<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.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] 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:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(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:
-------------------------------------------------------------------------
[_] 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:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------------
Notes:
<PAGE>
Baxter International Inc. 847.948.2000
One Baxter Parkway
Deerfield, Illinois 60015
LOGO
March 21, 1997
TO ALL BAXTER INTERNATIONAL INC. STOCKHOLDERS:
The Board of Directors joins me in inviting you to attend the
1997 annual meeting of stockholders. The meeting will be held
in the James Simpson Theatre in the Field Museum of Natural
History, McFetridge Drive and Lake Shore Drive, Chicago,
Illinois, on Monday, May 5, 1997. The meeting will begin at
9:30 a.m., Central Time. Registration will begin at 8:00 a.m.
Refreshments will be served before the meeting.
In addition to the matters described in the attached proxy
statement, I will report on the business and progress of
Baxter during 1996 and Baxter's future. Baxter's performance
is discussed in the enclosed 1996 Annual Report to
Stockholders. The enclosed Annual Report will give you
greater insight into our plans for 1997 and beyond.
I hope you will be able to attend the meeting and look
forward to seeing you there.
Sincerely,
/s/ Vernon R. Loucks Jr.
Vernon R. Loucks Jr.
Chairman of the Board of Directors
and Chief Executive Officer
<PAGE>
Baxter International Inc. 847.948.2000
One Baxter Parkway
Deerfield, Illinois 60015
LOGO
March 21, 1997
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The 1997 annual meeting of stockholders of Baxter
International Inc. ("Company") will be held in the James
Simpson Theatre in the Field Museum of Natural History,
McFetridge Drive and Lake Shore Drive, Chicago, Illinois, on
Monday, May 5, 1997 at 9:30 a.m. Central Time, 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 1997 (page
21);
3. To adopt the Company's Officer Incentive Compensation
Plan (page 21);
4. To act on the stockholder proposal relating to
cumulative voting in the election of directors (page
23); 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 7, 1997 will be entitled to vote
at the meeting. A list of the stockholders entitled to vote
at the meeting will be kept at the stock transfer department
of The First National Bank of Chicago, Chicago, Illinois,
for the 10-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,
/s/ David C. McKee
David C. McKee
Corporate Vice President, Secretary and Deputy General
Counsel
<PAGE>
- --------------------------------------------------------------------------------
LOGO
Baxter International Inc., One Baxter Parkway, Deerfield, Illinois 60015,
847.948.2000
- --------------------------------------------------------------------------------
PROXY STATEMENT
The Board of Directors of Baxter International Inc. ("Company") solicits your
proxy for the annual meeting of stockholders to be held on May 5, 1997. This
proxy statement and the accompanying proxy card are being mailed to
stockholders beginning approximately March 21, 1997.
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 7, 1997, will be entitled to vote.
On that date, approximately 273,023,212 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 automatically will 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 1997, for adoption of the Company's Officer Incentive
Compensation Plan, and against the stockholder proposal relating to cumulative
voting in the election of directors. Unless otherwise indicated by the
stockholder, proxy cards also give the Company's chairman and chief executive
officer and its 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 has no Common Stock standing in his or her name, the custodian,
1
<PAGE>
- --------------------------------------------------------------------------------
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.
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 votes cast 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.
- --------------------------------------------------------------------------------
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 certificate of incorporation and 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 February 1997, the
Board of Directors elected General Walter E. Boomer to serve as a director of
the Company until the 1997 annual meeting of stockholders.
The Board of Directors has nominated General Walter E. Boomer, John W.
Colloton, Susan Crown, Vernon R. Loucks Jr., and Georges C. St. Laurent, Jr.
for election as directors at the 1997 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.
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 and by complying with the related procedures specified
in the Company's bylaws. The Company's bylaws require the notice to be
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. No nominations for director
pursuant to this process were received for the 1997 annual meeting, and no
other candidates are eligible for election as directors at the 1997 annual
meeting. A copy of the bylaws may be obtained from the secretary of the
Company.
Silas S. Cathcart, David W. Grainger, and Lester B. Knight resigned as
directors of the Company in August 1996 in connection with their election to
the board of directors of Allegiance Corporation ("Allegiance"). Allegiance is
an independent publicly-traded corporation that was spun-off by the Company on
September 30, 1996 through a stock dividend. The board expresses its
appreciation for their contributions to the Company.
2
<PAGE>
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
ELECTION OF DIRECTORS
(ITEM 1 ON PROXY CARD)
Information Concerning Nominees for Election as Directors
Walter E. Boomer--Age 58 Director since 1997
In 1994, General Boomer retired as a general and assistant commandant of the
United States Marine Corps after 34 years of service. He joined McDermott
International Inc. in 1994, and served as executive vice president of McDermott
International Inc. and president of the Babcock & Wilcox Power Generation Group
through November 1996.
John W. Colloton--Age 66 Director since 1989
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 Inc., Mid American Energy
Company, Iowa-South Dakota Blue Cross and Blue Shield (IASD) and the University
of Pennsylvania Medical Center.
Susan Crown--Age 38 Director since 1993
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.
Vernon R. Loucks Jr.--Age 62 Director since 1975
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
Affymetrix, Inc., Anheuser-Busch Companies, Inc., The Dun & Bradstreet
Corporation, Coastcast Corporation, Emerson Electric Co. and The Quaker Oats
Company.
Georges C. St. Laurent, Jr.--Age 60 Director since 1992
Since 1988, Mr. St. Laurent has been chief executive officer of Western Bank,
a financial institution. From 1988 to 1996, he served as chairman of the board
of Western Bank. Mr. St. Laurent also serves as a director of Perkin Elmer
Corporation.
- --------------------------------------------------------------------------------
3
<PAGE>
- --------------------------------------------------------------------------------
Information Concerning Directors Continuing in Office
Pei-yuan Chia--Age 58 Director since 1996
Term Expires 1998
Mr. Chia was vice chairman of Citicorp and Citibank, N.A., its principal
subsidiary, from 1994 to 1996 when he retired. From 1993 to 1996, he served as
a director of Citicorp and Citibank, N.A., and assumed responsibility for their
global consumer business in 1992. Between 1974 and 1992, Mr. Chia held various
senior management positions in Citicorp and Citibank, N.A. and was Citibank,
N.A.'s senior customer contact for corporate banking activities in Asia. Mr.
