<PAGE>
As filed with the Securities and Exchange Commission on February 18, 2000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM 10/A-2
GENERAL FORM FOR REGISTRATION OF SECURITIES
Pursuant to Section 12(b) or 12(g) of
The Securities Exchange Act of 1934
----------------
Edwards Lifesciences Corporation
formerly known as CVG Controlled Inc.
(Exact name of registrant as specified in its charter)
Delaware 36-4316614
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
17221 Red Hill Avenue
Irvine, California 92614
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code:
(949) 250-2500
----------------
Securities to be registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
Title of each class Name of each exchange on which
to be registered each class is to be registered
------------------- ------------------------------
<S> <C>
Common Stock, par value $1.00 New York Stock Exchange
Series A Junior Participating Preferred New York Stock Exchange
Stock Purchase Rights (currently traded
with Common Stock)
</TABLE>
----------------
Securities to be registered pursuant to Section 12(g) of the Act: None.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
ANNEX I
THE INFORMATION CONTAINED IN THIS INFORMATION STATEMENT IS SUBJECT TO
COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO EDWARDS
LIFESCIENCES CORPORATION'S COMMON STOCK HAS BEEN FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION. THESE SECURITIES WILL NOT BE ISSUED BEFORE THE
REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS INFORMATION STATEMENT SHALL NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY THESE
SECURITIES.
<PAGE>
EXPLANATORY NOTE
This Registration Statement on Form 10 has been prepared on a prospective
basis on the assumption that, among other things, the distribution and the
related transactions contemplated to occur prior to or contemporaneously with
the distribution will be consummated as contemplated by the information
statement which is a part of this Registration Statement. There can be no
assurance, however, that any or all of such transactions will occur or will
occur as so contemplated. Any significant modifications or variations in the
transactions contemplated will be reflected in an amendment or supplement to
this Registration Statement.
<PAGE>
[BAXTER LOGO]
Baxter International Inc.
One Baxter Parkway
Deerfield, Illinois 60015
847.948.2000
March [ ], 2000
To all Baxter International Inc. Stockholders:
I am pleased to inform you that on March [ ], 2000, a special committee of
Baxter's board of directors declared a stock dividend to achieve a
distribution of all of the outstanding shares of common stock of Edwards
Lifesciences Corporation to all Baxter stockholders of record on March [ ],
2000.
Edwards Lifesciences is a new company, formed initially as a wholly owned
subsidiary of Baxter, and is comprised of Baxter's CardioVascular business.
Edwards Lifesciences is a leader in providing a comprehensive line of products
and services to treat late-stage cardiovascular disease. The distribution is
expected to make both Baxter and Edwards Lifesciences more competitive, giving
each company more financial flexibility to invest and grow. We believe the
combined value of two separate, but stronger companies will be greater than
the value of Baxter as a whole today.
Following the distribution, Baxter will continue to focus on providing
critical medical therapies that improve the lives of millions of people
worldwide. We intend to invest more resources in our Blood Therapies, I.V.
Systems/Medical Products and Renal businesses. These investments will further
enhance our ability to bring new products to market and to expand globally. If
you are a Baxter stockholder of record at the close of business on March [ ],
2000, the record date for the distribution, you will receive one share of
Edwards Lifesciences common stock for every [five] shares of Baxter common
stock you own on that date. Edwards Lifesciences stock certificates will be
distributed beginning March [ ], 2000. No action is required on your part to
receive your Edwards Lifesciences stock.
The attached information statement, which is being mailed to all Baxter
stockholders, describes the distribution in detail and contains important
information about Edwards Lifesciences, including financial statements.
Sincerely,
Harry M. Jansen Kraemer, Jr.
Chairman and Chief Executive Officer
<PAGE>
[Edwards Lifesciences Corporation letterhead]
March [ ], 2000
Dear Edwards Lifesciences Corporation Stockholder:
It is my pleasure to welcome you as a stockholder of Edwards Lifesciences
Corporation. We are a leader in providing a comprehensive line of therapies
and services to treat late-stage cardiovascular disease, and a significant
portion of our current products and services occupy market-leading positions.
Edwards Lifesciences operates in four main product lines: cardiac surgery,
critical care, vascular and perfusion products and services.
I invite you to learn more about Edwards Lifesciences in the attached
information statement. We expect that operating as an independent company
focused on late-stage cardiovascular disease therapy will accelerate the speed
of innovation of our business. We also expect that it will allow us to
significantly expand our product development pipeline, and pursue attractive
opportunities to expand our offerings and operations through acquisitions and
strategic alliances. Ultimately, we anticipate that this will lead to
innovative, diversified and improved treatment options for patients suffering
from late-stage cardiovascular disease. As a more aggressive competitor, we
believe that we can accelerate our future growth rate.
In 1999, we achieved net revenues of $905 million, an amount that will make
us the largest company focused exclusively on the late-stage cardiovascular
disease market. We expect that Edwards Lifesciences' common stock will be
listed and traded on the New York Stock Exchange and that its stock symbol
will be "EW. "
Our management team is eager to distinguish Edwards Lifesciences through
continued strong leadership and solid financial performance. We are pleased
that you, as a stockholder of Edwards Lifesciences, will participate in our
mission.
Sincerely,
Michael A. Mussallem
Chairman and Chief Executive Officer
<PAGE>
Information Contained Herein is Subject to Completion or Amendment
Preliminary Copy Dated March , 2000
INFORMATION STATEMENT
[LOGO]
Edwards Lifesciences Corporation
Common Stock
We are providing this information statement
to you as a stockholder of Baxter
International Inc. in connection with the
distribution by Baxter to its stockholders of
all of the outstanding shares of Edwards
Lifesciences common stock. Edwards
Lifesciences will conduct the business
currently performed by Baxter's
CardioVascular group.
Consider carefully the
risk factors beginning
on page 7 of this
information statement.
Stockholder approval
of the distribution of
Edwards Lifesciences
common stock is not
required. We are not
asking you for a proxy
and we request that
you do not send us a
proxy. Also, you are
not required to make
any payment for the
shares of Edwards
Lifesciences common
stock that you will
receive.
It is expected that the distribution will be
made on March [ ], 2000, to holders of record
of Baxter common stock on March [ ], 2000. If
you are a Baxter stockholder at the close of
business on the record date, you will receive
one share of Edwards Lifesciences common
stock for every [five] shares of Baxter
common stock you hold on that date.
Certificates for the shares will be mailed to
you, or your brokerage account will be
credited for the shares, on or about March
[ ], 2000. Fractional shares will not be
issued and you will receive a check or a
credit to your brokerage account for the cash
equivalent of any fractional shares you
otherwise would have received in the
distribution. You will not be required to pay
anything for the shares of Edwards
Lifesciences common stock to be distributed
to you, nor will you be required to surrender
or exchange your shares of Baxter common
stock or take any other action in order to
receive Edwards Lifesciences common stock.
This information
statement is not an
offer to sell, or a
solicitation of any
offer to buy, any
securities of Edwards
Lifesciences
Corporation or Baxter
International Inc.
Application has been made to list the Edwards
Lifesciences common stock on the New York
Stock Exchange under the symbol "EW."
The information contained in this information statement is subject to
completion or amendment. A registration statement on Form 10 relating to
Edwards Lifesciences' common stock has been filed with the Securities and
Exchange Commission. These securities will not be issued before the
registration statement becomes effective.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved the Edwards Lifesciences common stock,
or determined that this information statement is truthful or complete. Any
representation to the contrary is a criminal offense.
