
Group Vice President 1993 $264,200 $163,000 excluded -0- 16,500 -0- $14,975
Baxter World Trade Cor-
poration 1992 $246,900 $220,000 excluded $ 985,454 2,200 -0- $13,972
--------------------------------------------------------------------------------------------
HARRY M. JANSEN KRAEMER,
JR. (7) 1994 $249,615 $225,000 excluded $ 262,438 125,000 -0- $10,266
Senior Vice President
and Chief 1993 $200,000 $129,742 excluded -0- 7,200 -0- $ 8,764
Financial Officer 1992 N/A N/A N/A N/A N/A N/A N/A
--------------------------------------------------------------------------------------------
</TABLE>
(1) Amounts shown include cash compensation earned by the named executive
officers during the year covered, including amounts deferred at the
election of those officers. Bonuses are paid in the year following the year
during which they are earned.
(2) As permitted by the Securities and Exchange Commission's (SEC) rules
regarding disclosure of executive compensation in proxy statements, this
column excludes perquisites and other personal benefits for the named
executive officer if their total cost in each of 1994, 1993 and 1992 did
not exceed the lesser of $50,000 or 10% of the total of annual salary and
bonus reported for the named executive officer for those years. Of the 1994
amount shown for Mr. Loucks, $105,400 represents the approximate
incremental cost to the Company of his use of Company aircraft for personal
travel, which the Company required for security reasons.
(3) 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 amount shown for Mr. Loucks in 1992 includes the 65,000
shares of restricted stock he received in lieu of salary and cash bonus
increases for years 1992 through 1996 and the grant he received in 1992
under the Company's 1989 Long-Term Incentive Plan, both of which are
discussed in the Compensation Committee report beginning on page 12. The
amounts shown for the other named executive officers for 1994 and 1992
include their grants under the 1989 Long-Term Incentive Plan. As of
December 31, 1994, the number and value of the aggregate restricted stock
holdings of the named executive officers are as follows: Mr. Loucks--
165,478 shares ($4,674,754); Mr. White--38,858 shares ($1,097,739); Mr.
Knight--36,524 shares ($1,031,803); Mr. Baez--38,867 shares ($1,097,993);
Mr. Kraemer--28,417 shares ($802,780). Dividends are payable on all
outstanding shares of restricted stock held by all Company executives at
the same rate and time
8
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and in the same form in which dividends are payable on all outstanding
shares of Common Stock, as required by the Company's 1987 Incentive
Compensation Program.
(4) No Stock Appreciation Rights (SARs) were granted by the Company in 1994,
and there are no outstanding SARs held by any employee or director of the
Company. The number shown represents the number of shares of Common Stock
for which options were granted to the named executive officer. For 1994,
the number consists solely of the options granted and exercised pursuant to
the Company's Shared Investment Plan, which is described on page 10.
(5) The SEC rules regarding disclosure of executive compensation in proxy
statements allow awards of restricted stock that are subject to
performance-based conditions on vesting, in addition to lapse of time
and/or continued service with the Company, to be reported as awards under a
long-term incentive plan ("LTIP"), instead of as restricted stock awards.
The rules define a LTIP as a plan providing compensation intended to serve
as incentive for performance to occur over a period longer than one fiscal
year. Restricted stock awards which are earned based on annual financial
performance cannot be reported as LTIP awards, even if, as in the case of
the restricted stock awards identified in the "Restricted Stock Awards"
column, the stock may not be earned and vested until the end of at least
two years.
(6) Amounts shown represent the Company matching contributions in the Company's
Incentive Investment Plan, a qualified section 401(k) profit sharing plan,
additional matching contributions in the Company's deferred compensation
plan and the dollar value of split-dollar life insurance benefits. Those
three amounts for 1994, expressed in the same order as identified above,
for the named executive officers are as follows: Mr. Loucks--$4,500,
$27,903 and $3,042; Mr. White--$4,500, $15,089, and $437; Mr. Knight--
$4,500, $12,748 and $229; Mr. Baez--$4,500, $9,030, and $538; Mr. Kraemer--
$4,500, $5,688, and $78.
(7) Mr. Kraemer was not an executive officer of the Company or any of its
subsidiaries in 1992.
9
<PAGE>
--------------------------------------------------------------------------------
Stock Option Grants
The following table contains information relating to the stock option grants
made in 1994 under the Company's 1994 Incentive Compensation Program to the
named executive officers.
OPTION GRANTS TABLE
OPTION GRANTS IN LAST FISCAL YEAR(1)
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE
AT ASSUMED ANNUAL RATES
OF
STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
---------------------------------- ------------------------
% OF TOTAL
NUMBER OF OPTIONS
SECURITIES GRANTED TO EXERCISE
UNDERLYING EMPLOYEES OR BASE
OPTIONS IN FISCAL PRICE EXPIRATION
NAME GRANTED(#)(2) YEAR(3) ($/SH)(4) DATE(2) 0%($) 5%($)(5) 10%($)(5)
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Mr.
Loucks 350,000 4.7% $26.00 6/15/94 -0- -0- -0-
Mr.
White 200,000 2.7% $26.00 6/15/94 -0- -0- -0-
Mr.
Knight 200,000 2.7% $26.00 6/15/94 -0- -0- -0-
Mr. Baez 125,000 1.7% $26.00 6/15/94 -0- -0- -0-
Mr.
Kraemer 125,000 1.7% $26.00 6/15/94 -0- -0- -0-
--------------------------------------------------------------------------------
</TABLE>
(1) No Stock Appreciation Rights (SARs) were granted by the Company in 1994.
(2) Options granted to the named executive officers pursuant to the Company's
Shared Investment Plan, which is described below.
(3) In 1994, the Company granted options on approximately 7.5 million shares of
Common Stock to approximately 3,100 employees.
(4) The exercise price shown is the closing price of the Common Stock on the
date of grant.
(5) Because the Shared Investment Plan options were granted and exercised at
the closing price of the Common Stock on June 15, 1994, there was no
potential realizable value for the option term.
--------------------------------------------------------------------------------
SHARED INVESTMENT PLAN
Pursuant to the Shared Investment Plan, the Company received $121 million in
cash from 63 members of the Company's senior management team who collectively
purchased 4,685,000 shares of Common Stock. This plan more directly aligns
management and stockholder interests. Under the terms of the voluntary plan,
the participants used personal full-recourse loans to exercise options to
purchase Common Stock at the June 15, 1994 closing price of $26 per share. The
loans, borrowed from several commercial banks, are the personal obligation of
the participants. The Company has agreed to guarantee repayment to the banks in
the event of a default by a participant.
Under the terms of the plan, there are several restrictions on the sale of
the purchased shares. Except in specified and limited circumstances, including
death, disability and corporate control changes, no participant may sell any
portion of the purchased shares before the first anniversary of the exercise
date (June 15, 1995). In addition, no participant may sell any portion of the
purchased shares unless all principal, interest and prepayment fees due on the
loan described above have been paid or all sale proceeds are simultaneously
applied first to the payment of such amounts. The Compensation Committee of the
Board of Directors has the right to impose additional restrictions on the
timing, amount and form of the sale of the purchased shares with respect to any
participant to the extent it determines that such restrictions are in the best
interests of the Company.