Chia serves as a director of American International Group, Inc. He is a trustee
of The Asia Society and of the New York University Medical Center, both in New
York City. Mr. Chia also serves on the Wharton Graduate Executive Board of the
University of Pennsylvania and as a senior fellow at its SEI Center for
Advanced Studies in Management.
Mary Johnston Evans--Age 67 Director since 1986
Term expires 1998
Mrs. Evans is a director of Household International, Inc., Sun Company, Inc.,
Delta Air Lines, Inc., The Dun & Bradstreet Corporation and Scudder New Europe
Fund.
Frank R. Frame--Age 67 Director since 1992
Term expires 1998
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
director of Edinburgh Dragon Trust plc, and The British Investment Trust plc.
Martha R. Ingram--Age 61 Director since 1987
Term expires 1999
Since 1995, Ms. Ingram has been the chairman of the board of directors of
Ingram Industries Inc., an inland waterway transportation company, a
distributor of trade books and video products and an automobile insurance
company. She was first elected a director of Ingram Industries Inc. in 1981 and
became its chief executive officer in 1996. Ms. Ingram also serves as a
director of Ingram Micro, First American Corporation and Weyerhaeuser Company.
Harry M. Jansen Kraemer, Jr.--Age 42 Director since 1995
Term expires 1999
Mr. Kraemer has been senior vice president and chief financial officer of the
Company since 1993. Mr. Kraemer previously was the vice president of finance
and operations for a subsidiary of the Company. Prior to that he was employed
as controller, group controller, and president of various divisions of
subsidiaries of the Company. Mr. Kraemer also serves as a director of
MedPartners, Inc. and Comdisco Inc.
4
<PAGE>
- --------------------------------------------------------------------------------
Arnold J. Levine--Age 57 Director since 1994
Term expires 1998
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 65 Director since 1995
Term expires 1998
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), and The West Company, Inc.
Reed V. Tuckson, M.D.--Age 46 Director since 1996
Term expires 1999
Since 1991, Dr. Tuckson, an internist, has been the president of the Charles
R. Drew University of Medicine and Science, a private academic health sciences
university. From 1990 to 1991, he was the senior vice president for programs of
the March of Dimes Birth Defects Foundation. From 1986 to 1990, Dr. Tuckson was
the Commissioner of Public Health for the District of Columbia. Dr. Tuckson
also serves as president of the Association of Minority Health Professional
Schools.
Fred L. Turner--Age 64 Director since 1982
Term expires 1999
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 Ronald McDonald House Children's Charities, Aon Corporation and
W. W. Grainger, Inc.
- --------------------------------------------------------------------------------
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 1996, there were nine 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.
Committees of the Board
The Board of Directors has six committees, the duties of which are described
in the Company's bylaws.
The Executive Committee consists of three 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
5
<PAGE>
- --------------------------------------------------------------------------------
Committee did not meet in 1996. The current members of the Executive Committee
are Vernon R. Loucks Jr. (chairman), Susan Crown and Fred L. Turner.
The Audit Committee consists of four 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 five times in 1996.
The current members of the Audit Committee are Monroe E. Trout (chairman),
Frank R. Frame, Georges C. St. Laurent, Jr. and Fred L. Turner.
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 eight times in 1996. The current members
of the Compensation Committee are Georges C. St. Laurent, Jr. (chairman), Mary
Johnston Evans, Frank R. Frame and Martha R. Ingram.
The Finance Committee consists of five 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 five times in 1996.
The current members of the Finance Committee are John W. Colloton (chairman),
Pei-yuan Chia, Susan Crown, Arnold J. Levine and Reed V. Tuckson.
The Planning and Organization Committee consists of four 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. The Planning and
Organization Committee met three times in 1996. The current members of the
Planning and Organization Committee are Fred L. Turner (chairman), Susan Crown,
Mary Johnston Evans and Monroe E. Trout.
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 five times in 1996. The
current members of the Public Policy Committee are Martha R. Ingram (chairman),
Pei-yuan Chia, John W. Colloton, Arnold J. Levine and Reed V. Tuckson.
- --------------------------------------------------------------------------------
COMPENSATION OF DIRECTORS
The restricted stock plan for non-employee directors ("Director Stock Plan")
was amended in 1995 to provide directors with less cash compensation and more
Common Stock. The Director Stock Plan, as amended, aligns the directors'
interests more closely with the interests of all of the Company's stockholders.
Under the amended Director Stock Plan, each non-employee director receives
3,000 restricted shares of Common Stock upon election or re-election to a
three-year term. These restricted shares vest in 1,000 share installments on
the dates of the three annual meetings of
6
<PAGE>
- --------------------------------------------------------------------------------
stockholders following the date of election or re-election. This restricted
stock award replaced the annual cash retainer that previously was payable to
each non-employee director for board membership.
Each non-employee director receives an additional 1,000 restricted shares of
Common Stock upon election or re-election to a three-year term, pursuant to the
amended Director Stock Plan. This fixed number of shares replaces the variable
number of shares which would otherwise have been calculated and granted in
accordance with the Director Stock Plan before it was amended. These restricted
shares vest at the expiration of the director's term of office.
Cash compensation of non-employee directors consists of a $1,000 fee for each
board and each committee meeting attended. Members of committees receive an
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 any 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 who retires at age 65 or after, with at least five
years of board service, will receive upon retirement 1,000 restricted shares of
Common Stock for each of the director's full years of service as a non-employee
director, pursuant to the amended Director Stock Plan. This restricted stock
award replaced the annual cash payment which otherwise would have been paid for
a period of time equal to the director's full years of service as a non-
employee director. This restricted stock award applies to all directors who
retire on or after the 1995 effective date of the amendments. These restricted
shares vest six months after the grant date. Each non-employee director is
eligible for medical benefits and life insurance benefits. Medical benefit
payments in 1996 totaled $647 for all non-employee directors. No non-employee
director life insurance benefits were paid in 1996.
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.
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 1996 was $29,250, and it is expected to be
approximately the same in 1997. The members of the Company's scientific
advisory board also receive, from time to time, stock options which give them
the opportunity to purchase Common Stock for a limited period of time at the
closing price of the Common Stock on the date of grant. Dr. Levine did not
receive any stock options in 1996, and he has no outstanding stock options from
the Company.