The date of this information statement is March [ ], 2000.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ITEM PAGE
- ---- ----
<S> <C>
SUMMARY.................................................................... 1
Edwards Lifesciences' Business........................................... 1
Questions and Answers about Edwards Lifesciences and the Distribution.... 2
Summary Historical Financial Data........................................ 5
Summary Unaudited Pro Forma Financial Data............................... 6
RISK FACTORS............................................................... 7
Risks Related to Edwards Lifesciences' Business.......................... 7
Risks Related to the Health Care Industry................................ 12
Risks Related to Edwards Lifesciences' Separation from Baxter............ 13
Risks Related to Ownership of Edwards Lifesciences' Common Stock......... 14
FORWARD-LOOKING STATEMENTS................................................. 15
EDWARDS LIFESCIENCES' BUSINESS............................................. 17
Overview................................................................. 17
Business Strategy........................................................ 17
Edwards Lifesciences' Product and Service Offerings...................... 18
Cardiac Surgery.......................................................... 19
Critical Care............................................................ 20
Vascular................................................................. 21
Perfusion Products and Services.......................................... 21
Competition.............................................................. 22
Sales and Marketing...................................................... 23
Raw Materials and Manufacturing.......................................... 23
Quality Assurance........................................................ 24
Research and Development................................................. 24
Proprietary Technology................................................... 25
Government Regulation and Other Matters.................................. 26
Properties............................................................... 28
Employees................................................................ 28
EDWARDS LIFESCIENCES' RELATIONSHIP WITH BAXTER AFTER THE DISTRIBUTION...... 28
General.................................................................. 28
Reorganization Agreement................................................. 29
Tax Sharing Agreement.................................................... 31
Distribution Agreements.................................................. 32
Services and Other Agreements............................................ 32
THE DISTRIBUTION........................................................... 33
Background and Reasons for the Distribution.............................. 33
Manner of Effecting the Distribution..................................... 33
Accounting Treatment of Plan of Reorganization........................... 34
Important Federal Income Tax Consequences................................ 34
Market for Edwards Lifesciences Common Stock............................. 35
Dividend Policy.......................................................... 36
Distribution Conditions and Termination.................................. 36
Opinions of Financial Advisors........................................... 37
SELECTED HISTORICAL FINANCIAL DATA OF EDWARDS LIFESCIENCES................. 38
EDWARDS LIFESCIENCES' UNAUDITED PRO FORMA FINANCIAL DATA................... 39
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
ITEM PAGE
- ---- ----
<S> <C>
EDWARDS LIFESCIENCES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS...................................... 42
Overview................................................................ 42
Results of Operations................................................... 43
Liquidity and Capital Resources......................................... 46
Euro Conversion......................................................... 47
New Accounting and Disclosure Standard.................................. 47
Currency Risk........................................................... 47
EDWARDS LIFESCIENCES MANAGEMENT........................................... 49
Board of Directors...................................................... 49
Committees of the Board of Directors.................................... 50
Compensation of Directors............................................... 50
Executive Officers...................................................... 50
EDWARDS LIFESCIENCES EXECUTIVE COMPENSATION............................... 53
1999 Compensation of Executive Officers................................. 53
Stock Option Grants..................................................... 54
Stock Option Exercises.................................................. 55
Pension Plan and Excess Pension Plan.................................... 55
Baxter Common Stock Held By Edwards Lifesciences Employees.............. 56
Future Compensation of Executive Officers............................... 56
2000 Incentive Compensation Program..................................... 57
Edwards Lifesciences Change of Control Plan............................. 60
Edwards Lifesciences Retirement Plan for United States Employees........ 60
Employee Stock Purchase Plan for United States Employees................ 62
Transition Options for Salaried Exempt Employees........................ 62
Initial Stock Option Grant for Salaried Employees Worldwide............. 63
Employee Stock Purchase Plan for Employees Outside the United States.... 63
Initial Stock Grant for Hourly Employees Outside the United States...... 63
Other Retirement Plans for Employees Outside the United States.......... 63
SECURITY OWNERSHIP OF EDWARDS LIFESCIENCES................................ 64
DESCRIPTION OF EDWARDS LIFESCIENCES CAPITAL STOCK......................... 65
Authorized Capital Stock................................................ 65
Edwards Lifesciences Common Stock....................................... 65
Edwards Lifesciences Preferred Stock.................................... 65
Edwards Lifesciences Rights Agreement................................... 65
CERTAIN ANTI-TAKEOVER EFFECTS OF PROVISIONS OF EDWARDS LIFESCIENCES'
CERTIFICATE OF INCORPORATION AND BYLAWS AND OF DELAWARE LAW.............. 67
Certificate of Incorporation and Bylaws................................. 67
Delaware Law............................................................ 70
LIMITATION OF LIABILITY AND INDEMNIFICATIONOF EDWARDS LIFESCIENCES
DIRECTORS AND OFFICERS................................................... 70
Limitation of Liability of Directors.................................... 70
Indemnification of Directors and Officers............................... 71
EDWARDS LIFESCIENCES' 2001 ANNUAL MEETING OF STOCKHOLDERS................. 71
ADDITIONAL INFORMATION.................................................... 71
INDEX TO COMBINED FINANCIAL STATEMENTS AND SCHEDULE....................... F-1
</TABLE>
ii
<PAGE>
SUMMARY
This summary highlights selected information from this information
statement, but does not contain all details concerning the distribution of the
Edwards Lifesciences common stock to Baxter stockholders, including information
that may be important to you. To better understand the distribution, and the
business and financial position of Edwards Lifesciences, you should carefully
review this entire document. References in this information statement to
"Edwards Lifesciences" mean Edwards Lifesciences Corporation, a Delaware
corporation, and its subsidiaries and affiliates following the distribution.
References in this information statement to the CardioVascular business mean
the CardioVascular business as conducted by Baxter for periods prior to the
distribution date. References in this information statement to "Baxter" mean
Baxter International Inc., a Delaware corporation, and its subsidiaries and
affiliates.
Edwards Lifesciences' Business
Edwards Lifesciences designs, develops, manufactures and markets a
comprehensive line of products and services to treat late-stage cardiovascular
disease. Edwards Lifesciences is the worldwide leader in the development,
marketing and sale of both tissue replacement heart valves and heart valve
repair products. Edwards Lifesciences' product lines are grouped into four
general areas: cardiac surgery, critical care, vascular and perfusion products
and services. Edwards Lifesciences also offers a diverse grouping of other
product lines comprised mostly of pharmaceuticals and select distributed
products. Edwards Lifesciences supplies its products and services to customers
in more than 80 countries, both through direct sales and distribution
relationships, and reported annual sales in 1999 of $905 million.
Edwards Lifesciences' cardiac surgery product lines include products
relating to heart valve therapy, a left ventricular assist device, as well as
cannulae and cardioplegia products used during open heart surgery. Edwards
Lifesciences' critical care product offerings include hemodynamic monitoring
devices for measuring heart pressure and output during surgical procedures and
in post-surgical intensive care settings. Edwards Lifesciences has been a world
leader in this area since the development of its Swan-Ganz catheter more than
30 years ago. Edwards Lifesciences' vascular products include a line of
balloon-tipped, catheter-based products, surgical clips and inserts, angioscopy
equipment and artificial implantable grafts. The perfusion products offered by
Edwards Lifesciences include a diverse line of disposable and hardware products
used during cardiopulmonary bypass procedures, including oxygenators, blood
containers, filters and related devices and heart-lung machines. Edwards
Lifesciences also is the world's leading provider of contract perfusion
services with a staff of more than 400 clinical perfusionists who perform an
aggregate of more than 50,000 perfusion cases for open heart surgery per year.
Edwards Lifesciences employs over 5,000 people and its products are
manufactured throughout the world, including Brazil, the Dominican Republic,
Japan, The Netherlands, Puerto Rico, Switzerland and the United States. Edwards
Lifesciences' headquarters are located at 17221 Red Hill Avenue, Irvine,
California 92614 and its telephone number is 949.250.2500. Edwards Lifesciences
was incorporated in Delaware in 1999.
As of the distribution date, Baxter will have transferred its CardioVascular
business to Edwards Lifesciences, a newly formed Delaware corporation. Baxter
will distribute the shares of Edwards Lifesciences common stock to Baxter
stockholders on a proportionate basis beginning on March [ ], 2000.
The distribution of the shares of Edwards Lifesciences common stock will be
effective on the distribution date. No vote of Baxter's stockholders is
required to approve the distribution of the Edwards Lifesciences common stock.
1
<PAGE>
Questions and Answers about Edwards Lifesciences and the Distribution
Why is Baxter separating Baxter is creating an independent, publicly traded
Edwards Lifesciences? company for its CardioVascular business because its
management believes that the combined value of two
separate companies will be greater than the value
of Baxter as a whole today. Edwards Lifesciences
expects that the distribution will allow it to
compete more effectively in the intensely
competitive and rapidly consolidating
cardiovascular device industry. Edwards
Lifesciences believes that as an independent
company, it will increase the level of funding of,
and commitment to, intense research and development
with a focus on enhancing its number and diversity
of new products. Edwards Lifesciences also expects
that it will be more aggressive in pursuing
acquisition and strategic alliance opportunities as
an independent company with the ability to use its
stock as currency. Having a publicly traded equity
security will also enable Edwards Lifesciences to
better attract and retain key employees by more
directly linking its employees' compensation with
Edwards Lifesciences' performance.
Following the distribution, Baxter intends to
invest more resources in its remaining core
businesses, which it expects will further enhance
its ability to successfully commercialize new
products and to expand its global markets.
What will the
relationship be between After the distribution, Baxter and Edwards
Edwards Lifesciences and Lifesciences will be separate, publicly owned
Baxter after the companies. Baxter and Edwards Lifesciences will
distribution? enter into certain agreements to define their
ongoing relationship after the distribution. These
agreements also will allocate responsibility for
obligations both before and after the distribution
date. See "Edwards Lifesciences' Relationship With
Baxter After The Distribution" beginning on page
28.
How will Edwards
Lifesciences be managed? Edwards Lifesciences' operating management team
will be essentially the same as Baxter's
CardioVascular business had during the period prior
to the distribution. Michael A. Mussallem will be
the Chairman of the Board and Chief Executive
Officer of Edwards Lifesciences. Mr. Mussallem has
extensive experience in the medical products and
services industry, having been with Baxter for over
twenty years. Mr. Mussallem will be supported by an
experienced management team that will include
Stuart L. Foster and Anita B. Bessler, who together
have spent in excess of 45 collective years in the
industry. In addition, Edwards Lifesciences has
added Bruce Bentcover as Chief Financial Officer
and Bruce Garren as General Counsel, both of whom
have previous public-company experience. See
"Edwards Lifesciences Management--Executive
Officers" beginning on page 50.
The Edwards Lifesciences board of directors is
expected to initially consist of seven persons,
including Mr. Mussallem and six independent
directors. See "Edwards Lifesciences Management--
Board of Directors" beginning on page 49.
2
<PAGE>
When will the
distribution happen? March [ ], 2000. Baxter will distribute the shares
of Edwards Lifesciences common stock on the
distribution date, which will be on or about March
[ ], 2000, to holders of Baxter common stock on the
record date.
What is the record date
for the distribution? March [ ], 2000
What do I have to do to
participate in the Nothing. You are not required to take any action to
distribution? receive Edwards Lifesciences common stock in the
distribution. No proxy or vote is necessary for the
distribution. If you own Baxter common stock as of
the close of business on the record date, shares of
Edwards Lifesciences common stock will be mailed to
you or credited to your brokerage account on March
[ ], 2000. You do not need to mail in Baxter common
stock certificates to receive Edwards Lifesciences
common stock certificates. The number of shares of
Baxter common stock you own will not change as a
result of the distribution.