10
<PAGE>
--------------------------------------------------------------------------------
The plan incorporates a risk-sharing provision for participants who remain
employed by the Company or one of its subsidiaries at least until the first
anniversary of the exercise date (June 15, 1995). For those participants, the
Company will share the loss, if any, which the participant incurs upon the sale
of the purchased shares in connection with repayment of the loan. The risk
sharing provision operates as follows. If any portion of the purchased shares
is sold before the third anniversary of the exercise date (June 15, 1997), the
participant is responsible for 100% of the loss, and is entitled to receive 50%
of the gain, on that portion of the purchased shares. If any portion of the
purchased shares is sold on or after the third anniversary of the exercise date
(June 15, 1997), the participant is responsible for 50% of the loss, and is
entitled to receive 100% of the gain, on that portion of the purchased shares.
Under the terms of the plan, each participant is fully obligated to repay to
the banks all principal, interest and other amounts on the loan when due and
payable. The Company may take all action relating to the participant and his or
her assets, which the Compensation Committee deems reasonable and necessary, to
obtain full reimbursement for amounts the Company pays to the banks pursuant to
its loan guarantee, in excess of its obligation under the risk sharing
provision.
--------------------------------------------------------------------------------
Stock Option Exercises
The following table contains information relating to the exercise of stock
options by the named executive officers in 1994 as well as the number and value
of their unexercised options as of December 31, 1994.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES(/1/)
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
FISCAL YEAR-END (#)(/3/) FISCAL YEAR END ($)(/4/)
------------------------- -------------------------
SHARES ACQUIRED VALUE
NAME ON EXERCISE(#)(/2/) REALIZED(/2/) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Mr. Loucks 350,000 -0- 101,459 59,200 $151,453 $133,200
Mr. White 200,000 -0- 55,240 22,433 $260,858 $ 40,500
Mr. Knight 200,000 -0- 34,302 21,455 $ 89,431 $ 40,500
Mr. Baez 125,000 -0- 38,339 11,768 $123,574 $ 24,750
Mr. Kraemer 125,000 -0- 22,395 5,114 $116,448 $ 10,800
--------------------------------------------------------------------------------------------------
</TABLE>
(1) No Stock Appreciation Rights (SARs) were exercised by any Company employee
in 1994, and there are no outstanding SARs held by any employee or director
of the Company.
(2) The shares reported in this column were granted and exercised, at the
closing price of the Common Stock on June 15, 1994, pursuant to the
Company's Shared Investment Plan. The Shared Investment Plan is described
on page 10.
(3) The sum of the numbers under the Exercisable and Unexercisable columns of
this heading represents each named executive officer's total outstanding
options.
(4) The dollar amounts shown under the Exercisable and Unexercisable columns of
this heading represent the number of exercisable and unexercisable options,
respectively, multiplied by the difference between the closing price of the
Common Stock on December 31, 1994, which was $28.25 per share, and the
exercise price of the options.
11
<PAGE>
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Long-Term Incentive Plans
No long-term incentive plan table is included in this proxy statement because
no long-term incentive plan awards were made to any of the named executive
officers during 1994.
--------------------------------------------------------------------------------
COMPANY FINANCIAL PERFORMANCE
The following graph compares the performance of the Common Stock with the
Standard & Poor's 500 Composite Index and the Standard & Poor's Medical
Products and Supplies Index. The comparison of total return (change in year end
stock price plus reinvested dividends) for each of the years assumes that $100
was invested on December 31, 1989 in each of the Company, the Standard & Poor's
500 Index and the Standard & Poor's Medical Index with investment weighted on
the basis of market capitalization. The 1992 Company dividend includes the
Caremark International Inc. stock dividend distributed on November 30, 1992.
FIVE YEAR CUMULATIVE TOTAL RETURN
LOGO
<TABLE>
[GRAPH APPEARS HERE]
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG BAXTER INTERNATIONAL INC., S&P 500 INDEX AND PEER GROUP
<CAPTION>
Measurement Period BAXTER S&P
(Fiscal Year Covered) INTERNATIONAL INC. 500 INDEX MED INDEX
------------------- ------------------ --------- ----------
<S> <C> <C> <C>
Measurement Pt-
12/31/89 $100.0 $100.0 $100.0
FYE 12/31/90 $114.4 $ 96.8 $117.3
FYE 12/31/91 $167.7 $126.4 $191.9
FYE 12/31/92 $153.3 $141.9 $164.4
FYE 12/31/93 $120.0 $149.7 $125.4
FYE 12/31/94 $144.5 $151.7 $148.7
</TABLE>
*S&P Medical Products & Supplies Index
--------------------------------------------------------------------------------
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The compensation of the Company's executive officers is determined by the
Compensation Committee of the Board of Directors. The committee currently has
four members. As required by the Company's bylaws, the committee consists
solely of non-employee directors.
12
<PAGE>
--------------------------------------------------------------------------------
Compensation Philosophy for Executive Officers
The committee's philosophy is to provide compensation opportunities
supporting the Company's values of respect for individuals, responsiveness to
customers and results for stockholders. Forms and levels of total compensation
are structured to be competitive when compared to other health-care companies
and to companies of similar size. These comparable companies are reported in
surveys whose participants include most firms within the Standard & Poor's
Medical Products and Supplies Index, as well as other companies with which the
Company and its subsidiaries compete for executive talent ("comparable
companies"). This philosophy is intended to assist the Company in attracting,
retaining and motivating executives with superior leadership and management
abilities. Consistent with this philosophy, the committee determines a total
compensation structure for each officer, including Mr. Loucks, consisting
primarily of salary, cash bonus, restricted stock, stock options and benefits.
The proportions of these elements of compensation vary among the officers
depending upon their levels of responsibility. The senior executive officers
ordinarily 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 the Company's stockholders.
The committee's philosophy with respect to the cap on the tax-deductibility
of executive compensation is to maximize the benefit of tax laws for the
Company's stockholders by seeking performance-based exemptions where consistent
with the Company's compensation policies and practices. The committee adopted
1994 and 1995 performance goals for the Company's officer cash bonus plan and
1989 Long-Term Incentive Plan which are expected to satisfy the deductibility
requirements with respect to any payments under those plans in 1995 and 1996.
Compensation Elements
The committee establishes salaries 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 are based on the officer's
individual performance. Actual salaries in a number of cases are under the 50th
percentile due to the Company's commitment to controlling costs and its
practice of adjusting salaries over time rather than immediately when there are
promotions into senior executive positions.
Bonuses are intended to provide executive officers with an opportunity to
receive additional cash compensation (which when combined with salary provides
total cash compensation between the 50th and 75th percentile of total cash
compensation paid to executives in comparable companies), but only if they earn
it through the Company's achievement of strong performance results as measured
by earnings-per-share, return-on-equity and cash flow. Each year, the committee
establishes a bonus range for each executive officer by utilizing the market
data of comparable companies. After year-end results are reported, the
committee determines each officer's bonus based on individual performance and
the Company's performance against the earnings-per-share, return-on-equity and
cash flow goals it established for the year. The Company outperformed its
earnings-per-share, return-on-equity and cash flow goals for 1994. For example,
the Company's actual operational cash flow for 1994 was 212 percent of its
operational cash flow goal. Consequently, actual bonuses for 1994 ranged from
71 percent to 100 percent of the high end of the executive officers' respective
bonus ranges.