- --------------------------------------------------------------------------------
7
<PAGE>
- -------------------------------------------------------------------------------
COMPENSATION OF NAMED EXECUTIVE OFFICERS
General
The following table shows, for the years ended December 31, 1996, 1995, and
1994 the compensation provided by the Company and its subsidiaries to the
chairman and chief executive officer and the four next most highly compensated
executive officers in all capacities in which they served. The five
individuals identified in the Summary Compensation Table are referred to as
the "named executive officers" throughout this proxy statement.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
-------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------------------- --------------------- ----------
OTHER ALL
ANNUAL RESTRICTED SECURITIES OTHER
COMPEN- STOCK UNDERLYING LTIP COMPEN-
NAME AND PRINCIPAL SALARY BONUS SATION AWARD(S) OPTIONS PAYOUTS SATION
POSITION YEAR ($)(1) ($)(1) ($)(2) ($)(3) (#)(4) ($)(5) ($)(6)
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
VERNON R. LOUCKS JR. 1996 $751,000 $800,000 $325,592 -0- 396,600 $1,774,234 $50,016
Chairman of the Board
and 1995 $751,000 $800,000 $321,763 -0- 118,999 -0- $49,110
Chief Executive Officer 1994 $580,100 $800,000 $213,195 -0- 350,000 -0- $35,445
- ---------------------------------------------------------------------------------------------------
HARRY M. JANSEN KRAEMER,
JR. 1996 $352,231 $320,000 $ 7,685 -0- 133,300 $ 340,956 $17,891
Senior Vice President
and 1995 $288,577 $240,000 $ 5,634 -0- 38,019 -0- $15,504
Chief Financial Officer 1994 $249,615 $225,000 (excl) $262,438 125,000 -0- $10,266
- ---------------------------------------------------------------------------------------------------
ARTHUR F. STAUBITZ 1996 $302,000 $240,000 $ 3,692 -0- 96,600 $ 315,700 $15,869
Senior Vice President 1995 $280,000 $216,500 $ 106 -0- 25,024 -0- $14,400
and General Counsel 1994 $266,554 $200,000 (excl) $232,092 100,000 -0- $10,397
- ---------------------------------------------------------------------------------------------------
MICHAEL A. MUSSALLEM 1996 $301,539 $230,000 $ 13,148 -0- 106,500 $ 340,956 $14,494
Group Vice President 1995 $271,000 $175,000 $ 16,678 -0- 23,628 -0- $13,205
Baxter Healthcare
Corporation 1994 $235,000 $175,000 $219,442 $269,620 125,000 -0- $ 9,248
- ---------------------------------------------------------------------------------------------------
JACK L. MCGINLEY 1996 $311,538 $220,000 (excl) -0- 107,700 $ 340,956 $14,824
Group Vice President 1995 $277,500 $170,000 (excl) -0- 24,272 -0- $14,444
Baxter Healthcare
Corporation 1994 $245,169 $195,000 (excl) $180,115 125,000 -0- $10,894
- ---------------------------------------------------------------------------------------------------
</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 1996, 1995 and 1994 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
1996 amount shown for Mr. Loucks, $168,600 represents the approximate
incremental cost to the Company of his use of Company aircraft for
personal travel, which the Company required for security reasons. Of the
1994 amount shown for Mr. Mussallem, $97,000 represents incremental
relocation costs the Company incurred when Mr. Mussallem moved at the
Company's request.
(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. As of December 31, 1996, the number and value of the
aggregate restricted stock holdings of the named executive officers are as
follows: Mr. Loucks--233,600 shares ($9,577,600); Mr. Kraemer--76,000
shares ($3,116,000); Mr. Staubitz--30,000 shares ($1,230,000); Mr.
Mussallem--32,400 shares ($1,328,400); and Mr. McGinley--32,400 shares
($1,328,400). Dividends are payable on all outstanding shares of
restricted stock held by all Company executives at the same rate and time
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.
8
<PAGE>
- -------------------------------------------------------------------------------
(4) No Stock Appreciation Rights (SARs) were granted by the Company in 1996,
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. In October
1996, the Compensation Committee adopted an equitable adjustment formula
applicable to all options outstanding on September 26, 1996, the record
date for the Allegiance spin-off. The options shown for 1994 were not
equitably adjusted. The 1994 options were exercised on June 15, 1994 as
part of the Company's Shared Investment Plan described on page 15. The
options shown for 1995 reflect the equitable adjustment. (See footnote 2
on page 11 for more information about the equitable adjustment formula.)
The options shown for 1996 were not equitably adjusted because they were
granted after the record date for the Allegiance spin-off. The options
shown for 1996 consist of two separate option grants. (See the Option
Grants Table on page 10 for information about the 1996 option grants.)
(5) Amounts shown represent the market value of earned restricted stock which
vested, under the Company's 1989 Long-Term Incentive Plan, on December 31,
1996. The 1989 Long-Term Incentive Plan is described below the Long-Term
Incentive Plan Table on page 12.
(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 1996, expressed in the same order as
identified above, for the named executive officers are as follows: Mr.
Loucks--$4,500, $42,030, and $3,486; Mr. Kraemer--$4,500, $13,267, and
$124; Mr. Staubitz--$4,500, $11,055, and $314; Mr. Mussallem--$4,500,
$9,796, and $198; and Mr. McGinley--$4,500, $9,946, and $378.
9
<PAGE>
- -------------------------------------------------------------------------------
Stock Option Grants
The following table contains information relating to the stock option grants
made in 1996 under the Company's 1987 and 1994 Incentive Compensation Programs
to the named executive officers.