How many shares of
Edwards Lifesciences Baxter will distribute one share of Edwards
common stock will I Lifesciences common stock, along with associated
receive? preferred stock purchase rights, for every [five]
shares of Baxter common stock you own as of the
close of business on the record date. For example,
if you own [100] shares of Baxter common stock on
the record date, you will receive [20] shares of
Edwards Lifesciences common stock in the
distribution. Based on approximately [290,199,514]
shares of Baxter common stock that we expect to be
outstanding on the record date for the
distribution, Baxter will distribute a total of
approximately [58,039,903] shares of Edwards
Lifesciences common stock.
Will Baxter distribute No. Baxter will not distribute any fractional
fractional shares? shares of Edwards Lifesciences common stock. You
will receive a check or a credit to your brokerage
account for the cash equivalent of any fractional
shares you otherwise would have received in the
distribution, less applicable taxes. The amount of
the cash payment will depend upon the prices at
which the fractional shares are sold in the open
market on or about the distribution date.
Is the distribution The distribution is conditioned on Baxter receiving
taxable for United States a ruling from the United States Internal Revenue
federal income tax Service substantially to the effect that the
purposes? distribution will be tax-free to Baxter and to
Baxter's United States stockholders, except with
respect to cash paid in lieu of fractional shares
of Edwards Lifesciences common stock. See "The
Distribution--Important Federal Income Tax
Consequences" beginning on page 34, for a more
complete discussion of the United States federal
income tax consequences of the distribution to
holders of Baxter common stock.
Will I be paid any Edwards Lifesciences has no current plans to pay
dividends on the Edwards dividends following the distribution. Edwards
Lifesciences common Lifesciences will pay dividends on Edwards
stock? Lifesciences common stock only if declared by the
Edwards
3
<PAGE>
Lifesciences board of directors in its sole
discretion following the distribution. The payment
and level of cash dividends, if any, will be based
upon a number of factors, including the operating
results, cash flow and financial requirements of
Edwards Lifesciences. See "The Distribution--
Dividend Policy" beginning on page 36.
Where will my shares of
Edwards Lifesciences Edwards Lifesciences expects that its common stock
common stock trade? will be listed on the New York Stock Exchange under
the symbol "EW." See "The Distribution--Market for
Edwards Lifesciences Common Stock" beginning on
page 35.
What will happen to the Nothing. Baxter common stock will continue to be
listing of Baxter's listed on the NYSE under the symbol "BAX."
shares on the New York
Stock Exchange?
Will the distribution Yes. After the distribution, the trading price of
affect the trading price Baxter common stock is likely to be lower than the
of my Baxter common trading price immediately prior to the
stock? distribution. Moreover, the trading price of Baxter
common stock may fluctuate after the distribution
as the market evaluates the operations of Baxter
without the business of Edwards Lifesciences. Until
the market has fully analyzed Edwards Lifesciences'
business, the prices at which the Edwards
Lifesciences common stock trades may fluctuate
significantly. The combined market value of Baxter
common stock and Edwards Lifesciences common stock
may be less than, equal to or greater than the
market value of Baxter common stock prior to the
distribution. See "The Distribution--Market for
Edwards Lifesciences Common Stock" beginning on
page 35.
Who do I contact for Before the distribution, you should direct
information regarding the inquiries relating to the distribution to:
distribution and Edwards
Lifesciences? Baxter International Inc.
One Baxter Parkway
Deerfield, IL 60015
Attention: Investor Relations
847.948.2000
After the distribution, you should direct inquiries
relating to an investment in Edwards Lifesciences
common stock to:
Edwards Lifesciences Corporation
17221 Red Hill Avenue
Irvine, CA 92614
Attention: Investor Relations
949.250.2500
After the distribution, the transfer agent and
registrar for the Edwards Lifesciences common stock
will be:
First Chicago Trust Company of New York,
a division of EquiServe
Shareholder Relations
P.O. Box 2500
Jersey City, NJ 07303-2500
4
<PAGE>
Summary Historical Financial Data
The following table sets forth summary historical combined financial data
for Edwards Lifesciences. The historical combined financial data of Edwards
Lifesciences are derived from the "Combined Financial Statements," which are
included elsewhere in this information statement. See Note 3 to "Combined
Financial Statements" and "Edwards Lifesciences Management's Discussion and
Analysis of Financial Condition and Results of Operations" for discussions of
the effect of certain Edwards Lifesciences acquisitions on Edwards
Lifesciences' revenues, expenses and financial position.
<TABLE>
<CAPTION>
For the years ended
December 31,
----------------------
1999 1998 1997
------ ------ ------
(in millions)
<S> <C> <C> <C>
Income Statement Data
Net sales........................................ $ 905 $ 865 $ 879
Gross profit..................................... $ 439 $ 399 $ 416
Net income (loss) (a)............................ $ 82 $ 62 $ (52)
Balance Sheet and Cash Flow Data
Cash flow provided from operations............... $ 176 $ 176 $ 163
Cash flow from investment transactions, net...... $ (49) $ (52) $ (58)
Cash flow from financing transactions, net....... $ (127) $ (124) $ (105)
Total assets..................................... $1,437 $1,483 $1,526
Other Data
EBITDA (a)(b).................................... $ 197 $ 175 $ 197
</TABLE>
- -------
(a) See Note 3 to "Combined Financial Statements" and "Edwards Lifesciences
Management's Discussion and Analysis of Financial Condition and Results of
Operations" for additional information regarding the $132 million in-
process research and development charge in 1997 relating to the
acquisition of Research Medical, Inc.
(b) EBITDA, or earnings before interest, income taxes, depreciation,
amortization and other significant non-cash charges, is presented because
it is a widely accepted indicator used by certain investors and analysts
to compare and analyze companies on the basis of operating performance. We
believe a presentation of earnings before certain noncash charges may
enhance an investor's comparisons of competitor companies that have
historically used different methods of accounting for business
combinations. EBITDA in 1997 excludes the $132 million in-process research
and development charge relating to the acquisition of Research Medical,
Inc.
EBITDA is not intended to represent cash flows for the period, nor is it
presented as an alternative to operating income or as an indicator of
operating performance. It should not be considered in isolation or as a
substitute for measures of performance prepared in accordance with
accounting principles generally accepted in the United States (GAAP).
Disclosure regarding cash flows from operating, investing and financing
transactions is presented in "Edwards Lifesciences Management's Discussion
and Analysis of Financial Condition and Results of Operations". Further,
EBITDA is not indicative of operating income or cash flow from operations
as determined under GAAP. Items excluded from EBITDA are significant
components in understanding and assessing financial performance. Our method
of computation may or may not be comparable to other similarly titled
measures of other companies.
5
<PAGE>
Summary Unaudited Pro Forma Financial Data
The following table sets forth summary unaudited pro forma financial data.
This data presents the combined results of Edwards Lifesciences assuming that
the transactions contemplated by the distribution had been completed as of
January 1, 1999. See page 39 for computation of pro forma amounts, including
descriptions of the pro forma adjustments.
We have prepared the summary unaudited pro forma information utilizing the
historical combined financial statements of Edwards Lifesciences. You should
read this information in conjunction with the historical combined financial
statements and notes to those statements, included elsewhere in this
information statement. The summary unaudited pro forma financial data does not
purport to be indicative of the results of Edwards Lifesciences in the future
or what the financial position and results of operations would have been had
Edwards Lifesciences been a separate, stand-alone entity during the periods
shown. Pro forma cash flows are not presented as such amounts would not be
factually supportable.
<TABLE>
<CAPTION>
For the year
ended
December 31,
1999
------------
(in millions)
<S> <C> <C> <C>
Net sales............................................ $905
Gross profit......................................... $436
Net income........................................... $ 41
EBITDA (a)........................................... $169
</TABLE>
- --------
(a) EBITDA, or earnings before interest, income taxes, depreciation and
amortization and other significant non-cash charges, is not a measure
defined by generally accepted accounting principles. Refer to footnote (b)
of "Summary Historical Financial Data" for a discussion of the EBITDA
measure.
6
<PAGE>
RISK FACTORS
Consider carefully all of the information contained in this information
statement and, in particular, the following factors:
Risks Related to Edwards Lifesciences' Business
If Edwards Lifesciences does not introduce new products in a timely manner,
its products may become obsolete, and its operating results may suffer.
The cardiovascular products industry is characterized by rapid
technological changes, frequent new product introductions and evolving
industry standards. Without the timely introduction of new products and
enhancements, Edwards Lifesciences' products will likely become
technologically obsolete over time, in which case Edwards Lifesciences'
revenue and operating results would suffer. The success of Edwards
Lifesciences' new product offerings will depend on several factors, including
its ability to:
. properly identify and anticipate customer needs;
. innovate and develop new technologies and applications;
. successfully commercialize new technologies in a timely manner;
. manufacture and deliver products in sufficient volumes on time;
. differentiate Edwards Lifesciences' offerings from competitors offerings;
and
. price products competitively.
In addition, new technologies that Edwards Lifesciences develops may not be
accepted quickly because of industry-specific factors, such as the need for
regulatory clearance, unanticipated restrictions imposed on approved
indications, entrenched patterns of clinical practice, uncertainty over third-
party reimbursement and clinicians' fears of malpractice suits.
Moreover, significant technical innovations generally will require a
substantial investment before Edwards Lifesciences can determine the
commercial viability of these innovations. Edwards Lifesciences may not have
the financial resources necessary to fund these technical innovations. In
addition, even if Edwards Lifesciences is able to successfully develop
enhancements or new generations of its products, these enhancements or new
generations of products may not produce revenue in excess of the costs of
development, and they may be quickly rendered obsolete by changing customer
preferences or the introduction by Edwards Lifesciences' competitors of
products embodying new technologies or features.