13
<PAGE>
--------------------------------------------------------------------------------
Restricted stock has been granted, under the Company's 1989 Long-Term
Incentive Plan, to maintain the plan period through 1996. This plan was
established as part of the Company's 1987 Incentive Compensation Program ("1987
Program"), which was approved by the Company's stockholders in 1987. Restricted
stock grants are intended to be a mechanism for aligning management's and
stockholders' interests. The plan provides participants the opportunity to
build equity in the Company if the Company achieves strong performance as
measured by return-on-equity and Common Stock performance. Each participant has
a targeted number of restricted shares which can be earned annually if the
Company achieves its return-on-equity goal. The amount earned is then adjusted
upward or downward based on the Company's total rate of return to stockholders
compared to the percentage change in the Standard & Poor's Medical Products and
Supplies Index. The number of restricted shares granted is determined based
upon the number of restricted shares which each executive officer would earn if
the Company achieved its annual return-on-equity goal. The stock ordinarily
vests one year after it is earned, provided the participant remains employed by
the Company or one of its subsidiaries. Because of the Company's actual return-
on-equity in 1994, and because the Company's 1994 total rate of return to
stockholders exceeded the percentage change in the Standard & Poor's Medical
Products and Supplies Index, 137.5 percent of restricted share targets were
earned under the plan for 1994.
Stock options are granted under the Company's 1994 Incentive Compensation
Program ("1994 Program"), which was approved by the Company's stockholders in
1994. They represent an additional vehicle for aligning management's and
stockholders' interests, specifically motivating executives to remain focused
on the market value of the Common Stock in addition to earnings-per-share,
return-on-equity and cash flow goals. Options are granted with an exercise
price equal to the fair-market value of the Common Stock on the day of the
grant. Normally, stock options are granted annually. In 1994, the committee
granted stock options on approximately 7.5 million shares of Common Stock to
approximately 3,100 employees of the Company and its subsidiaries. The options
granted to the named executive officers were granted under the Company's Shared
Investment Plan, as explained below.
The Company implemented the Shared Investment Plan in 1994 to align further
management's interests with the interest of stockholders and continue to tie
management incentives to stockholder value. The Plan provided the Company's 63
top managers with a one day option to purchase a significant amount of Common
Stock. The five named executive officers voluntarily took out full-recourse,
personal loans to buy $26,000,000 worth (one million shares) of Common Stock.
This is one of the strongest statements our management team has made about
their personal commitment to increasing stockholder value. The transaction
increased key employees' motivation to manage the Company as owners. To a
significant degree, their financial well-being will depend heavily on the
performance of the Common Stock. The Shared Investment Plan is more fully
described on page 10.
The number of restricted shares and options ordinarily granted to executive
officers is formula-driven. The formula is designed to provide an opportunity
to earn stock-based compensation (half in restricted stock, half in options) at
a third-quartile level compared to executives in comparable companies. The
grants of restricted stock are based on the value of the Common Stock on the
date of grant. The grants of stock options are based on an estimated
appreciation in the Common Stock over time discounted to a present value. When
the Company grants restricted stock under the 1989 Long-Term Incentive Plan and
stock options, it considers approaches taken by comparable companies, to the
extent those approaches are consistent with the Company's total compensation
philosophy and its performance against established goals.
14
<PAGE>
--------------------------------------------------------------------------------
Mr. Loucks' 1994 Compensation
Mr. Loucks participates in the same compensation plans provided to other
executive officers. The committee's general approach to setting Mr. Loucks'
compensation is to be competitive with comparable companies--and to have a
majority of his compensation dependent on achievement of performance criteria
established by the committee and the performance of the Common Stock. All
compensation actions relating to Mr. Loucks are subject to the approval of the
Board of Directors. The actions described in this report have been approved.
Mr. Loucks' salary had most recently been established in 1991, based upon an
analysis of competitive compensation data. In February 1992, the committee
capped Mr. Loucks' salary at $751,000, its 1991 level, and capped his bonus at
$800,000, its 1990 level, for the five-year period beginning in 1992. Mr.
Loucks' salary and bonus were capped for the five-year period, and the
committee granted Mr. Loucks 65,000 shares of restricted stock in lieu of the
salary and cash bonus increases he might have otherwise received over that
five-year period, because of the committee's continuing emphasis on aligning
management's and stockholders' interests. The committee determines the number
of shares earned on an annual basis, based on its assessment of Mr. Loucks'
performance for that particular year. All earned shares are scheduled to vest
on December 31, 1997, if he remains employed by the Company or one of its
subsidiaries on that date.
In September 1993, Mr. Loucks requested and was granted a 25 percent salary
reduction as a demonstration of his personal commitment to controlling costs
and improving the Company's operating performance. A reduced salary continued
throughout 1994. In January 1995, Mr. Loucks' salary was restored to its 1991
level. Recently, the committee determined that Mr. Loucks earned 17,000 of the
65,000 shares of restricted stock for 1994, based on the Company's strong
operating performance. The committee also determined that Mr. Loucks earned an
$800,000 bonus because the Company exceeded its earnings-per-share, return-on-
equity and cash flow goals for 1994, and because the Company achieved a total
rate of return to stockholders of 20.5% for 1994. The Company's success in 1994
reflects Mr. Loucks' continued commitment to the strategic direction of the
Company toward an objective of leadership in health-care and his guidance of
the Company through a particularly turbulent and challenging environment in
U.S. health-care.
Under the Company's Shared Investment Plan, Mr. Loucks purchased 350,000
shares of Common Stock. As described above, this purchase by Mr. Loucks and
other executive officers reinforces the link between management's and
stockholders' interests.
Mr. Loucks, like other participants in the 1989 Long-Term Incentive Plan, was
deemed to have earned 137.5% of his annual target award of restricted stock in
1994, based on the Company's strong return-on-equity and Common Stock
performance for 1994.
Relationship of Executive Compensation to Company Performance
The committee believes that management should be motivated, and compensated,
based on the Company's financial and Common Stock performance. For this reason,
the committee has emphasized goals for return on equity, earnings-per-share,
cash flow and Common Stock performance when determining cash bonus and long-
term incentive compensation for all executive officers, as explained above. The
committee believes that strong financial performance, as expressed by return-
on-equity, earnings-per-share, cash flow and Common Stock performance,
15
<PAGE>
--------------------------------------------------------------------------------
were the appropriate focus for 1994. The relatively low common stock returns
during the past five years are in part attributable to the pressure on health-
care costs, uncertainty over the direction of U.S. health-care reform and in
part to the fact that the Company has not yet realized the full benefits of
required strategic investments made during the past several years. Despite
those obstacles, the Company surpassed its financial performance goals and
achieved a total rate of return to stockholders of 20.5 percent for 1994. Also,
the Company's market value increased over $1.3 billion during that period.
Silas S. Cathcart (Chairman)
John W. CollotonMary Johnston Evans
Georges C. St. Laurent, Jr.
16
<PAGE>
--------------------------------------------------------------------------------
PENSION PLAN AND EXCESS PLAN
The following table shows estimated annual retirement benefits payable to
participants in the Company's United States pension plan ("Pension Plan") whose
employment terminates at normal retirement (age 65). The 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 Pension
Plan participation. In general, the earnings covered by the Pension Plan
include salary, annual cash bonuses and other regular pay. The figures shown
include benefits payable under the Pension Plan and under the Company'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 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 1994.