OPTION GRANTS TABLE
OPTION GRANTS IN LAST FISCAL YEAR (1)
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
------------------------------- ---------------------------------------
PERCENT OF
NUMBER OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES OR BASE
GRANTED IN FISCAL PRICE EXPIRATION
NAME (#) YEAR(2) ($/SH)(3) DATE 0%($) 5% ($)(4) 10% ($)(4)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Mr. Loucks 221,600 6.2% $51.00 11/17/06 $-0- $ 4,039,325 $ 13,126,277
175,000 4.9% $42.13 11/27/06 $-0- $ 4,636,678 $ 11,750,270
- --------------------------------------------------------------------------------------------------------------
Mr. Kraemer 70,800 2.0% $51.00 11/17/06 $-0- $ 1,290,542 $ 4,193,774
62,500 1.7% $42.13 11/27/06 $-0- $ 1,655,956 $ 4,196,525
- --------------------------------------------------------------------------------------------------------------
Mr. Staubitz 46,600 1.3% $51.00 11/17/06 $-0- $ 849,425 $ 2,760,309
50,000 1.4% $42.13 11/27/06 $-0- $ 1,324,765 $ 3,357,220
- --------------------------------------------------------------------------------------------------------------
Mr. Mussallem 44,000 1.2% $51.00 11/17/06 $-0- $ 802,032 $ 2,606,300
62,500 1.7% $42.13 11/27/06 $-0- $ 1,655,956 $ 4,196,525
- --------------------------------------------------------------------------------------------------------------
Mr. McGinley 45,200 1.3% $51.00 11/17/06 $-0- $ 823,906 $ 2,677,381
62,500 1.7% $42.13 11/27/06 $-0- $ 1,655,956 $ 4,196,525
- --------------------------------------------------------------------------------------------------------------
All Stockholders N/A N/A N/A N/A $-0- $7,218,379,532(5) $18,292,820,336(5)
- --------------------------------------------------------------------------------------------------------------
All Optionees 3,600,000 100% N/A N/A $-0- $ 75,541,560(6) $ 222,735,120(6)
- --------------------------------------------------------------------------------------------------------------
Optionee Gain as % of
All Stockholders' Gain N/A N/A N/A N/A N/A 1.05% 1.22%
- --------------------------------------------------------------------------------------------------------------
</TABLE>
(1) No Stock Appreciation Rights (SARs) were granted by the Company in 1996.
(2) In 1996, the Company granted options on approximately 3.6 million shares
of Common Stock to approximately 340 employees. The first option shown for
each named executive officer was granted effective November 18, 1996. The
second option shown for each named executive officer was granted effective
November 27, 1996.
(3) The $51.00 exercise price shown is 120% of the closing price of the Common
Stock on the effective date of grant, which was November 18, 1996. The
$42.13 exercise price shown for the second grant is the closing price of
the Common Stock on the effective date of the grant, which was November
27, 1996.
(4) The amounts shown in these two columns represent the potential realizable
values using the options granted and the exercise prices. The assumed
rates of stock price appreciation are set by the SEC proxy statement
disclosure rules and are not intended to forecast the future appreciation
of the Common Stock.
(5) The potential realizable values for all stockholders was calculated based
on the approximately 272,440,000 shares of Common Stock outstanding on
December 31, 1996. The potential realizable value was calculated assuming
the stockholders purchased the Common Stock at $42.50, the closing price
of the Common Stock on November 18, 1996.
(6) The potential realizable values for all optionees was calculated based on
approximately 2.4 million options granted at the $51.00 exercise price and
approximately 1.2 million options granted at the $42.13 exercise price.
(7) The options with the $51.00 exercise price become exercisable five years
from the date of grant, subject to accelerated vesting as follows. One
hundred percent of the option will become exercisable on the first
business day after the ninetieth consecutive calendar day during which the
average fair market value of the
10
<PAGE>
- -------------------------------------------------------------------------------
Common Stock equals or exceeds $65 per share. The options with the $42.13
exercise price become exercisable on October 1, 1999. The exercise price
may be paid in cash or shares of Common Stock. The 1987 and 1994 Programs
provide that if specified corporate control changes occur, all outstanding
options will become exercisable immediately. Both of the option grants
shown in this table are explained in the Compensation Committee report on
page 15.
(8) None of the options shown in this table was equitably adjusted for the
Allegiance spin-off because each option was granted after the record date
for the Allegiance spin-off.
- -------------------------------------------------------------------------------
Stock Option Exercises
The following table contains information relating to the exercise of stock
options by the named executive officers in 1996 as well as the number and
value of their unexercised options as of December 31, 1996.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES(1)
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
FISCAL YEAR -END (#)(2) FISCAL YEAR END ($)(3)
SHARES ACQUIRED VALUE ------------------------- -------------------------
NAME ON EXERCISE (#) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Mr. Loucks -0- N/A 172,547 515,599 $2,526,444 $752,074
Mr. Krae-
mer -0- N/A 29,541 171,319 $ 527,705 $240,280
Mr.
Staubitz -0- N/A 10,417 121,624 $ 175,006 $158,152
Mr.
Mussallem -0- N/A 29,172 130,128 $ 496,253 $149,329
Mr. McGin-
ley -0- N/A 31,950 131,972 $ 441,165 $153,399
- ----------------------------------------------------------------------------------------
</TABLE>
(1) No Stock Appreciation Rights (SARs) were exercised by any Company employee
in 1996, and there are no outstanding SARs held by any employee or
director of the Company.
(2) The sum of the numbers under the Exercisable and Unexercisable columns of
this heading represents each named executive officer's total outstanding
options. In October 1996, the Compensation Committee adopted an equitable
adjustment formula applicable to all options outstanding on September 26,
1996, the record date for the Allegiance spin-off. The formula, which is
consistent with the applicable tax and accounting rules, is intended to
preserve the value of the options after the Allegiance spin-off. The
formula used the average of the closing prices of the Common Stock for the
five consecutive trading days ending September 26, 1996. The formula
compared the average of the closing prices for the Common Stock trading
"regular way," which included the spin-off dividend of Allegiance stock,
to the closing prices for the Common Stock trading "ex-distribution,"
which excluded the spin-off dividend of Allegiance stock. The application
of the equitable adjustment formula resulted in a decrease of
approximately 7% in the exercise price and an increase of approximately 7%
in the number of shares subject to the option. The number of exercisable
and unexercisable options shown reflect the equitably adjusted options.
(3) The dollar amounts shown under the Exercisable and Unexercisable columns
of this heading represent the number of exercisable and unexercisable
options, respectively, which were "In-the-Money" on December 31, 1996,
multiplied by the difference between the closing price of the Common Stock
on December 31, 1996, which was $41.00 per share, and the exercise price
of the options. For purposes of these calculations, In-the-Money options
are those with an exercise price below $41.00 per share. The dollar
amounts shown reflect the equitably adjusted options, as explained in
footnote 2 above.