Edwards Lifesciences may incur product liability and professional liability
losses and insurance coverage may be inadequate or unavailable to cover these
losses.
Edwards Lifesciences' business exposes it to potential product liability
risks that are inherent in the design, manufacture and marketing of medical
devices. Edwards Lifesciences' products are often used in surgical and
intensive care settings with seriously ill patients. In addition, some of the
medical devices manufactured and sold by Edwards Lifesciences are designed to
be implanted in the human body for long periods of time. Edwards Lifesciences
could be the subject of product liability suits alleging that component
failures, manufacturing flaws, design defects or inadequate disclosure of
product-related risks or product-related information could result in an unsafe
condition or injury to patients. Product liability lawsuits and claims, safety
alerts or product recalls in the future, regardless of their ultimate outcome,
could have a material adverse effect on Edwards Lifesciences' business and
reputation and on its ability to attract and retain customers. In addition,
Edwards Lifesciences' perfusion services subsidiaries expose it to medical
malpractice risks. In recent years, physicians, hospitals and other medical-
service providers have become subject to an increasing number of lawsuits
alleging medical malpractice. Medical malpractice suits often involve large
claims and substantial defense costs.
Upon the distribution, Edwards Lifesciences will assume the defense of
litigation involving claims related to the CardioVascular business and will
indemnify Baxter for all related losses, costs and expenses. As part of its
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risk management policies, Edwards Lifesciences intends to seek third-party
product liability and professional liability insurance coverage. However,
Edwards Lifesciences is not certain that it will be able to obtain product
liability and professional liability insurance on commercially reasonable
terms, if at all. Furthermore, product liability claims against Edwards
Lifesciences may exceed the coverage limits of any insurance policies or cause
Edwards Lifesciences to record a self-insured loss. Edwards Lifesciences
maintains professional liability insurance coverage for individuals employed
by the subsidiary who perform perfusion services, although the amount of that
coverage may not be sufficient. Further, even if any product liability or
professional liability losses are covered by an Edwards Lifesciences insurance
policy, these policies may have substantial retentions or deductibles that
provide that Edwards Lifesciences will not receive insurance proceeds until
the losses incurred by Edwards Lifesciences exceed the amount of those
retentions or deductibles. To the extent that any losses are below these
retentions or deductibles, Edwards Lifesciences will be responsible for paying
these losses. A product liability or professional liability claim in an amount
in excess of applicable insurance could have a material adverse effect on
Edwards Lifesciences.
Edwards Lifesciences may experience supply interruptions that could harm its
ability to manufacture products.
Edwards Lifesciences uses a diverse and broad range of raw and organic
materials and other items in the design and manufacture of its products.
Edwards Lifesciences' non-implantable products are manufactured from man-made
raw materials including resins, chemicals, electronics and metals. Edwards
Lifesciences' heart valve therapy products are manufactured from natural
animal tissue and man-made materials. Edwards Lifesciences purchases certain
of the materials and components used in the manufacture of its products from
external suppliers. In addition, Edwards Lifesciences purchases certain
supplies from single sources for reasons of quality assurance, cost-
effectiveness or constraints resulting from regulatory requirements. Edwards
Lifesciences works closely with its suppliers to assure continuity of supply
while maintaining high quality and reliability. Alternative supplier options
are generally considered and identified, although Edwards Lifesciences does
not typically pursue regulatory qualification of alternative sources due to
the strength of its existing supplier relationships and the time and expense
associated with the regulatory process. Although a change in suppliers could
require significant effort or investment by Edwards Lifesciences in
circumstances where the items supplied are integral to the performance of
Edwards Lifesciences' products or incorporate unique technology, management
does not believe that the loss of any existing supply contract would have a
material adverse effect on the company.
In an effort to reduce potential product liability exposure, certain
suppliers have announced that they intend to limit or terminate sales of
certain materials and parts to companies that manufacture implantable medical
devices. In the past, Baxter has been required in specific instances to
indemnify certain suppliers for its CardioVascular business for product
liability expenses. There can be no assurance that an indemnity from Edwards
Lifesciences will be satisfactory to these suppliers. If Edwards Lifesciences
is unable to obtain these raw materials or there is a significant increase in
the price of materials or components, its business could be harmed.
Edwards Lifesciences may not successfully identify and complete acquisitions
or strategic alliances on favorable terms or achieve anticipated synergies
relating to any acquisitions or alliances; Edwards Lifesciences may be
required to incur additional indebtedness to fund any acquisitions.
As part of Edwards Lifesciences' growth strategy, Edwards Lifesciences
intends to aggressively seek to acquire complementary businesses,
technologies, services or products and to enter into strategic alliances.
Edwards Lifesciences may be unable to find suitable acquisition candidates.
Even if Edwards Lifesciences identifies appropriate acquisition or alliance
candidates, Edwards Lifesciences may be unable to complete such acquisitions
on favorable terms, if at all. In addition, the process of integrating an
acquired business, technology, service or product into Edwards Lifesciences'
existing business and operations may result in unforeseen
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operating difficulties and expenditures. Integration of an acquired company
also may require significant management resources that otherwise would be
available for ongoing development of Edwards Lifesciences' business. Moreover,
Edwards Lifesciences may not realize the anticipated benefits of any
acquisition. Future acquisitions could also require issuances of equity
securities, the incurrence of debt, contingent liabilities or amortization
expenses related to goodwill and other intangible assets, any of which could
harm Edwards Lifesciences' business. Edwards Lifesciences currently does not
have any current understandings, commitments or agreements with respect to any
material acquisition.
Edwards Lifesciences also intends to pursue strategic alliances with third
parties. Edwards Lifesciences may not identify appropriate partners with which
to form partnerships or strategic alliances. Any alliances may not generate
anticipated financial results.
Edwards Lifesciences' business is subject to economic, political and other
risks associated with international sales and operations.
Because Edwards Lifesciences sells its products in a number of foreign
countries, its business is subject to risks associated with doing business
internationally. Edwards Lifesciences' net revenue originating outside of the
United States, as a percentage of Edwards Lifesciences' total net revenue, was
41% in 1998 and 44% in 1999. Edwards Lifesciences anticipates that revenue
from international operations will continue to represent a substantial portion
of its total revenue. In addition, many of Edwards Lifesciences' manufacturing
facilities and suppliers are located outside of the United States. Edwards
Lifesciences management expects to increase its sales efforts internationally,
which could expose it to greater risks associated with international sales and
operations. Accordingly, Edwards Lifesciences' future results could be harmed
by a variety of factors, including:
. changes in foreign medical reimbursement policies and programs;
. unexpected changes in foreign regulatory requirements;
. changes in foreign currency exchange rates;
. changes in a specific country's or region's political or economic
conditions, particularly in emerging regions;
. trade protection measures and import or export licensing requirements;
. potentially negative consequences from changes in tax laws;
. difficulty in staffing and managing foreign operations;
. differing labor regulations; and
. differing protection of intellectual property.
Edwards Lifesciences will be subject to risks arising from currency exchange
rate fluctuations.
Approximately 44% of Edwards Lifesciences' revenues in 1999 were generated
from outside of the United States. Measured in local currency, a substantial
portion of Edwards Lifesciences foreign-generated revenues were generated in
Europe (and primarily denominated in the Euro) and in Japan. The United States
dollar value of Edwards Lifesciences' foreign-generated revenues varies with
currency exchange rate fluctuations. Significant increases in the value of the
United States dollar relative to the Euro or the Japanese Yen, as well as
other currencies, could have a material adverse effect on Edwards
Lifesciences' results of operations. The CardioVascular business has
historically been considered in Baxter's overall risk management strategy. As
part of this strategy, Baxter has used financial instruments to reduce its
exposure to adverse movements in currency exchange rates. As an independent
company, Edwards Lifesciences plans to implement a hedging policy which
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will attempt to manage currency exchange rate risks to an acceptable level
based on management's judgment of the appropriate trade-off between risk,
opportunity and cost; however this hedging policy may not successfully
eliminate the effects of currency exchange rate fluctuations.
The conversion to the Euro has required Edwards Lifesciences to modify its
business operations and if these modifications are not successful or if there
are any negative economic developments in the European Union, Edwards
Lifesciences' business may be negatively affected.
On January 1, 1999, eleven member countries of the European Union
established fixed conversion rates between their existing currencies and one
common currency, the Euro. Uncertainties exist as to the effects the Euro may
have on Edwards Lifesciences' European customers, as well as the impact of the
Euro conversion on the economies of the participating countries. Approximately
44% of Edwards Lifesciences' revenues in 1999 were derived from outside the
United States, a significant portion of which were generated in Europe and
primarily denominated in currencies linked to the Euro since January 1, 1999.
Any negative economic developments that occur in the combined European Union
economy and the possible devaluation of the Euro could have a material negative
impact on Edwards Lifesciences' business.
Potential effects on Edwards Lifesciences' operations include:
. the need to modify business systems to recognize the Euro as a functional
currency; and
. the competitive impact of cross-border price transparency, which may make
it more difficult for a business to charge different prices for the same
products on a country-by-country basis, particularly once the Euro
currency begins circulation in 2002.
Edwards Lifesciences will continue to evaluate the impact of the
introduction of the Euro as Edwards Lifesciences continues to expand its
operations throughout Europe.
Fluctuations in Edwards Lifesciences' quarterly operating results may cause
Edwards Lifesciences' stock price to decline.