Although age 65 is the normal retirement age under the Pension Plan, the
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 Pension
Plan participation and one point for each year of age. Participants who
terminate employment after accumulating 65 points, and who wait to begin
receiving their Pension Plan benefits until they have 85 points, receive the
same Pension Plan benefits they would otherwise receive at age 65, regardless
of their actual age when they begin receiving their Pension Plan benefits.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
ESTIMATED ANNUAL RETIREMENT BENEFITS
-------------------------------------------------------
YEARS OF PENSION PLAN PARTICIPATION(1)
FINAL AVERAGE -------------------------------------------------------
PAY(1) 15 20 25 30 35
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 400,000 $101,200 $135,000 $168,700 $202,500 $ 236,400
500,000 127,500 170,000 212,500 255,000 297,600
600,000 153,700 205,000 256,200 307,500 358,900
700,000 180,000 240,000 300,000 360,000 420,100
800,000 206,200 275,000 343,700 412,500 481,400
900,000 232,500 310,000 387,500 465,000 542,600
1,000,000 258,700 345,000 431,200 517,500 603,900
1,100,000 285,000 380,000 475,000 570,000 665,100
1,200,000 311,200 415,000 518,700 622,500 726,400
1,300,000 337,500 450,000 562,500 675,000 787,600
1,400,000 363,700 485,000 606,200 727,500 848,900
1,500,000 390,000 520,000 650,000 780,000 910,100
1,600,000 416,200 555,000 693,700 832,500 971,400
1,700,000 442,500 590,000 737,500 885,000 1,032,600
</TABLE>
--------------------------------------------------------------------------------
(1) As of January 1, 1995, the named executive officers' years of Pension Plan
participation and Final Average Pay for purposes of calculating annual
retirement benefits payable under the Pension Plan are as follows: Mr.
Loucks--28 years and $1,360,608; Mr. White--24 years and $476,459; Mr.
Knight--12 years and $431,438; Mr. Baez--20 years and $421,275; Mr.
Kraemer--11 years and $202,487.
17
<PAGE>
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SIGNIFICANT BUSINESS RELATIONSHIPS
American Healthcare Systems ("AmHS") is a network of integrated health care
systems representing more than 900 not-for-profit health-care facilities.
During 1994, AmHS purchased approximately $767 million of products and services
from the Company's subsidiaries. It is anticipated that AmHS' purchases from
the Company's subsidiaries will be approximately $806 million in 1995. Dr.
Monroe E. Trout was chairman of the board, president and chief executive
officer of AmHS from 1987 to 1994 when he retired. All of the 1994 sales to
AmHS were made, and all of the 1995 sales to AmHS will be made, in the ordinary
course of business.
--------------------------------------------------------------------------------
SECTION 16 REPORTING
Section 16 of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors to report to the Securities and Exchange
Commission their ownership of the Company's equity securities when they are
first elected, and to report subsequent changes in their ownership. Georges C.
St. Laurent, Jr., a director, timely filed a Form 4, which included a late
report of 14 shares of Common Stock acquired as a participant in the Company's
dividend reinvestment plan. J. Robert Hurley and Carlos del Salto, corporate
vice presidents of one of the Company's principal subsidiaries, filed
amendments to their initial statements of beneficial ownership of securities
(Form 3) to report shares of Common Stock held in their brokerage accounts. In
all cases, the omissions were inadvertent.
--------------------------------------------------------------------------------
LEGAL PROCEEDINGS RELATING TO DIRECTORS AND OFFICERS
All of the individuals who served as directors of the Company as of September
1, 1993, as well as Lester B. Knight, executive vice president of the Company,
are named as defendants in a lawsuit ostensibly filed as a "demand excused"
derivative action. Seigel v. Loucks, et al, was filed on September 15, 1993, in
the Court of Chancery in New Castle County, Delaware Cir. Ct., New Castle Co.,
Del., C.A. No. 13130. On October 24, 1993, a substantially identical complaint
was filed in the same court by Bartholomew J. Millano. The two complaints have
been consolidated. The plaintiffs allege that the directors failed to oversee
management in connection with actions which were the basis for a dispute
between the Company and the Department of Veterans Affairs concerning sales and
pricing practices, failed to prevent such actions, and failed to create a
compliance program to prevent or detect such actions. The complaint seeks to
recover alleged damages incurred by the Company as the result of lost sales due
to the dispute, as well as the compensation paid to Messrs. Gantz, Knight,
Loucks, and Tobin since 1991. The Company and its directors filed motions to
dismiss the suit, answered the complaint and filed a counterclaim seeking
permanently to bar and enjoin the plaintiff from prosecuting this case because
her claims have been disposed of and barred in a prior suit against the
Company. On March 7, 1995, the court granted the defendants' motions to dismiss
the suit. The plaintiffs have 30 days to appeal the dismissal order.
18
<PAGE>
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OWNERSHIP OF COMPANY SECURITIES
The following tables and footnotes show, as of February 24, 1995, information
to the best of the Company's knowledge with respect to the persons who
beneficially owned more than five percent of the Company's Common Stock as well
as information as to the Common Stock beneficially owned by each director and
named executive officer and by all directors and executive officers of the
Company as a group. The information relating to directors and named executive
officers is furnished by the respective directors and officers. For purposes of
this disclosure, the Securities and Exchange Commission has defined "beneficial
ownership" to include securities over which the individual has sole or shared
investment or voting power regardless of the economic incidents of ownership.
The amounts shown indicate the number of outstanding shares of Common Stock
beneficially owned by each director and named executive officer and all
directors and executive officers as a group, and include shares of Common Stock
beneficially owned under the Company's Incentive Investment Plan, a qualified
Section 401(k) profit sharing plan (the Plan amounts are included as of January
31, 1995, the latest information reasonably available). There are no
outstanding equity securities of the Company other than its Common Stock. No
director or named executive officer beneficially owned more than 1.0% of the
outstanding Common Stock. All directors and executive officers as a group owned
1.8% of the outstanding shares of Common Stock. Where a director or executive
officer has the right to acquire shares of Common Stock within 60 days after
February 24, 1995, through the exercise of stock options or participation in
the Company's employee stock purchase plans, these shares of Common Stock are
treated as beneficially owned by the individual and as outstanding for purposes
of computing the percentages owned by the individual and the group.
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK
BENEFICIALLY RIGHT TO
NAME OR GROUP OWNED ACQUIRE (1)
------------------------------------------------------------------------------
<S> <C> <C>
FMR Corp. 14,752,446(2) --
Manuel A. Baez 202,506 38,339
Silas S. Cathcart 2,334 --
David C.K. Chin 441 --
John W. Colloton 1,662 --
Susan Crown 10,000(3) --
James D. Ebert 600 --
Mary Johnston Evans 3,134 --
Frank R. Frame 324 --
William B. Graham 271,845 --
David W. Grainger 31,500 --
Martha R. Ingram 31,000 --
Lester B. Knight 296,146 34,302
Harry M. Jansen Kraemer, Jr. 186,640 22,635
Arnold J. Levine 700 --
Vernon R. Loucks Jr. 700,235 101,819
Georges C. St. Laurent, Jr. 248,866 --
Monroe E. Trout 1,100 --
Fred L. Turner 4,539 --
Tony L. White 334,917 55,601
All directors and executive officers as a group(4) 5,173,538 800,841
</TABLE>
--------------------------------------------------------------------------------
19
<PAGE>
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(1) The shares indicated under Right to Acquire are included under Shares of
Common Stock Beneficially Owned.
(2) Based upon information as of December 31, 1994 set forth in a Schedule 13G
filing made by FMR Corp. and dated February 13, 1995. This number of shares
represents approximately 5.2% of the outstanding shares of Common Stock.
FMR Corp.'s address is 82 Devonshire Street, Boston, Massachusetts 02109.
(3) Ms. Crown disclaims beneficial ownership of 4,000 shares.
(4) Adjustments are made to avoid double counting of shares as to which more
than one beneficial owner is listed.
--------------------------------------------------------------------------------
Except as indicated in the following table, the shares of Common Stock shown
above are held with sole power over both investment and voting.