- -------------------------------------------------------------------------------
11
<PAGE>
- --------------------------------------------------------------------------------
Long-Term Incentive Plans
The following table provides information relating to restricted stock grants
made to the named executive officers during 1996 under the Company's 1989 Long-
Term Incentive Plan. All of the amounts shown on the following table represent
shares of Common Stock.
LONG-TERM INCENTIVE PLANS
AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS UNDER NON-
STOCK PRICE-BASED PLANS
-----------------------------------
# OF SHARES, UNITS PERFORMANCE OR OTHER PERIOD ANNUAL
NAME OR OTHER RIGHTS (#) UNTIL MATURATION OR PAYOUT THRESHOLD(#) TARGET (#) MAXIMUM (#)
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Mr. Loucks 145,963 1/1/96--12/31/00 16,860 28,100 56,200
Mr. Kraemer 63,324 1/1/96--12/31/00 6,600 11,000 22,000
Mr. Staubitz 27,375 1/1/96--12/31/00 3,000 5,000 10,000
Mr. Mussallem 28,900 1/1/96--12/31/00 3,240 5,400 10,800
Mr. McGinley 28,813 1/1/96--12/31/00 3,240 5,400 10,800
- --------------------------------------------------------------------------------------------------
</TABLE>
The shares of restricted stock granted in 1996 to the named executive
officers were granted under the Company's 1989 Long-Term Incentive Plan. Each
participant in the Plan, including the named executive officers, has an annual
target number of restricted shares that can be earned annually if the Company
achieves its net income growth and average operational cash flow goals over a
multi-year period. The number of shares earned is then adjusted upward or
downward based on the Company's total rate of return to stockholders for the
year compared to the total rate of return achieved by the Standard & Poor's
Medical Products and Supplies Index for the same year. The restricted stock
ordinarily vests one year after it is earned, if the Plan participant remains
employed by the Company or one of its subsidiaries on the vesting date. The
Allegiance Corporation stock dividend was not distributed on any of the shares
of restricted stock granted to the named executive officers in 1996. The shares
of restricted stock granted in 1996 were granted after the record date for the
Allegiance spin-off.
The Summary Compensation Table on page 8 shows "LTIP Payouts" to the named
executive officers in 1996. The amounts shown represent the market value of
earned restricted stock which vested under the Plan on December 31, 1996. The
shares were earned in 1995 based on the Company's annual net income growth and
based on the average amount of operational cash flow the Company generated in
the two-year period ending December 31, 1995. The number of shares earned was
then adjusted based on the total rate of return achieved by the Company and the
Standard & Poor's Medical Products and Supplies Index in 1995, as explained
above.
- --------------------------------------------------------------------------------
12
<PAGE>
- --------------------------------------------------------------------------------
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, 1991 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.
The 1996 Company dividend includes the Allegiance Corporation stock dividend
distributed on September 30, 1996.
[GRAPH APPEARS HERE]
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG BAXTER INTERNATIONAL, S&P 500 INDEX AND PEER GROUP
<TABLE>
<CAPTION>
Measurement Period BAXTER S&P
(Fiscal Year Covered) INTL MEDICAL INDEX 500 INDEX
- ------------------- ------ ------------- ---------
<S> <C> <C> <C>
Measurement Pt-
12/31/91 $100 $100 $100
FYE 12/31/92 $ 91.0 $ 86.0 $108.0
FYE 12/31/93 $ 71.0 $ 65.0 $118.0
FYE 12/31/94 $ 86.0 $ 77.0 $120.0
FYE 12/31/95 $131.0 $131.0 $165.0
FYE 12/31/96 $150.0 $150.0 $203.0
</TABLE>
- --------------------------------------------------------------------------------
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee, comprised of four non-employee directors,
establishes and monitors the total compensation program for the senior
executives of the Company and its subsidiaries.
Compensation Philosophy for Executive Officers
The committee's philosophy is to provide compensation opportunities which are
structured to be competitive when compared to manufacturing companies of
similar size, including health care and non-health care 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 reviews compensation data from
surveys whose participants include the large companies in the Standard & Poor's
Medical Products and Supplies Index and other large non-
13
<PAGE>
- --------------------------------------------------------------------------------
health care companies with which the Company and its subsidiaries compete for
executive talent ("comparable companies"). Based on the survey data, the
committee determines a total compensation structure for each officer, including
Mr. Loucks, consisting primarily of salary, cash bonus, restricted stock, and
stock options. 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 $1 million 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 and the
related stockholder approval where consistent with the Company's compensation
policies and practices. Item 3 on the proxy card seeks stockholder approval of
the Company's cash bonus plan for this purpose. See page 21 for more
information about the Company's cash bonus plan and the recommended stockholder
approval.
Compensation Elements
Salaries
The committee establishes salaries each year at a level intended to be
competitive with the 50th percentile of salaries paid to executive officers in
comparable companies. In addition, officer salaries are based on the officer's
individual performance and experience in the position. For this reason, actual
salaries for some executive officers are below the 50th percentile due to the
Company's practice of adjusting salaries over time rather than immediately when
there are promotions into executive officer positions.
Cash Bonuses
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 60th percentile of total cash
compensation paid to executives in comparable companies), but only if they earn
it through achievement of specified Company performance goals. 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 the Company's achievement of
the specified performance goals and the officer's individual performance. The
Company outperformed its net income growth and operational cash flow goals for
1996. Consequently, actual bonuses for 1996 ranged from 89 percent to 100
percent of the high end of the executive officers' respective bonus ranges.
Restricted Stock
Restricted stock has been granted, under the Company's 1989 Long-Term
Incentive Plan, to maintain the plan period through the year 2000. This plan
was established as part of the Company's 1987 Incentive Compensation Program
("1987 Program"), which was approved by the Company's stockholders. Restricted
stock grants are intended to be an additional mechanism for compensating
executives while aligning their interests more closely with the interests of
all of the Company's stockholders. The plan provides participants the
opportunity to build equity in the Company if the Company achieves strong
performance as measured by net income growth and average operational cash flow
over a three-year period. Each participant has a target number of restricted
shares that can be earned annually if the Company achieves its net income
growth and average
14
<PAGE>
- --------------------------------------------------------------------------------
operational cash flow goals. The number of shares earned is then adjusted
upward or downward based on the Company's total rate of return to stockholders
for the year compared to the total rate of return achieved by the Standard &
Poor's Medical Products and Supplies Index for the same year. The number of
restricted shares granted is determined based upon the number of restricted
shares which each executive officer would receive if the target number of
restricted shares is earned. The stock ordinarily vests one year after it is
earned, if the participant remains employed by the Company or one of its
subsidiaries.