Edwards Lifesciences' revenue and operating results may vary significantly
from quarter to quarter. A high proportion of Edwards Lifesciences' costs are
fixed, due in part to significant sales, research and development and
manufacturing costs. Thus, small declines in revenue could disproportionately
affect operating results in a quarter, and the price of Edwards Lifesciences
common stock may fall. Other factors that could affect quarterly operating
results include:
. demand for and clinical acceptance of products;
. the timing and execution of customer contracts, particularly large
contracts that would materially affect Edwards Lifesciences' operating
results in a given quarter;
. the timing of sales of products;
. changes in foreign currency exchange rates;
. unanticipated delays or problems in introducing new products;
. competitors' announcements of new products, services or technological
innovations;
. changes in Edwards Lifesciences' pricing policies or the pricing policies
of its competitors;
. increased expenses, whether related to sales and marketing, raw materials
or supplies, product development or administration;
. adverse changes in the level of economic activity in the United States
and other major regions in which Edwards Lifesciences does business;
. costs related to possible acquisitions of technologies or businesses;
. Edwards Lifesciences' ability to expand its operations; and
. the amount and timing of expenditures related to expansion of Edwards
Lifesciences' operations.
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Edwards Lifesciences' inability to protect its intellectual property could
have a material adverse effect on its business.
Edwards Lifesciences' success and competitive position are dependent, in
part, upon its proprietary intellectual property. Edwards Lifesciences relies
on a combination of patents, trade secrets and nondisclosure agreements to
protect its proprietary intellectual property, and will continue to do so.
Although Edwards Lifesciences seeks to protect its proprietary rights through
a variety of means, Edwards Lifesciences cannot guarantee that the protective
steps it has taken are adequate to protect these rights. Patents issued to or
licensed by Edwards Lifesciences in the past or in the future may be
challenged and held invalid or not infringed by third parties. Competitors may
also challenge Edwards Lifesciences' patents.
Edwards Lifesciences will also rely on confidentiality agreements with
certain employees, consultants and other parties to protect, in part, trade
secrets and other proprietary information. These agreements could be breached
and Edwards Lifesciences may not have adequate remedies for any breach. In
addition, others may independently develop substantially equivalent
proprietary information or gain access to Edwards Lifesciences' trade secrets
or proprietary information.
Edwards Lifesciences will be required to spend significant resources to
monitor and enforce its intellectual property rights. Edwards Lifesciences may
not be able to detect infringement and may lose its competitive position in
the industry. In addition, competitors may design around Edwards Lifesciences'
technology or develop competing technologies. Intellectual property rights may
also be unavailable or limited in some foreign countries, which could make it
easier for competitors to capture increased market position.
Third parties may claim Edwards Lifesciences is infringing their intellectual
property, and Edwards Lifesciences could suffer significant litigation or
licensing expenses or be prevented from selling products.
During recent years, Baxter's competitors have been involved in substantial
litigation regarding patent and other intellectual property rights in the
medical device industry generally. In the future, Edwards Lifesciences may be
forced to defend itself against claims and legal actions alleging infringement
of the intellectual property rights of others. Because intellectual property
litigation can be costly and time consuming, Edwards Lifesciences'
intellectual property litigation expenses could be significant in the future.
Adverse determinations in any such litigation could subject Edwards
Lifesciences to significant liabilities to third parties, could require
Edwards Lifesciences to seek licenses from third parties and could, if such
licenses are not available, prevent Edwards Lifesciences from manufacturing,
selling or using certain of its products, any one of which could have a
material adverse effect on Edwards Lifesciences.
Third parties could also obtain patents that may require Edwards
Lifesciences to either re-design its products or, if possible, negotiate
licenses to conduct its business. If Edwards Lifesciences is unable to re-
design its products or obtain a license, Edwards Lifesciences may have to exit
a particular product offering.
Edwards Lifesciences has not previously operated as an independent company.
Edwards Lifesciences does not have an operating history as an independent
public company and Edwards Lifesciences' management has no experience, as a
group, in operating Edwards Lifesciences as a stand-alone business. While
Edwards Lifesciences has been profitable as a part of Baxter, there is no
assurance that as a stand-alone company revenues and profits will continue at
the same level. For more information, see "Combined Financial Statements."
The agreements governing Edwards Lifesciences' indebtedness will contain
restrictive covenants that may limit Edwards Lifesciences' future financial
flexibility.
In connection with the distribution, Edwards Lifesciences will borrow
approximately $[550] million. This indebtedness is reflected in the pro forma
financial information presented elsewhere in this information statement.
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The debt agreements relating to this indebtedness will contain restrictive
covenants which may limit or prohibit certain actions by Edwards Lifesciences.
For more information, see "Edwards Lifesciences Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources" and "Edwards Lifesciences' Unaudited Pro Forma Financial
Data."
Risks Related to the Health Care Industry
Edwards Lifesciences faces intense competition and consolidation within its
industry, and if Edwards Lifesciences does not compete effectively, its
business will be harmed.
The cardiovascular medical products industry is highly competitive. Edwards
Lifesciences competes with many companies, some of which have longer operating
histories, better brand or name recognition and greater access to financial
and other resources than Edwards Lifesciences. Furthermore, the industry is
characterized by intensive development efforts and rapidly advancing
technology. Edwards Lifesciences' present and future products could be
rendered obsolete or uneconomical by technological advances by one or more of
Edwards Lifesciences' current or future competitors or by alternative
therapies, including drug therapies. The future success of Edwards
Lifesciences will depend, in large part, on its ability to anticipate
technology advances and keep pace with other developers of cardiovascular
therapies and services. In addition, the medical devices industry has been
consolidating and as a result, transactions with customers are larger, more
complex and tend to involve more long-term contracts. The enhanced purchasing
power of these larger Edwards Lifesciences customers may also increase
downward pressure on product pricing. Competitive market forces may also
adversely affect the prices at which Edwards Lifesciences sells its products.
Many existing and potential customers for Edwards Lifesciences' products
have combined to form group purchasing organizations (GPOs). GPOs negotiate
pricing arrangements with medical supply manufacturers and distributors and
these negotiated prices are made available to a GPO's affiliated hospitals. If
Edwards Lifesciences is not one of the providers selected by a GPO, Edwards
Lifesciences may be precluded from making sales to members of a GPO for
several years. Even if Edwards Lifesciences is one of the selected providers,
Edwards Lifesciences may be at a disadvantage relative to other selected
providers that are able to offer volume discounts based on purchases of a
broader range of medical equipment and supplies. Further, Edwards Lifesciences
may be required to commit to pricing that has a material adverse effect on
sales and profit margins, the business, financial condition, and results of
operations of Edwards Lifesciences.
Edwards Lifesciences and its customers are subject to various governmental
regulations, and Edwards Lifesciences may incur significant expenses to
comply with these regulations and develop its products to be compatible with
these regulations.
The medical devices manufactured and marketed by Edwards Lifesciences are
subject to rigorous regulation by the FDA and numerous other federal, state
and foreign governmental authorities. The process of obtaining regulatory
approvals to market a medical device, particularly from the FDA and certain
foreign governmental authorities, can be costly and time consuming, and
approvals might not be granted for future products on a timely basis, if at
all. Delays in receipt of, or failure to obtain, approvals for future products
could result in delayed realization of product revenues or in substantial
additional costs which could have material adverse effects on Edwards
Lifesciences' business or results of operations. In addition, there can be no
assurance that Edwards Lifesciences will be or will continue to be in
compliance with applicable FDA and other material regulatory requirements. If
the FDA were to conclude that Edwards Lifesciences was not in compliance with
applicable laws or regulations, it could institute proceedings to detain or
seize Edwards Lifesciences' products, issue a recall, impose operating
restrictions, enjoin future violations and assess civil penalties against
Edwards Lifesciences, its officers or its employees and could recommend
criminal prosecution to the Department of Justice. Moreover, the FDA could
proceed to ban, or request recall, repair, replacement or refund of the cost
of, any device or product manufactured or distributed by Edwards Lifesciences.
Furthermore, both the FDA and foreign government regulators have become
increasingly stringent, and Edwards Lifesciences may be subject to more
rigorous regulation by governmental authorities in the future.
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If third-party payors decline to reimburse Edwards Lifesciences customers for
Edwards Lifesciences products or reduce reimbursement levels, Edwards
Lifesciences' ability to profitably sell its products will be harmed.
Edwards Lifesciences sells its products and services to hospitals, doctors
and other health care providers, all of which receive reimbursement for the
health care services provided to their patients from third-party payors, such
as government programs (both domestic and international), private insurance
plans and managed care programs. These third-party payors may deny
reimbursement if they determine that a device used in a procedure was not used
in accordance with cost-effective treatment methods, as determined by such
third-party payor, or was used for an unapproved indication. Third-party
payors may also decline to reimburse for experimental procedures and devices.
Many of Edwards Lifesciences' existing and future products are cost-effective
because they are intended to reduce overall health care costs over a long
period of time. Edwards Lifesciences cannot be certain whether these third-
party payors will recognize these cost savings or will merely focus on the
lower initial costs associated with competing therapies. If Edwards
Lifesciences' products are not considered cost-effective by third-party
payors, Edwards Lifesciences' customers may not be reimbursed for Edwards
Lifesciences' products.
In addition, third-party payors are increasingly attempting to contain
health care costs by limiting both coverage and the level of reimbursement for
medical products and services. There can be no assurance that levels of
reimbursement, if any, will not be decreased in the future, or that future
legislation, regulation or reimbursement policies of third-party payors will
not otherwise adversely affect the demand for and price levels of Edwards
Lifesciences' products. In Japan, Edwards Lifesciences' customers are
reimbursed for Edwards Lifesciences products under a government-operated
insurance system. Under this system, the Japanese government annually reviews
the reimbursement levels for products. If the Japanese government decides to
reduce reimbursement levels for Edwards Lifesciences' products, Edwards
Lifesciences' product pricing may be adversely affected.