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VOTING POWER INVESTMENT POWER
NAME SHARED SHARED
------------------------------------------------------------------------------
<S> <C> <C>
Manuel A. Baez 300 300
Susan Crown 4,000 4,000
Lester B. Knight 7,351 7,351
Harry M. Jansen Kraemer, Jr. 10,658 10,658
Monroe E. Trout 1,000 1,000
Tony L. White 21,933 21,933
All directors and executive officers as a group 152,772 152,772
</TABLE>
--------------------------------------------------------------------------------
PROPOSAL TO RATIFY APPOINTMENT OF INDEPENDENT ACCOUNTANT
(ITEM 2 ON PROXY CARD)
The Board of Directors has reappointed Price Waterhouse LLP as independent
accountant for the Company in 1995. The board recommends that the appointment
be ratified. If the resolution is not adopted, the board will consider the
selection of another public accounting firm for 1995 and future years.
Fees for services performed by Price Waterhouse LLP during 1994 related to
the audit of the consolidated annual financial statements, including statutory
audits of foreign subsidiaries, aggregated approximately $2.9 million. In
addition to the audit of the consolidated financial statements, Price
Waterhouse LLP performed other audit related services including: audits of
employee benefit plans, limited reviews of quarterly financial information,
reviews of officers' compensation, assistance with regulatory filings,
acquisitions and divestiture review, and consultations in connection with
various financial reporting and accounting matters. Fees for these other audit
related services, which include audit work related to the Diagnostics business
divestiture, aggregated approximately $1.5 million while fees for other
consulting services aggregated approximately $2.8 million.
A representative of Price Waterhouse LLP will attend the annual meeting and
will be prepared to respond to questions. The representative may make a
statement at the meeting if he or she so desires.
The Board of Directors recommends a vote FOR ratification of the selection of
Price Waterhouse LLP as independent accountant for 1995.
20
<PAGE>
--------------------------------------------------------------------------------
PROPOSAL FOR ADDITIONAL STOCK UNDER EMPLOYEE STOCK PURCHASE PLAN (ITEM 3 ON
PROXY CARD)
The Company has a qualified Employee Stock Purchase Plan ("Qualified Plan")
which permits eligible employees to purchase shares of Common Stock at a 15%
discount from the market price. The plan is qualified because it satisfies the
requirements of Section 423 of the Internal Revenue Code. The 15% discount is
specifically authorized by Section 423 of the Internal Revenue Code. The
qualified Plan was initially approved by the Company's stockholders in 1968.
Most of the Company's U.S. employees (including officers and those directors
who are also employees) are eligible to participate in the Qualified Plan. As
of December 31, 1994, approximately 6,400 of approximately 32,000 eligible
employees were participating in the Qualified Plan.
Under the Qualified Plan, each eligible employee may subscribe to purchase
Common Stock with an aggregate subscription price up to 25% of the employee's
annual rate of compensation. Shares are purchased by payroll deductions at a
maximum rate of 12% of compensation. The purchase price is the lower of 85% of
the closing market price on the date of subscription or 85% of the closing
market price on the date sufficient funds have been withheld to purchase 20
shares. No employee may purchase shares under the Qualified Plan, in any
calendar year, with an aggregate fair market value in excess of $25,000,
determined on the subscription date. All shares under subscription may be
purchased immediately if specified corporate control changes occur. The Company
receives a tax deduction to the extent employees must recognize ordinary income
in the United States.
For the year ended December 31, 1994, the aggregate difference between the
fair market value of the Common Stock purchased under the Qualified Plan on the
date of purchase and the purchase price for the following persons and indicated
group is as follows: Mr. Loucks--$2,449; Mr. White--$2,498; Mr. Knight--(no
purchases); Mr. Baez--$3,359; Mr. Kraemer--$2,929; (all executive officers as a
group (17 participants--$62,615; and all employees of the Company as a group
(approximately 6,400 participants)--$9,022,981.
Stockholders are being asked to approve the issuance of additional shares
under the Qualified Plan. The last time the Company's stockholders approved
additional stock under the Qualified Plan was 1989. At that time, the
stockholders approved 10,000,000 shares. Of those 10,000,000, approximately 1.1
million remain available for issuance.
To permit continuation of the Qualified Plan, which the Board of Directors
considers to be an important employee benefit and an important vehicle for
allowing employees at all levels of the Company to increase their ownership of
the Common Stock, additional shares must be authorized. The board has
authorized an additional 10,000,000 shares under the Qualified Plan, subject to
stockholder approval which is required by Section 423 of the Internal Revenue
Code. It is expected that the additional shares will permit the continuation of
the Qualified Plan for an additional four or more years, without further
stockholder action.
The Board of Directors recommends a vote FOR approval of the additional
stock.
21
<PAGE>
--------------------------------------------------------------------------------
CURRENT STOCKHOLDER PROPOSAL
The Company has been informed that the following stockholder proposal will be
presented for a vote at the 1995 annual meeting of stockholders. The Board of
Directors recommends a vote AGAINST the proposal; its reasons follow the
stockholder's proposal and supporting statement.
--------------------------------------------------------------------------------
STOCKHOLDER PROPOSAL RELATING TO CUMULATIVE VOTING IN THE ELECTION OF DIRECTORS
(ITEM 4 ON PROXY CARD)
The Company has been advised that Margaret R. and/or John J. Gilbert, 29 East
64th Street, New York, New York 10021-7043, as co-trustees under the will of
Minnie D. Gilbert and as beneficial owners of 100 shares of Common Stock,
and/or Martin Glotzer, 7061 N. Kedzie, Chicago, Illinois 60645, as the owner of
50 shares of Common Stock will have the following resolution presented at the
annual meeting:
RESOLVED: That the stockholders of Baxter International Inc., assembled in
annual meeting in person and by proxy, hereby request the Board of Directors to
take the steps necessary to provide for cumulative voting in the election of
directors, which means each stockholder shall be entitled to as many votes as
shall equal the number of shares he or she owns multiplied by the number of
directors to be elected, and he or she may cast all of such votes for a single
candidate, or any two or more of them as he or she may see fit.
--------------------------------------------------------------------------------
Stockholder's Statement Supporting the Proposed Resolution
Very strong support along the lines we suggest were shown at the last annual
meeting when 35.5%, 5,358 owners of 67,320,514 shares, were cast in favor of
this proposal. The vote against included 251 unmarked proxies.
A law enacted in California provides that all state pension holdings and
state college funds, invested in shares must be voted in favor of cumulative
voting proposals, showing increasing recognition of the importance of this
democratic means of electing directors.
The National Bank Act provides for cumulative voting. Unfortunately, in many
cases companies get around it by forming holding companies without cumulative
voting. Banking authorities have the right to question the capability of
directors to be on banking boards. Unfortunately, in many cases authorities
come in after and say the director or directors were not qualified. We were
delighted to see that the SEC has finally taken action to prevent bad directors
from being on the boards of public companies.
We think cumulative voting is the answer to find new directors for various
committees. Additionally, some recommendations have been made to carry out the
Valdez 10 points. The 11th should be having cumulative voting and ending
stagger systems of electing directors, in our opinion.
When Alaska became a state it took away cumulative voting over our
objections. The Valdez oil spill might have been prevented if environmental
directors were elected through cumulative voting. Also, the huge derivative
losses might have been prevented with cumulative voting.