Because of the Company's 1996 net income growth and operational cash flow
generated over the three-year period ending December 31, 1996, and based on the
Company's 1996 total rate of return to stockholders compared to the 1996 total
rate of return achieved by the Standard & Poor's Medical Products and Supplies
Index, 191 percent of restricted share targets were earned under the plan in
1996. The number of shares earned by each participant was then increased by a
formula to make-up for the value of the 1996 earned shares that was represented
by Allegiance Corporation on December 31, 1996. The make-up applied only to the
1996 earned shares on which the Allegiance Corporation stock dividend was not
distributed. The vesting and payout of the 1996 earned shares will occur on
December 31, 1997.
Stock Options
The stock options held by the executive officers have been granted under the
Company's 1987 and 1994 Incentive Compensation Programs, both of which were
approved by the Company's stockholders. 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 the specified performance goals in the cash bonus plan and long-
term incentive plan. The 1996 stock option grants to the Company's executive
officers included two distinct grants which are explained below.
Premium-Priced Stock Option
Each of the Company's executive officers and selected other key employees
received a premium-priced stock option in November 1996. The option exercise
price is $51 per share, which is 120% of the $42.50 closing price of the Common
Stock on November 18, 1996, the effective date of the grant. The stock option
equals twice the number of shares the recipient received in his or her last
option grant from the Company. The size of the option provides each option
recipient with a significant financial opportunity, but only if the price of
the Common Stock rises significantly above $51 per share. The Compensation
Committee previously has not granted a premium-priced stock option to Company
executives. This premium-priced option grant is another example of the
Compensation Committee's emphasis on compensating executives while aligning
their interests more closely with all stockholders' interests.
Shared Investment Plan-Related Stock Option
The Company implemented the Shared Investment Plan in 1994 to align further
management's interests with the interests of stockholders. The Plan provided
the 63 top members of the Company's management with a one day stock option to
purchase a significant amount of Common Stock. The five named executive
officers voluntarily took out full-recourse, personal loans to buy $21,450,000
worth (825,000 shares) of Common Stock on June 15, 1994. This is one of the
strongest statements our management team has made about the 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.
15
<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 stock option 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 Compensation Committee concluded that it is in the best interests of the
Company to have the Shared Investment Plan participants who are currently
employed by the Company hold the Common Stock that they purchased through the
Plan until 1999, the year in which the loans are due. To encourage this result,
the Compensation Committee granted to each executive officer and to other
participants in the Shared Investment Plan a stock option equal to one-half the
number of shares they purchased through the Shared Investment Plan, in exchange
for their agreement to defer the sale of their shares until February 1, 1999.
February 1, 1999 is the date of the sale restriction because it allows an
eight-month period during which the sales could be managed, in the interests of
all stockholders, in advance of the October 1, 1999 loan due date.
There are several important and desirable results which arise from the option
grant. First, restricting the sale of the Shared Investment Plan shares until
February 1, 1999 keeps the participants at personal financial risk,
attributable to the outstanding personal loans, throughout 1997 and 1998.
Second, by providing a stock option, the participants have the opportunity for
additional financial reward, but the opportunity is realized only to the extent
that the Common Stock price continues to rise. Third, the option terms and
conditions incorporate an employment retention feature. If an option recipient
voluntarily terminates employment before October 1, 1999, the date on which the
option vests, the person forfeits the option, but remains subject to the
February 1, 1999 sale restriction. There are exceptions for retirement, death
and disability. This option is another example of the committee's emphasis on
aligning management's and stockholders' interests.
Mr. Loucks' 1996 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.
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. At the same time, 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. Recently, the committee determined that Mr.
16
<PAGE>
- --------------------------------------------------------------------------------
Loucks earned 18,000 of the 65,000 shares of restricted stock for 1996, based
on the Company's strong operating performance and on its total rate of return
to stockholders for 1996. 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.
The committee also determined that Mr. Loucks earned an $800,000 bonus
because the Company exceeded its net income growth and operational cash flow
goals for 1996. The Company's success in 1996 and, in particular, the
successful spin-off of Allegiance Corporation, reflects Mr. Loucks' continued
commitment to the strategic direction of the Company toward an objective of
leadership in health care.
Mr. Loucks, like other participants in the 1989 Long-Term Incentive Plan, was
deemed to have earned 191 percent of his annual target award of restricted
stock in 1996, based on the Company's strong net income growth, operational
cash flow and Common Stock performance for 1996.
Mr. Loucks also received the premium-priced stock option described above
representing 221,600 shares of Common Stock. This is twice the number of
options he received in 1995, and the relative grant size for Mr. Loucks is the
same as that determined for all other recipients of the premium-priced option.
The Shared Investment Plan-related stock option also was granted to Mr.
Loucks representing an additional 175,000 shares of Common Stock. This option
equals one-half of the shares of Common Stock he purchased through the Shared
Investment Plan. The Shared Investment Plan-related option terms and conditions
described above also apply to Mr. Loucks.
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 net income growth, operational 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 net
income growth, operational cash flow and Common Stock performance, were the
appropriate focus for 1996. The common stock returns improved in 1996 despite
the continuing pressure on health-care costs. Total shareholder return, stock
price plus dividend, rose 14 percent during 1996. Over the last three years,
total shareholder return has increased at a compound annual growth rate of 28
percent--higher than the Dow Jones Industrial Average and the Standard & Poor's
500.
Georges C. St. Laurent, Jr. (Chairman)
Mary Johnston Evans Frank R. Frame Martha R. Ingram
17
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Pension Plan, Excess Plans and Supplemental Plans
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 percent 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, the Company's
related defined benefit excess pension plan and supplemental plans for certain
individuals. 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 1996.