Risks Related to Edwards Lifesciences' Separation from Baxter
The distribution may become a taxable event as a result of subsequent actions
or events undertaken by Edwards Lifesciences.
Although the distribution is expected to be free from United States federal
income tax as of the distribution date, it could be rendered taxable as a
result of subsequent actions or events. Edwards Lifesciences has agreed not to
undertake specified actions and has agreed that under particular circumstances
it will indemnify Baxter for taxes, liabilities and associated expenses
incurred as a result of any such actions or events. For more information, see
"Edwards Lifesciences' Relationship With Baxter After the Distribution--
Reorganization Agreement."
After Edwards Lifesciences' separation from Baxter, Edwards Lifesciences may
experience increased costs resulting from decreased purchasing power, which
could decrease its profitability overall.
Prior to Edwards Lifesciences' separation from Baxter, Edwards Lifesciences
was able to take advantage of Baxter's size and purchasing power in procuring
goods, services and technology, such as computer software licenses. As a
separate, stand-alone entity, Edwards Lifesciences may be unable to obtain
goods, services and technology at prices and on terms as favorable as those it
obtained prior to the distribution.
Edwards Lifesciences' new name is not yet recognized as a brand in the
marketplace, and as a result its product sales could suffer.
The loss of the "Baxter" brand name may hinder Edwards Lifesciences'
ability to establish new relationships. In addition, Edwards Lifesciences'
current customers, suppliers and partners may react negatively to the
separation from Baxter. In connection with Edwards Lifesciences' separation
from Baxter, Edwards Lifesciences will change the brand name and some
associated trademarks and trade names under which Edwards Lifesciences
conducts its business. This transition to a new name will occur rapidly in
certain geographic regions and over specified periods of time in other
regions. Edwards Lifesciences believes that sales of its products have
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benefited from the use of the "Baxter" brand name. In addition, although
Edwards Lifesciences believes that it will have all necessary rights to use
its new brand name, Edwards Lifesciences' rights to use the name may be
challenged by others.
Edwards Lifesciences will need to fund its future capital requirements
internally or obtain third-party financing.
Edwards Lifesciences believes that its capital requirements will vary
greatly from quarter to quarter, depending on, among other things, capital
expenditures, fluctuations in Edwards Lifesciences' operating results,
financing activities and build-up of inventories. In the past, Edwards
Lifesciences' working capital requirements have been met from internally-
generated cash flow. Edwards Lifesciences believes that the planned initial
debt financing, along with its future cash flow from operations, will be
sufficient to satisfy its working capital, capital expenditure and research
and development requirements for the foreseeable future. However, Edwards
Lifesciences may be required or choose to obtain additional debt or equity
financing in the future, especially for significant acquisitions. Future
equity financings could be dilutive to the existing holders of Edwards
Lifesciences' common stock. Future debt financings could involve restrictive
covenants that limit Edwards Lifesciences' ability to take certain actions. To
the extent Edwards Lifesciences must obtain financing, Edwards Lifesciences
cannot guarantee that financing will be available on favorable terms and any
financing may not be at interest rates as favorable as those historically
enjoyed by Baxter. See "Edwards Lifesciences Management's Discussion and
Analysis of Financial Condition and Results of Operations."
The transitional services being provided to Edwards Lifesciences by Baxter
may be difficult to replace without operational problems.
Baxter has agreed to provide certain administrative services to Edwards
Lifesciences in various countries around the world. These services include
information systems and telecommunications, human resources, finance and
accounting and other administrative services. In most cases, either party will
have the right after 21 months to terminate these arrangements either in whole
or in part. If these arrangements are terminated, Edwards Lifesciences will
need to seek alternative providers of these services. Edwards Lifesciences may
experience operational problems if it is not able to immediately replace these
services or as Edwards Lifesciences transitions to another provider's systems.
In addition, since the prices charged to Edwards Lifesciences under these
arrangements are intended to approximate the costs of providing the services,
the costs of obtaining services from third parties upon any termination could
be in excess of the costs payable by Edwards Lifesciences to Baxter.
Risks Related to Ownership of Edwards Lifesciences' Common Stock
Edwards Lifesciences' common stock has no prior market, and Edwards
Lifesciences cannot guarantee that Edwards Lifesciences' stock price will not
decline after the distribution.
There has been no prior trading market for Edwards Lifesciences' stock and
there can be no assurance as to the prices at which Edwards Lifesciences'
stock will trade before or after the date of the distribution. Until the
Edwards Lifesciences common stock is fully distributed and an orderly market
develops, the prices at which the Edwards Lifesciences common stock trades may
fluctuate significantly. Prices for the Edwards Lifesciences common stock will
be determined in the trading markets and may be influenced by many factors,
including:
. the depth and liquidity of the market for Edwards Lifesciences' stock;
. developments generally affecting the cardiovascular products market;
. investor perceptions of Edwards Lifesciences and its business;
. the financial results of Edwards Lifesciences;
. Edwards Lifesciences' dividend policy; and
. general economic and industry conditions.
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For more information, see "The Distribution--Market for Edwards
Lifesciences Common Stock."
In addition, the stock market, in general, frequently experiences extreme
volatility that is often seemingly unrelated to the operating performance of
particular companies. These broad market fluctuations may adversely affect the
trading price of Edwards Lifesciences common stock. In the past, securities
class action litigation often has been instituted against companies following
periods of volatility in the market price of their securities. Such litigation
could result in substantial costs and a diversion of management's attention
and resources.
Edwards Lifesciences' charter documents and Delaware law contain provisions
that may discourage takeover attempts which could preclude Edwards
Lifesciences' stockholders from receiving a change of control premium.
Edwards Lifesciences' certificate of incorporation and bylaws and Delaware
law contain anti-takeover provisions that could have the effect of delaying or
preventing changes in control that a stockholder may consider favorable. The
provisions in Edwards Lifesciences' charter documents include the following:
. a classified board of directors with three-year staggered terms;
. the ability of Edwards Lifesciences' board of directors to issue shares
of preferred stock and to determine the price and other terms, including
preferences and voting rights, of those shares without stockholder
approval;
. stockholder action to be taken only at a special or regular meeting;
. advance notice procedures for nominating candidates to Edwards
Lifesciences' board of directors or presenting matters at stockholder
meetings;
. removal of directors only for cause; and
. super-majority voting requirements to amend the charter.
The foregoing could have the effect of delaying, deferring or preventing a
change in control of Edwards Lifesciences, discouraging bids for Edwards
Lifesciences' common stock at a premium over the market price or harming the
market price of, and the voting and other rights of the holders of, Edwards
Lifesciences' common stock. Edwards Lifesciences also is subject to Delaware
laws that could have similar effects. One of these laws prohibits Edwards
Lifesciences from engaging in a business combination with any significant
stockholder for a period of three years from the date the person became a
significant stockholder unless specific conditions are met. In addition,
Edwards Lifesciences has adopted a stockholder rights plan. The preferred
stock purchase rights under this plan, if triggered, would cause substantial
dilution to any person or group who attempts to acquire a significant interest
in Edwards Lifesciences without advance approval of Edwards Lifesciences'
board of directors. For more information, see "Description of Edwards
Lifesciences Capital Stock" and "Certain Anti-Takeover Effects of Provisions
of Edwards Lifesciences' Certificate of Incorporation and Bylaws and of
Delaware Law."
FORWARD-LOOKING STATEMENTS
This information statement and other materials filed or to be filed by
Edwards Lifesciences with the SEC (as well as information included in oral
statements or other written statements made, or to be made, by Edwards
Lifesciences) contain, or will contain, disclosures which are "forward-looking
statements." Forward-looking statements include all statements that do not
relate solely to historical or current facts, and can generally be identified
by the use of words such as "may," "believe," "will," "expect," "project,"
"estimate," "anticipate," "plan" or "continue." These forward-looking
statements address, among other things, strategic objectives and the
anticipated effects of the distribution. These forward-looking statements are
based on the current plans and expectations of the management of Edwards
Lifesciences and are subject to a number of uncertainties and risks that could
significantly affect current plans and expectations and the future financial
condition and results of Edwards Lifesciences. These factors include, but are
not limited to:
. the highly competitive nature of the health care industry;
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. the efforts of insurers, health care providers and others to contain
health care costs;
. possible changes in United States or foreign programs that may further
limit reimbursements to health care providers and insurers;
. changes in federal, state or local regulation affecting the health care
industry;
. the possible enactment of federal or state health care reform;
. the departure of key executive officers from Edwards Lifesciences;
. claims and legal actions relating to product liability;
. fluctuations in the market value of Edwards Lifesciences common stock;
. changes in accounting practices;
. changes in general economic conditions and foreign currency
fluctuations;
. product demand and risks associated with industry acceptance;
. new product development and commercialization; and
. other risk factors described above.
As a consequence, current plans, anticipated actions and future financial
conditions and results may materially differ from those expressed in any
forward-looking statements made by or on behalf of Edwards Lifesciences. You
are cautioned not to unduly rely on such forward-looking statements when
evaluating the information presented in this information statement.
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EDWARDS LIFESCIENCES' BUSINESS
Overview
Edwards Lifesciences provides a comprehensive line of products and services
to treat late-stage cardiovascular disease. Edwards Lifesciences is the
worldwide leader in the design, development, manufacture and marketing of
tissue heart valves and heart valve repair products. Many products
manufactured by Edwards Lifesciences occupy leading positions around the
world. Edwards Lifesciences' engineers and scientists work closely with many
leading clinicians, which has allowed Edwards Lifesciences to develop and
commercialize new products and to pioneer new treatment techniques. Edwards
Lifesciences' sales are categorized in four main product areas: cardiac
surgery, critical care, vascular and perfusion products and services. Edwards
Lifesciences is headquartered in Irvine, California, and supplies its products
and services to customers in more than 80 countries, both through direct sales
and distributor relationships. In 1999, Edwards Lifesciences reported sales of
$905 million. Edwards Lifesciences' products are manufactured in locations
throughout the world, including Brazil, the Dominican Republic, Japan, The
Netherlands, Puerto Rico, Switzerland and the United States.