22
<PAGE>
--------------------------------------------------------------------------------
Many successful corporations have cumulative voting. For example, Pennzoil
having cumulative voting defeated Texaco in that famous case. Another example
is Ingersoll-Rand which has cumulative voting and won two awards. In FORTUNE
magazine it was ranked second in its industry as "America's Most Admired
Corporations" and the WALL STREET TRANSCRIPT noted "on almost any criteria used
to evaluate management, Ingersoll-Rand excels." In 1994 they raised their
dividend. We believe that Baxter should follow these examples.
If you agree, please mark your proxy for this resolution; otherwise it is
automatically cast against it, unless you have marked to abstain.
--------------------------------------------------------------------------------
Board of Directors' Statement Opposing Stockholder Resolution
For the reasons explained below, the Board of Directors believes that
cumulative voting for directors would not serve the best interests of the
Company and its stockholders. The board recommends a vote AGAINST the proposed
resolution.
Directors should be elected based on their ability and commitment to
represent the best interests of the Company and its stockholders as a whole.
This tenet is best served when each director is elected by a majority vote of
the stockholders. Cumulative voting can enable, and indeed encourage, a
relatively small special-interest group to elect one or more directors.
Directors so elected might feel compelled to act in the interest of the group
that elected them rather than in the interest of all stockholders.
Cumulative voting introduces the possibility of partisanship among board
members, which could undermine the ability of the board to work together
effectively. The variety and complexity of issues facing the Company
necessitates that no actual or apparent influence bring into question the
objectivity of the board's insight, perspective or counsel.
The board encourages stockholders to present director candidates to the
board's Planning and Organization Committee, which assists and advises the
board in connection with board membership. Notably, the Planning and
Organization Committee consists solely of non-employee directors. It is also
important to note that the Company's chairman and chief executive officer is
the only Company employee on the Board of Directors. A summary of the process
by which stockholders may present director candidates is included in the
description of the Planning and Organization Committee on page 5 of this proxy
statement.
In the board's opinion, the present method of electing directors, where each
director is elected by majority vote of all stockholders, best assures that the
directors will guide the affairs of the Company for the benefit of all
stockholders.
The board recommends a vote AGAINST cumulative voting in the election of
directors.
--------------------------------------------------------------------------------
FUTURE STOCKHOLDER PROPOSALS
From time to time stockholders present proposals which may be proper subjects
for inclusion in the proxy statement and for consideration at the annual
meeting. To be included in the proxy statement for the 1996 annual meeting,
proposals must be received by the Company no later than November 24, 1995.
23
<PAGE>
--------------------------------------------------------------------------------
Stockholders may present proposals which are proper subjects for
consideration at an annual meeting, even if the proposal is not submitted by
the deadline for inclusion in the proxy statement. To do so, the stockholder
must comply with the procedures specified by the Company's bylaws. The
Company's bylaws require all stockholders who intend to make proposals at an
annual stockholders meeting to submit their proposals to the Company 60 to 90
days before the anniversary date of the previous year's annual meeting. To be
eligible for consideration at the 1996 annual meeting, proposals which have not
been submitted by the deadline for inclusion in the proxy statement must be
received by the Company between February 7 and March 9, 1996. The provision is
intended to allow all stockholders to have an opportunity to consider business
expected to be raised at the meeting.
--------------------------------------------------------------------------------
COST OF PROXY SOLICITATION
The Company will bear the costs of soliciting proxies. In addition to use of
the mails, proxies may be solicited by directors, officers and employees of the
Company personally, by telephone or by telegram. Such persons will not be
specially compensated for such solicitation. The Company will request banks and
brokers to solicit their customers who have Common Stock registered in their
names or the names of their nominees and will reimburse such banks and brokers
for their reasonable out-of-pocket costs.
In addition, the Company has retained Georgeson & Co. Inc., 88 Pine Street,
New York, New York 10005 to aid in soliciting proxies from brokers, bank
nominees and other institutional owners by personal interview, telephone,
telegram or mail. The Company will pay Georgeson & Co. Inc. $12,500 for
stockholder solicitation and distribution of proxy materials and will reimburse
it for expenses.
--------------------------------------------------------------------------------
OTHER BUSINESS
The Company is not aware of any business to be presented at the annual
meeting other than the matters described above. If a stockholder vote is
necessary to transact any other business at the meeting, the proxyholders
intend to vote their proxies in accordance with their best judgment related to
such business.
By order of the Board of Directors,
[signature of A. Gerard Sieck]
A. Gerard Sieck
Secretary
Deerfield, Illinois
March 24, 1995
24
<PAGE>
[BAXTER LOGO]
Baxter International Inc.
One Baxter Parkway
Deerfield, IL 60015
708 949.2000
PROXY
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS--MAY 8, 1995
Solicited by the Board of Directors of Baxter International Inc.
The undersigned hereby appoint(s) Vernon R. Loucks Jr. and Arthur F. Staubitz or
either of them, with full power of substitution, as proxyholders to represent
and to vote, as designated on the reverse hereof, the common stock of the
undersigned (including any shares of common stock credited under the Company's
Stockholder Investment Service or uncertificated share account of the employee
stock purchase plans) at the annual meeting of the stockholders of the Company
to be held on May 8, 1995 and at any adjournment thereof.
Election of Director, Nominees: Comments/Change of Address
_______________________________________
Mary Johnston Evans _______________________________________
Frank R. Frame _______________________________________
William B. Graham _______________________________________
Arnold J. Levine _______________________________________
Monroe E. Trout _______________________________________
You are encouraged to specify your choices by marking the appropriate boxes. SEE
REVERSE SIDE. You need not mark any boxes if you wish to vote in accordance with
the Board of Directors' recommendations. The proxyholders named above cannot
vote your shares unless you sign and return this card. Please mark, sign and
date this proxy card and mail it in the envelope provided.
----------------
SEE REVERSE SIDE
----------------
<PAGE>
8552
[X] PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN.
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF DIRECTORS,
FOR PROPOSALS 2 AND 3, AND AGAINST PROPOSAL 4.
--------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2 AND 3.
--------------------------------------------------------------------------------
1. Election of Directors (See Reverse). [_] FOR [_] WITHHELD
For, except vote withheld from the following nominee(s):
--------------------------
2. Ratification of Independent Accountants. [_] FOR [_] AGAINST [_] ABSTAIN
3. Authorize additional stock under Employee [_] FOR [_] AGAINST [_] ABSTAIN
Stock Plan.
--------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST PROPOSAL 4.
--------------------------------------------------------------------------------
4. Proposal relating to cumulative voting in [_] FOR [_] AGAINST [_] ABSTAIN
the election of directors.
--------------------------------------------------------------------------------
Treat votes as confidential. [_]
Mark the box if you will attend the Annual Meeting. [_]
--------------------------------------------------------------------------------
SIGNATURE(S)_______________DATE_______
NOTE: Please sign exactly as name
appears hereon. Joint owners
should each sign. When signing
as attorney, executor,
administrator, trustee
or guardian, please give full
title as such.
The signer hereby revokes all
proxies heretofore given by the
signer to vote at said meeting or
any adjournments thereof.
<PAGE>
EXHIBIT 1
TO
PROXY STATEMENT
QUALIFIED EMPLOYEE STOCK PURCHASE PLAN
Baxter International Inc., a Delaware corporation, having its principal place of
business at One Baxter Parkway, Deerfield, Illinois ("Baxter"), hereby adopts
this Qualified Employee Stock Purchase Plan (the "Plan") to offer its employees
the right to purchase its Common Stock, par value $1 per share ("Stock") on the
following terms and conditions.
SECTION 1. EMPLOYEES ENTITLED TO PARTICIPATE.