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 at least 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>
$ 200,000 $ 48,400 $ 64,500 $ 80,700 $ 96,800 $ 113,100
300,000 74,700 99,500 124,400 149,300 174,400
400,000 100,900 134,500 168,200 201,800 235,600
500,000 127,200 169,500 211,900 254,300 296,900
600,000 153,400 204,500 255,700 306,800 358,100
700,000 179,700 239,500 299,400 359,300 419,400
800,000 205,900 274,500 343,200 411,800 480,600
900,000 232,200 309,500 386,900 464,300 541,900
1,000,000 258,400 344,500 430,700 516,800 603,100
1,100,000 284,700 379,500 474,400 569,300 664,400
1,200,000 310,900 414,500 518,200 621,800 725,600
1,300,000 337,200 449,500 561,900 674,300 786,900
1,400,000 363,400 484,500 605,700 726,800 848,100
1,500,000 389,700 519,500 649,400 779,300 909,400
1,600,000 415,900 554,500 693,200 831,800 970,600
1,700,000 442,200 589,500 736,900 884,300 1,031,900
1,800,000 468,400 624,500 780,700 936,800 1,093,100
1,900,000 494,700 659,500 824,400 989,300 1,154,400
</TABLE>
- -------------------------------------------------------------------------------
(1) As of January 1, 1997, 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--30 years and $1,441,043; Mr. Kraemer--13 years and $397,324; Mr.
Staubitz--16 years and $393,044; Mr. Mussallem--16 years and $323,216; and
Mr. McGinley--31 years and $399,246.
18
<PAGE>
- -------------------------------------------------------------------------------
Before 1995, Mr. McGinley managed the operations of the Company's
subsidiaries in Canada and Japan. While he resided in those two countries,
he did not accrue benefits in the Pension Plan. In 1995, in recognition of
Mr. McGinley's service for the Company outside the United States, the
Company provided Mr. McGinley with a non-qualified and unfunded pension
supplement. The pension supplement will provide Mr. McGinley with the
difference between 1) his actual accrued benefits under the Pension Plan
and the Company's Canadian Pension Plan and 2) the benefit he would have
accrued under the Pension Plan if his service in Canada and Japan were
included in the Pension Plan. Also, the pension supplement provides him
with five additional years of Pension Plan participation and five
additional years of age. The 31 years of Pension Plan participation shown
for Mr. McGinley includes the five additional years which he received
through the pension supplement. The pension supplement is payable to Mr.
McGinley at the same time he begins to receive his actual accrued benefit
under the Pension Plan. If Mr. McGinley resigns before December 31, 1997,
he will forfeit the pension supplement.
- -------------------------------------------------------------------------------
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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. Joseph F.
Damico, a former executive officer of one of the Company's principal
subsidiaries, inadvertently filed a Form 4 late. The Form 4, which reported
one transaction for the sale of Common Stock in May 1996, was filed in July
1996 instead of June 1996.
- -------------------------------------------------------------------------------
19
<PAGE>
- -------------------------------------------------------------------------------
OWNERSHIP OF COMPANY SECURITIES
No person or group, to the best of the Company's knowledge, owns 5% or more
of the Company's Common Stock, as of December 31, 1996. The following tables
and footnotes show, as of February 21, 1997, information with respect 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,
1997, 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 own
approximately 1.2% 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 21, 1997, 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>
Walter E. Boomer 260 --
Pei-yuan Chia 4,380 --
John W. Colloton 3,838 --
Susan Crown 13,000(2) --
Mary Johnston Evans 7,134 --
Frank R. Frame 4,477 --
Martha R. Ingram 36,000 --
Harry M. Jansen Kraemer, Jr. 254,144 29,801
Arnold J. Levine 6,386 --
Vernon R. Loucks Jr. 790,468 172,797
Jack L. McGinley 209,989 32,130
Michael A. Mussallem 206,847 29,172
Georges C. St. Laurent, Jr. 251,037 --
Arthur F. Staubitz 157,360 10,587
Monroe E. Trout 5,100 --
Reed V. Tuckson 4,130 --
Fred L. Turner 9,539 --
All directors and executive officers as a group(3) 3,333,537 637,804
</TABLE>
- -------------------------------------------------------------------------------
(1) The shares indicated under Right to Acquire are included under Shares of
Common Stock Beneficially Owned.
(2) Ms. Crown disclaims beneficial ownership of 5,000 shares.
20
<PAGE>
- --------------------------------------------------------------------------------
(3) 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>
Susan Crown 5,000 5,000
Harry M. Jansen Kraemer, Jr. 23,433 23,433
Michael A. Mussallem 20,275 20,275
Arthur F. Staubitz 16,943 16,943
Monroe E. Trout 2,100 2,100
All directors and executive officers as a group 150,789 150,789
- ------------------------------------------------------------------------------
</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 1997. 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 1997 and future years.
Fees for services performed by Price Waterhouse LLP during 1996 related to
the audit of the consolidated annual financial statements, including statutory
audits of foreign subsidiaries, aggregated approximately $2.1 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,
acquisition and divestiture reviews, and consultations in connection with
various financial reporting and accounting matters. Fees for these other audit
related services aggregated approximately $1.0 million while fees for other
consulting services aggregated approximately $1.0 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 1997.
- --------------------------------------------------------------------------------
PROPOSAL TO ADOPT THE OFFICER INCENTIVE COMPENSATION PLAN
(ITEM 3 ON PROXY CARD)
The Compensation Committee has adopted the Officer Incentive Compensation
Plan, an annual cash bonus plan in which all of the Company's executive
officers are eligible to participate ("Bonus Plan"). The Bonus Plan was adopted
in February 1997, subject to stockholder approval in compliance with the
provisions of Section 162(m) of the Internal Revenue Code, as amended ("Code").
Section 162(m) prevents a publicly-traded corporation from taking a tax
deduction for certain compensation in excess of $1 million per year which it or
its subsidiaries pays to specified
21
<PAGE>
- --------------------------------------------------------------------------------
executives. Those specified executives are the chief executive officer and the
four next most highly compensated executive officers for whom proxy disclosure
is required ("Covered Employees"). Certain compensation, including compensation
based on the attainment of performance goals, is excluded from the deduction
limit and therefore deductible, even if it exceeds $1 million per year. To
qualify for this performance-based exemption, the material terms pursuant to
which the compensation is to be paid, including the performance goals and the
maximum amount payable to the Covered Employees, must be approved by the
stockholders before the payments are made.