Cardiovascular disease is the number one cause of death in the world, and
is among the top three diseases in terms of health care spending in nearly
every country in the world. We believe that around the world, more than $200
billion is spent each year for the treatment of cardiovascular disease.
Cardiovascular disease is both progressive and pervasive; progressive, in that
it tends to worsen over time, and pervasive because it often affects an
individual's entire circulatory system. In its later stages, surgery
frequently becomes the preferred treatment option. In 1999, approximately one
million open heart surgeries were performed worldwide; of these, approximately
64% were coronary artery bypass graft (CABG) procedures, approximately 24%
were heart valve replacement or repair procedures, and approximately 12% were
related to the repair of congenital heart defects.
Edwards Lifesciences expects the following factors to contribute to the
growth in the number of patients being treated for advanced late-stage
cardiovascular disease:
. an increasing and aging population;
. the progressive nature of the disease; and
. continued economic development around the world, which permits more
resources to be dedicated to treating chronic health conditions.
Patients undergoing surgical treatment for cardiovascular disease are
likely to encounter a variety of Edwards Lifesciences' products and services.
For example, an individual with a heart valve disorder may have a faulty valve
re-shaped and repaired with an Edwards Lifesciences annuloplasty ring, or the
surgeon may elect to remove the valve altogether and replace it with one of
Edwards Lifesciences' handcrafted bioprosthetic heart valves, which can be
made of bovine or porcine tissue. If a patient undergoes other types of open
heart surgery, such as a CABG procedure, the functions of their heart and
lungs may be managed through the use of disposable products and equipment
offered in Edwards Lifesciences' perfusion products line. The perfusion
process may be performed by a clinical perfusionist employed by Edwards
Lifesciences' perfusion services, the largest organization of contract
perfusionists in the world. A patient with end-stage cardiovascular disease
who is awaiting a heart transplant may receive treatment from Edwards
Lifesciences' mechanical cardiac assist system. If the circulatory problems
are in the limbs rather than in the heart, the patients' procedure may involve
some of Edwards Lifesciences' vascular products, which include various types
of balloon-tipped catheters that are used to remove blood clots. Finally,
virtually all high-risk patients in the operating room or cardiac-care unit
are candidates for having their cardiac function monitored by Edwards
Lifesciences' critical care products.
Business Strategy
Treatment of cardiovascular disease represents a significant, growing
opportunity. Edwards Lifesciences' strategy is to develop, manufacture and
market products that result in improved therapeutic outcomes for patients with
late-stage cardiovascular disease. Edwards Lifesciences plans to aggressively
expand its leading product
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offerings and develop new products and therapies that improve the quality of
patient care and reduce overall treatment costs. The key aspects of Edwards
Lifesciences' strategy include:
Focus on Late-Stage Cardiovascular Disease Therapy. Cardiovascular
disease is the leading cause of death in the world. Edwards Lifesciences
has differentiated itself from other competitors by focusing primarily on
late-stage treatments, which tend to rely more heavily on the use of
devices and implantables and less on behavior-modification or drug therapy.
Edwards Lifesciences believes there will be significant opportunity for
growth as the aging global population increases and new technologies are
developed.
Invest in Technological Innovation. Clinical performance historically
has been the primary driver of commercial success for products used to
treat cardiovascular disease. Edwards Lifesciences' product portfolio
includes many leading technologies, and Edwards Lifesciences has been
credited with pioneering a variety of new treatment techniques. Edwards
Lifesciences plans to increase investment in research and development to
enhance existing technologies and to develop and commercialize new products
and therapies.
Expand Global Sales. Continuing economic development around the world
and expanded global adoption of established medical procedures will provide
attractive growth opportunities for Edwards Lifesciences. Edwards
Lifesciences expects to broaden its sales, service and distribution
channels globally to take advantage of these opportunities. Currently, an
estimated 44% of Edwards Lifesciences' sales are derived from outside of
the United States.
Evaluate Attractive Investment Opportunities. Edwards Lifesciences'
operations generate significant operating cash flow, some of which Edwards
Lifesciences plans to reinvest to accelerate growth and maximize long-term
return to its stockholders. Edwards Lifesciences plans to evaluate
investment opportunities based on the incremental return on invested
capital in excess of Edwards Lifesciences' weighted average cost of
capital. Edwards Lifesciences believes that its stockholders will recognize
the greatest appreciation in value through investments which generate the
highest incremental return.
Improve Existing Cost Structure. As an independent company, Edwards
Lifesciences will be required to anticipate and react to market changes and
eliminate inefficient processes and unnecessary costs. Edwards Lifesciences
is already pursuing a number of opportunities to improve its existing cost
structure and plans to continue identifying and implementing additional
cost-savings initiatives.
Pursue Strategic Opportunities. The cardiovascular medical products
industry is undergoing significant consolidation. Edwards Lifesciences
plans to continue pursuing attractive opportunities to expand its product
offerings and operations through acquisition. Possible acquisition
candidates will have innovative technology positions or well-established
product franchises. In addition, Edwards Lifesciences will continue to
critically assess all of its product lines and offerings to ensure that
each is contributing a return on invested capital that meets Edwards
Lifesciences' short-term and long-term objectives.
Edwards Lifesciences' Product and Service Offerings
Edwards Lifesciences' comprehensive line of cardiovascular products and
services are categorized into four main areas:
. Cardiac Surgery, encompassing heart valve therapy products, mechanical
cardiac assist systems, and cannulae and cardioplegia;
. Critical Care, featuring cardiac monitoring systems and disposables used
to evaluate cardiac output and measure blood pressure;
. Vascular, which includes products used in peripheral vascular surgery,
surgical accessories, implantable grafts, and endovascular graft systems
for treating aortic aneurysms; and
. Perfusion Products and Services, comprised of oxygenators and related
disposables used during cardiopulmonary bypass, cardiopulmonary bypass
hardware and perfusion services.
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Cardiac Surgery
Heart Valve Therapy
Edwards Lifesciences is the world's leading manufacturer of tissue heart
valves and valve repair products, which are used to replace or repair a
patient's diseased or defective heart valve. Edwards Lifesciences operates two
world-class manufacturing facilities in Irvine, California, and Horw,
Switzerland, producing pericardial and porcine valves from biologically inert
animal tissue sewn onto proprietary wireforms or stents.
An estimated 270,000 patients worldwide will have heart valve surgery in
2000. The procedure can extend lives and provide a higher quality of life than
many patients have experienced in years. Depending on a patient's valve
condition as well as other factors such as overall health, age and physical
activity level, a surgeon may elect to replace a malfunctioning valve with a
prosthetic heart valve made either of metal or tissue, or may perform a
surgical repair of the heart valve, a procedure known as an annuloplasty.
Edwards Lifesciences expects the number of valve procedures to continue to
grow due, in part, to an aging population; the high incidence in developing
nations of rheumatic fever, which often leads to valvular problems; and the
global growth of cardiovascular disease. Increased health care spending around
the world, and improved diagnostic techniques that allow physicians to detect
valve problems sooner, also are expected to contribute to an increasing number
of heart valve procedures. Edwards Lifesciences has been a pioneer in the
development and commercialization of tissue valves and repair products and is
the world's leader in these areas.
Although patients of any age may require valve surgery, younger patients
are more likely to receive a human-donated hemograft, mechanical valve or
repair product, while older patients are more frequently candidates for tissue
valves. Tissue valves can offer considerable lifestyle advantages over
mechanical valves, in that mechanical valve patients must maintain a life-long
regimen of blood-thinning medications. These medications increase the
likelihood of bleeding and related complications, potentially impairing their
physical activity levels or impacting other health conditions. Implantation
rates for tissue valves are exceeding overall valve procedure growth, as
surgeons continue to demonstrate their preference for tissue valves for
certain types of patients.
The core of Edwards Lifesciences' tissue product line is the Carpentier-
Edwards pericardial valve, made from the tissue that surrounds a cow's heart.
The most widely prescribed tissue heart valve due to its proven durability and
performance is the Carpentier-Edwards pericardial valve and is the only
pericardial valve available in the United States.
While stented tissue valves represent the vast majority of tissue implants
and the greatest opportunity for growth, some physicians may choose an
unstented porcine tissue valve for select patients. Edwards Lifesciences
introduced the Prima Plus, the first stentless valve, nearly a decade ago and
continues to offer this product outside of the United States. Edwards
Lifesciences also offers mechanical valves, including the Edwards MIRA bi-
leaflet mechanical valve, and the Starr-Edwards silastic ball valve which
Edwards Lifesciences launched in the 1960s as the first commercially available
artificial heart valve. The Prima Plus valve is currently in clinical trials
in the United States as part of the FDA approval process and Edwards
Lifesciences is awaiting approval to commence clinical trials of the Edwards
MIRA valve in the United States.
In addition to its replacement valves, Edwards Lifesciences is the
worldwide leader in heart valve repair products. Through extended product
development, training and promotion, Edwards Lifesciences has been a major
force in the rapid acceptance of heart valve repair procedures, also known as
annuloplasty, as an alternative to heart valve replacement. Through its
Carpentier-Edwards and Cosgrove-Edwards annuloplasty systems, Edwards
Lifesciences offers the broadest offering of heart valve repair products in
the industry.
Mechanical Cardiac Assist
While tens of thousands of patients worldwide need heart transplants each
year, only a fraction--about 4,000 individuals--actually receive a donor
organ. The others must rely on continuous medication therapy or mechanical
assist while they wait for an organ.