Each regular employee (regularly scheduled to work for more than twenty (20)
hours per week and five (5) months per calendar year) of Baxter and each regular
employee of any other corporation in which Baxter owns or acquires, directly or
indirectly, at least a 50% ownership interest, if such corporation has been
designated as a participating corporation by the Administration Committee, is
eligible to participate in the Plan.
SECTION 2. SUBSCRIPTION PRICE.
The subscription price hereunder shall be the lesser of: (a) 85% of the fair
market value of the Stock on the day the executed subscription form is received
by Baxter, or (b) 85% of the fair market value of the Stock on the day the right
to purchase is exercised, as provided in Section 7(a) below. The fair market
value on such days is hereby defined as the closing price of the Stock as
reported on the National Association of Securities Dealers' New York Stock
Exchange Composite Reporting Tape (the "Composite Tape") on the given day or, if
no sales are reported on such date, at such closing price on the most recent
preceding day on which such sales did occur.
SECTION 3. NUMBER OF SHARES AUTHORIZED.
The total number of shares of Stock authorized to be issued hereunder is
40,000,000 shares, which may be either newly issued or Treasury shares.
Additional shares may be authorized to be issued hereunder from time to time by
the Board of Directors of Baxter, provided that the stockholders of Baxter
approve such increase within twelve (12) months before or after such action by
the Board of Directors.
<PAGE>
SECTION 4. SUBSCRIPTIONS.
a. How to Subscribe.
----------------
Any eligible employee may subscribe hereunder by executing and mailing or
delivering to the secretary of Baxter, or any representative designated by him
or her, a subscription form approved by the Administration Committee. The
receipt of such subscription form by Baxter shall constitute the grant to the
employee (and the acceptance by him or her) of a right to purchase the number of
shares indicated on the form at the subscription price and subject to the terms
and conditions contained herein, except that no such right shall be deemed to
have been granted: (i) during any period in which the offering of Stock under
this Plan does not comply with the requirements of the Securities Act of 1933 or
any applicable state securities law or (ii) if all shares authorized to be
issued or transferred hereunder have been subscribed.
b. Maximum Number of Shares and Subscriptions Allowed.
--------------------------------------------------
The maximum number of shares which an eligible employee may have under
subscription at any one time is that number of shares whose aggregate
subscription price is not more than 25% of his or her annual rate of
compensation at the time the subscription form is received. An employee may
subscribe for less than the maximum number of shares and may successfully
subscribe for additional shares until he or she has under subscription that
number of shares whose aggregate subscription prices are not more than 25% of
his or her then current annual rate of compensation. An employee may not
subscribe for additional shares if the employee has shares under subscription
pursuant to four (4) or more subscriptions. For purposes of this Plan,
"compensation" shall not be deemed to include prizes, bonuses, reimbursed
relocation expenses and similar non-recurring items. An employee may subscribe
only for units of five (5) shares and multiples thereof, except that in the
event that the subscription price of five shares exceeds 8% of the current
annual rate of compensation of any employee, that employee may subscribe for the
greatest number of shares the subscription price of which does not exceed 8%.
c. Waiting Period.
--------------
An employee who has subscribed for the maximum number of shares may not
subscribe for additional shares unless: (i) six (6) months have elapsed since
the date of receipt of his or her last prior subscription form, (ii) he or she
has withdrawn a prior subscription, or (iii) he or she has received an increase
in his or her annual rate of compensation.
d. Limitations.
-----------
No employee shall be entitled to subscribe hereunder if such employee
immediately after receipt of the subscription form by Baxter owns Stock
possessing 5% or more of the total combined voting power or value of all classes
of Stock of his or her employer corporation or its parent or any subsidiary
corporation. For purposes of the preceding sentence, the rules of Section
425(d) of the Internal Revenue Code of 1986, as amended (the "Internal Revenue
Code") shall apply in determining the Stock ownership of an employee, and Stock
which the employee may purchase
Page 2
<PAGE>
under outstanding subscriptions shall be treated as Stock owned by the employee.
Nor shall any employee be permitted to purchase Stock under all stock purchase
plans (to which plans Section 423 of the Internal Revenue Code is applicable) of
his or her employer corporation and its parent and subsidiary corporations
(within the meaning of and subject to the rules contained in Section 423(b)(8)
of the Internal Revenue Code) at a rate which exceeds $25,000 of fair market
value of such Stock (determined at the time the subscription form is received)
for each calendar year in which such subscription is outstanding at any time.
Each subscription under the Plan shall expire after the expiration of 27 months
from the date of subscription.
SECTION 5. PAYMENT OF SUBSCRIPTION PRICE.
a. Payroll Deductions.
------------------
Payment of the subscription price under the Plan shall be made by deduction from
the employee's compensation at the rate of 12% of compensation if his or her
aggregate subscription prices exceed 17% of his or her annual rate of
compensation; at the rate of 8% if his or her aggregate subscription prices are
more than 8% and do not exceed 17% of his or her annual rate of compensation;
and at the rate of 4% if his or her aggregate subscription prices are 8% or less
of his or her annual rate of compensation. Deductions for payment of the
subscription prices shall be made from each check for compensation paid to a
participating employee, beginning within two (2) months from the date the
subscription form is received, until all of his or her subscriptions have been
paid or withdrawn. If an employee's annual rate of compensation is reduced from
the rate payable to him or her at the time a subscription form is received,
payments thereafter shall be increased appropriately so that the entire
subscription price shall be paid within 27 months from the date on which the
subscription form is received. If local law prohibits payroll deductions for
such purpose, any alternative method approved by the Administration Committee
may be substituted. All payments shall be forwarded monthly to the Treasurer of
Baxter.
b. Prepayment of Subscription Price.
--------------------------------
Subject to the limitations of Section 4b of the Plan, any or all outstanding
subscriptions may be paid in full immediately if a Change in Control occurs.
For purposes of this Plan, a Change in Control shall have occurred if:
(i) any "Person", as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") (other
than Baxter, any corporation owned, directly or indirectly, by the
stockholders of Baxter in substantially the same proportions as their
ownership of stock of Baxter, and any trustee or other fiduciary holding
securities under an employee benefit plan of Baxter 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
Baxter representing 30% or more of the combined voting power of Baxter's
then outstanding securities;
(ii) during any 24-month period, individuals who at the beginning of such
period constitute the Board of Directors of Baxter, and any new director
(other than a director
Page 3
<PAGE>
designated by a Person who has entered into an agreement with Baxter to
effect a transaction described in clause (i), (iii) or (iv) of this
Section) whose election by the Board of Directors or nomination for
election by Baxter'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;
(iii) the stockholders of Baxter approve a merger or consolidation of
Baxter with any other corporation, other than (A) a merger or consolidation
which would result in the voting securities of Baxter 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 Baxter or such surviving entity outstanding immediately after such
merger or consolidation or (B) a merger or consolidation effected to
implement a recapitalization of Baxter (or similar transaction) in which no
Person acquires more than 30% of the combined voting power of Baxter's then
outstanding securities; or
(iv) the stockholders of Baxter approve a plan of complete liquidation of
Baxter or an agreement for the sale or disposition by Baxter of all or
substantially all of Baxter's assets (or any transaction having a similar
effect).
SECTION 6. SUBSCRIPTION ACCOUNTS.
A subscription account shall be created for each participating employee and all
amounts withheld from his or her compensation shall be credited to such account.
Amounts credited to such accounts shall be available for the general use of
Baxter. Baxter will provide a statement at least once each year of the
remaining balance in each participating employee's account.