The principal features of the Bonus Plan are described below. The Bonus Plan
was adopted pursuant to the Baxter International Inc. 1994 Incentive
Compensation Program, which was approved by the Company's stockholders at the
1994 annual meeting of stockholders. If the Bonus Plan is not approved by the
Company's stockholders, the Plan will be terminated and no payments under the
Bonus Plan will be made to any Covered Employee.
Principal Features of the Plan
Each year, the Compensation Committee establishes a cash bonus range for each
executive officer participating in the Bonus Plan. The bonus range is
established based on compensation data from comparable companies. (See the
Compensation Committee report on page 13 for more information on the comparable
companies.) At the same time, the Compensation Committee establishes Company
performance goals for the year. After year-end results are reported, the
Compensation Committee determines the amount of the bonus that is payable to
each Bonus Plan participant, based on its certification of the extent to which
the Company achieved the Company performance goals for the year. The
Compensation Committee has the discretion to reduce the amount of the bonus
otherwise payable to an executive officer.
In February 1997, the Compensation Committee adopted 1997 Company performance
goals under the Bonus Plan. It also established a bonus range for each
participant in the Bonus Plan. The 1997 Company performance goals are net
income growth and operational cash flow. These are the same performance goals
the Compensation Committee approved for 1995 and 1996. The named executive
officers' 1997 bonus ranges are as follows: Mr. Loucks--$670,000--$890,000; Mr.
Kraemer--$310,000--$410,000; Mr. Staubitz--$175,000--$235,000; Mr. Mussallem--
$180,000--$245,000; Mr. McGinley--$180,000--$245,000. There are a total of 20
executive officer participants in the Bonus Plan for 1997, including the named
executive officers. The aggregate 1997 bonus ranges for all 20 executive
officer participants are $3,215,000--$4,310,000.
For 1998 and future years, the Compensation Committee will establish Company
performance goals under the Bonus Plan which will include one or more of the
following performance measures: net income growth, operational cash flow, sales
growth, Common Stock price, earnings per share, total shareholder return and
inventory turns. The Compensation Committee will limit the maximum bonus
payable to a Covered Employee for any one year to $2.0 million. Currently, it
is not possible to determine the number of executive officer participants or
participant bonus ranges under the Bonus Plan for 1998 and future years.
The Compensation Committee may amend or terminate the Bonus Plan at any time.
No amendment which requires stockholder approval to maintain the Bonus Plan's
compliance with Section 162(m) of the Code will be effective unless the
necessary stockholder approval is received.
The Board of Directors recommends a vote FOR adoption of the Officer
Incentive Compensation Plan.
- --------------------------------------------------------------------------------
22
<PAGE>
- --------------------------------------------------------------------------------
CURRENT STOCKHOLDER PROPOSAL
The Company has been informed that the following stockholder proposal will be
presented for a vote at the 1997 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
Continued very strong support along the lines we suggest were shown at the
last annual meeting when 30.7%, 5,110 owners of 64,489,379 shares, were cast in
favor of this proposal. The vote against included 167 unmarked proxies.
A California law 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. 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. In many cases authorities come in after and say the director or
directors were not qualified. We were delighted to see the SEC has finally
taken action to prevent bad directors from being on boards of public companies.
The SEC should have hearings to prevent such persons from becoming directors
before they harm investors.
We think cumulative voting is the answer to find new directors for various
committees. Some recommendations have been made to carry out the CERES 10
points. The 11th, in our opinion, should be having cumulative voting and ending
staggered boards.
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. The huge derivative losses
might have also been prevented with cumulative voting.
Many successful corporations have cumulative voting. Example, Pennzoil
defeated Texaco in that famous case. Ingersoll-Rand also having cumulative
voting, won two awards. FORTUNE magazine ranked it second in its industry as
"America's Most Admired Corporations" and the
23
<PAGE>
- --------------------------------------------------------------------------------
WALL STREET TRANSCRIPT noted "on almost any criteria used to evaluate
management, Ingersoll-Rand excels." In 1994 and 1995 they raised their
dividend.
Lockheed-Martin, as well as VWR Corporation now have a provision that if
anyone has 40% or more of the shares, cumulative voting applies; it does apply
at the latter company.
In 1995 American Premier adopted cumulative voting. Allegheny Power System
tried to take away cumulative voting, as well as put in a stagger system, and
stockholders defeated it, showing stockholders are interested in their rights.
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. A summary of
the process by which stockholders may present director candidates is included
on page 2 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 1998 annual meeting,
proposals must be received by the Company no later than November 21, 1997.
24
<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 1998 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 5 and March 6, 1998. 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,
/s/ David C. McKee
DAVID C. McKEE
Corporate Vice President, Secretary and Deputy General Counsel
Deerfield, Illinois
March 21, 1997
25
<PAGE>
[BAXTER LOGO]
PROXY
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS - MAY 5, 1997
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 5, 1997 and at any adjournment thereof.
Election of Directors, Nominees: Comments/Change of Address
--------------------------------
Walter E. Boomer, John W. Colloton --------------------------------
Susan Crown, Vernon R. Loucks Jr. --------------------------------
Georges C. St. Laurent, Jr. --------------------------------
--------------------------------
--------------------------------
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
-----------------
[x] Please mark your
votes as in this 8552
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 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.
- --------------------------------------------------------------------------------
FOR WITHHELD
1. Election of [_____] [_____]
Directors
(See Reverse).
For, except vote withheld from the following nominee(s):
- --------------------------------------------------------
FOR AGAINST ABSTAIN
2. Ratification of [_____] [_____] [_____]
independent
accountants.
3. To adopt the [_____] [_____] [_____]
Company's Officer
Incentive
Compensation Plan.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Board of Directors recommends a vote AGAINST proposal 4.
- --------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
4. Proposal relating to [_____] [_____] [_____]
cumulative voting in
the election of directors.
- --------------------------------------------------------------------------------
Treat votes [_____]
as confidential.
Mark the box if [_____]
you will attend the
Annual Meeting.
Mark the box if you have more [_____]
than one account and want to
discontinue receiving multiple
copies of future annual reports.
SIGNATURES(S)____________________________ DATE_________
The signer hereby revokes all proxies heretofore given by the signer to vote at
said meeting or any adjournment thereof.
NOTE Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator or guardian, please give full
title as such.