SECTION 7. ISSUANCE AND SALE OF STOCK.
a. Completion of Payment for Subscription Unit.
-------------------------------------------
When the subscription account of any employee contains an amount at least equal
to twenty (20) or any lesser number of shares under subscription (on a first in
first out basis) multiplied by 85% of fair market value of the Stock on the day
the executed subscription form is received by Baxter, but in any event at least
once per year, the right to purchase twenty (20) or such lesser number of shares
shall be deemed to be exercised. Thereafter the account shall be debited for
the subscription price (as defined in Section 2) of such shares, and Baxter
shall issue or cause to be transferred to the employee or to a custodian
approved by the Administration Committee on behalf of the employee, a
certificate for such shares within a reasonable time. An employee may request
issuance of a certificate for any shares held on his or her behalf by the
custodian by completing a form approved by the Administration Committee. If the
fair market value on the day
Page 4
<PAGE>
of exercise is below that on the day the executed subscription is received by
Baxter, the employee's subscription account shall be charged for only an amount
equal to 85% of fair market value on such exercise date. The number of shares
purchased shall in every case be determined solely by reference to the fair
market value on the date the executed subscription form is received by Baxter
and may not be increased by reason of any subsequent decline in fair market
value.
b. Rights as Stockholders: Sales.
-----------------------------
Nothing in this Plan shall confer upon any participating employee any rights as
a stockholder except the issuance of a stock certificate to the custodian on the
employee's behalf or to the employee. The Administration Committee shall
prescribe the procedure by which an employee participant may sell Stock held by
the custodian on his or her behalf.
c. Extension of Time for Delivery.
------------------------------
The time of issuance and delivery of shares may be postponed for such period as
may be required to comply with registration requirements under the Securities
Act of 1933, as amended, listing requirements of any stock exchange upon which
the Stock may be listed, and the requirements under any other law or regulation
applicable to the issuance of transfer of such shares.
SECTION 8. WITHDRAWAL OF SUBSCRIPTIONS.
Any employee may withdraw any subscription upon filing a notice thereof with the
person and on the form approved by the Administration Committee. Said
subscription shall thereupon be canceled as to all shares with respect to which
the right to purchase has not been exercised. If the employee withdraws all his
or her subscriptions hereunder, he or she will be entitled to receive the
balance of his or her account within thirty (30) days after the receipt of such
notice. If an employee withdraws a subscription, he or she shall not be
entitled to subscribe for additional shares for three (3) months after the last
such withdrawal.
SECTION 9. TERMINATION OF EMPLOYMENT: DIVESTITURES.
a. Death, Permanent Disability and Retirement.
------------------------------------------
If a participating employee's services are terminated before his or her
subscription is fully paid, because of death, permanent disability or retirement
at age 55 or thereafter, the employee (or, in the case of death, his or her
estate) may, at his or her option, within three (3) months thereafter in the
case of such permanent disability or retirement or within twelve (12) months
thereafter in the case of death, prepay his or her subscription in whole or in
part, or may receive the balance of his or her subscription account in
satisfaction of all rights under the Plan.
Page 5
<PAGE>
b. Divestitures.
------------
If a participating employee's services are terminated before his or her
subscription is fully paid by virtue of a divestiture of the division or
subsidiary corporation by which he or she is employed, the Administration
Committee may, by designation of such division or subsidiary corporation, permit
the employee to purchase the balance of his or her subscription account on such
terms as it deems appropriate.
c. Other Termination of Service.
----------------------------
If a participating employee's services are terminated before his or her
subscription is fully paid, for any reason other than death, permanent
disability, retirement, a designated or divestiture, the employee will be
entitled to receive only the balance of his or her subscription account. Such
payment shall constitute satisfaction of all his or her rights under this Plan
and all remaining subscriptions hereunder shall be deemed withdrawn.
d. Temporary Absence.
-----------------
Any employee who ceases to be a regular employee by reason of leave of absence,
temporary layoff, or temporary disability may, for a period of 180 days, make
regular payments to the treasurer of the Company in an amount equal to the sum
which would have been withheld had he or she continued on the regular payroll.
If the employee has not resumed regular employment when such 180-day period has
ended, or if the employee does not choose to make periodic payments, the
employee shall only be entitled to receive the amount to which he or she would
be entitled if his or her services were terminated for any reason as provided in
subparagraph (b) hereof.
SECTION 10. RIGHTS NOT TRANSFERABLE.
Neither the right of an employee to purchase shares hereunder, nor his or her
account balance, shall be transferable by the employee (by way of assignment,
pledge, or otherwise) except by will or the laws of descent and distribution,
and neither such right nor such balance shall be liable for or subject to the
debts or liabilities of such employee. If any action is taken by the employee
to so transfer such right or balance, such action shall be deemed to constitute
a withdrawal of the subscription involved.
SECTION 11. ADMINISTRATION COMMITTEE.
This Plan shall be administered by an Administration Committee consisting of
three (3) or more persons appointed by Baxter's Board of Directors. The
Committee, or a majority thereof, shall have the authority to interpret this
Plan, to prescribe rules and regulations thereunder, and to make all other
determinations necessary or advisable for the Plan's administration. The
members of the Committee shall serve without compensation and for the duration
of the Plan or until their successors have been appointed by the Board of
Directors.
Page 6
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SECTION 12. ADJUSTMENTS.
In the event of a dividend payable in Baxter Stock or a subdivision or
combination of Baxter Stock, the number of shares offered under this Plan, and
the number of shares covered by options outstanding under the Plan, shall be
increased or decreased proportionately as the case may be, without change in the
aggregate subscription price for such shares. In case Baxter is reorganized or
merged or consolidated with another corporation, appropriate provisions shall be
made for the protection and continuation of any outstanding subscriptions under
the Plan by the substitution on an equitable basis determined by the Board of
Directors of appropriate stock or other securities of the reorganized, merged or
consolidated corporation which will be issuable in respect of Baxter Stock.
SECTION 13. TAX ON ADDITIONAL COMPENSATION.
In the event that the issuance or disposition of any stock subscribed hereunder
results in additional compensation to an employee under federal, state or
foreign laws which require that the tax thereon be withheld, Baxter and its
subsidiaries will deduct from the employee's compensation the amount required
for such withholding. Until such tax is withheld or otherwise paid by the
employee to Baxter, Stock paid for but unissued or undelivered hereunder will be
held by Baxter in issued form as security for the amount required to be
withheld.
SECTION 14. TERM OF PLAN.
This Plan shall become effective on such date within twelve (12) months
following its approval by the stockholders of Baxter as the Administration
Committee shall determine. The Board of Directors may terminate the Plan at any
time, and may amend the Plan from time to time, subject to any approval of the
stockholders of Baxter that may be required in order that the Plan shall
continue to qualify under Section 423 of the Internal Revenue Code. Upon
termination of the Plan, participating employees shall, in the discretion of the
Board of Directors, either be permitted to complete unpaid subscriptions in a
manner determined by the Board of Directors or shall be entitled to receive the
balance in their subscription account in satisfaction of all rights under the
Plan.
SECTION 15. INTERPRETATION OF THE PLAN.
It is intended that this plan shall meet and comply with all the requirements of
Section 423 of the Internal Revenue Code, and related Sections. The Plan and
the terms used herein shall be interpreted in such manner as to carry out such
intention, and in particular, the grant of a right to purchase shares hereunder
shall be deemed to constitute the grant of an option under Section 423 of the
Internal Revenue Code, and the exercise of the right to purchase hereunder shall
be deemed to constitute the exercise of an option under such section.
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