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Edwards Lifesciences' Novacor Left Ventricular Assist System (LVAS) is a
small, electromechanical pump that takes over the hearts pumping function for
end-stage heart disease patients requiring a heart transplant. The device,
which is implanted in the abdomen and surgically attached to the heart's left
ventricle, is regulated by an external controller and battery pack that
automatically responds to a patient's changing heartbeat and circulatory
demands. The LVAS has been shown to add months, and in some cases years, to
patients' lives while they await their donor hearts.
To date, more than 1,000 patients worldwide have received the Novacor LVAS.
Approved in Europe since 1994 as both a "bridge" for patients awaiting
transplant, as well as a permanent "alternative" to transplant, the Novacor
LVAS was approved in 1998 by the FDA for the "bridge" application only.
Although Edwards Lifesciences considers the achievement of the "bridge"
approval in the United States to be a critical milestone toward gaining
broader clinical acceptance of mechanical assist systems, it recognizes the
significantly greater patient need in the "alternative" indication and
continues to focus its resources on pursuing this opportunity.
Cannulae and Cardioplegia
Edwards Lifesciences, through the 1997 acquisition of Research Medical,
Inc., is a leading manufacturer of cannulae and cardioplegia products used
during cardiac surgery. Cannulae are various types of specialized tubing that
are used in the surgical field to transport blood from the heart to the
cardiopulmonary pump and oxygenator and to return the blood to the circulatory
system. While there are standard configurations of cannulae, many are custom-
designed to suit individual surgeons' requirements. Edwards Lifesciences
offers more than 1,200 types of cannulae and accessories to facilitate the
perfusion process.
Edwards Lifesciences also offers cardioplegia products that are used to
preserve the heart muscle tissue during open heart surgery. Preservation is
necessary because during traditional open heart surgery, the heart is
disconnected from the body's circulatory system and unless some form of
preservation or heart cooling is employed, the heart tissue will be damaged.
Through its close work with clinicians, Edwards Lifesciences helped pioneer a
new methodology for administering cardioplegia through a retrograde approach
that delivers cardioplegia solutions to the coronary sinus and venous side of
the heart, thereby bypassing the blocked coronary arteries.
Edwards Lifesciences' more recent developments include a line of cannulae
to facilitate vacuum-assisted venous drainage during perfusion, and dispersion
aortic cannulae, which are used to reduce the pressure of blood flow returning
to the body in the wall of the aorta. Edwards Lifesciences also has introduced
a number of products to facilitate coronary artery bypass surgery when it is
performed on a beating heart. Included among these products is the AnastaFlo
coronary shunt, which is used to redirect blood away from the suturing site,
and the VisuFlo humidifying blower, which keeps the surgical site dry and
optimizes the surgeon's visual field during a procedure.
Critical Care
Edwards Lifesciences is also a world leader in hemodynamic monitoring
systems that are used to measure a patient's heart function in surgical and
intensive care settings. Hemodynamic monitoring enables a clinician to balance
the oxygen supply and demand of a critically ill patient. Failure to
appropriately manage a patient's hemodynamic needs can cause organ injury,
organ failure, or death. Edwards Lifesciences' systems provide important added
clinical value by serving as a diagnostic tool that prompts clinicians to act
when a patient's hemodynamic balance becomes disrupted.
In addition, hemodynamic monitoring plays an important role in assuring
that the heart function of millions of patients who have pre-existing
cardiovascular conditions or other critical illnesses is optimized before they
undergo a surgical procedure. The vast majority of high-risk patients
undergoing open heart, major vascular, major abdominal, neurological, and
orthopedic procedures are candidates for Edwards Lifesciences' bedside
monitoring technologies, which are often deployed before, during, and after
surgery.
Edwards Lifesciences is credited with pioneering the practice of
hemodynamic monitoring with the launch of the original Swan-Ganz catheter in
the 1970s. Today, we believe that Edwards Lifesciences' extensive line of
monitoring catheters and bedside patient monitoring equipment continue to be
considered the standard in critical
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care medicine. Edwards Lifesciences has played a major role in evolving
critical care monitoring technologies, selling more than 20 million catheters
and monitors worldwide, with new generations of products performing
increasingly sophisticated functions.
Edwards Lifesciences also is a global leader in the broader field of
disposable pressure monitoring devices and has introduced a line of innovative
products enabling closed-loop arterial blood sampling to protect both patients
and clinicians from the risk of infection.
Recently Edwards Lifesciences initiated the European launch of Vantex, the
first anti-microbial central venous catheter, manufactured from a patented,
antimicrobial material. Central venous catheters are the primary route for
fluid and medication delivery to patients undergoing major surgical procedures
and/or intensive care. Bloodstream infections related to central venous
catheters have increased significantly over the past 10 years, and addressing
this life-threatening and costly problem is another example of Edwards
Lifesciences' leadership in critical care.
Edwards Lifesciences recognizes that assessing a patient's physiological
balance and minimizing the risk of infection will remain fundamental
requirements for successful treatment of critically ill patients. Edwards
Lifesciences will continue to leverage its strength in this area and explore
further opportunities in the diagnostics and therapeutic delivery areas.
Vascular
The pervasive nature of cardiovascular disease means that the conditions
that occur inside of the heart are often duplicated elsewhere in a patient's
body. Outside of the heart, the network of veins and arteries are collectively
referred to as the body's vascular system. Atherosclerotic disease is one
common circulatory condition which involves the thickening of blood-carrying
vessels and the formation of circulation-restricting plaque, clots, and other
substances, and often occurs concurrently in the vascular system as well as in
the heart. When the abdomen, arms or legs are impacted, the diagnosis is
usually peripheral vascular disease (PVD), which occurs in millions of
patients worldwide, and in very advanced cases, may lead to amputation of
patients' limbs.
Edwards Lifesciences manufactures and sells a variety of products used to
treat PVD, including a line of balloon-tipped, catheter-based products, as
well as surgical clips and inserts, angioscopy equipment, and artificial
implantable grafts. Edwards Lifesciences' Fogarty line of embolectomy
catheters has been an industry standard for removing blood clots from
peripheral blood vessels for more than 30 years.
Edwards Lifesciences is also working on a number of new innovative
technologies to treat PVD. For example, Edwards Lifesciences' Side Branch
Occlusion system was launched in 1998 to help surgeons restore circulation in
the legs. By working within the saphenous veins, the system eliminates the
traditional incision along the entire length of the leg and the extensive
complications usually associated with this procedure.
Another significant area of interest and investment has been the
development of endovascular grafts. Edwards Lifesciences has developed the
Lifepath AAA System to treat potentially life-threatening abdominal aortic
aneurysms (AAA) with an endovascular approach. An abdominal aortic aneurysm
can form in the aorta, the body's main circulatory channel, when a portion of
the aortic wall becomes weakened and begins bulging outward. Often, the
aneurysm grows until it poses a life-threatening risk of rupturing. The
Lifepath AAA System treats abdominal aortic aneurysm by inserting an
endovascular graft which replaces the wall of the aorta in the damaged area.
By accessing and repairing the aneurysm from within the aorta, rather than
making a major incision that exposes most of the body's internal organs, the
endovascular procedure is less traumatic and invasive than standard aortic
repair surgery. The Lifepath AAA is approved for commercial sale in Europe and
Australia. It remains in clinical trials in the United States, with an
anticipated commercial approval within the next two years.
Perfusion Products and Services
During the majority of open heart surgical procedures, a patient's heart is
stopped, and the body's blood flow and oxygenation needs are managed through a
series of pumps, tubing and filters attached to a
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cardiopulmonary bypass machine. After the surgery is completed, the heart is
revived after the normal blood flow through the heart and lung is restored.
The practice of bypassing the heart and lungs externally during surgery is
known as extracorporeal circulation.
Edwards Lifesciences develops, manufactures and markets a diverse line of
disposable products used during extracorporeal circulation, including
oxygenators, blood containers, filters and related devices. Many of the
disposable products in Edwards Lifesciences' perfusion product line are coated
with Edwards Lifesciences' patented Duraflo heparin treatment, which has been
shown to improve the compatibility of medical devices used in cardiopulmonary
bypass procedures with a patient's blood.
Edwards Lifesciences recently expanded its offering of perfusion products
to include hardware with the acquisition of the COBE Century Heart Lung
Machine business, one of the most popular heart-lung machine systems for
cardiopulmonary bypass. Edwards Lifesciences also recently acquired and now
offers the Metaplus Blood Pump System, a next-generation cardiopulmonary
bypass circuit.
Although Edwards Lifesciences had been manufacturing and distributing
perfusion products for years, it did not become active in the service side of
the perfusion business until 1996, when it merged two previously acquired
contract perfusion service companies, PSICOR, Inc. and SETA, Inc., into one
company operating as an indirect, wholly owned subsidiary of Edwards
Lifesciences. Through this subsidiary, coupled with the addition of several
smaller regional perfusion service providers in the United States and Europe,
Edwards Lifesciences now owns or operates the world's largest practice of
contract perfusionists, employing more than 400 clinical perfusionists who
perform an aggregate of more than 50,000 perfusion cases for open heart
surgery per year in the United States. In all but one state, Edwards
Lifesciences' perfusion services allow hospitals to purchase perfusion
supplies and capital equipment as well as contract for highly trained
personnel who perform perfusion during open heart and transplant surgeries,
blood salvage, and intra-aortic balloon pumping procedures.
Competition
The medical devices industry is highly competitive. Edwards Lifesciences
competes with many companies ranging from small start-up enterprises to
companies that are larger and more established than Edwards Lifesciences with
access to significant financial resources. Furthermore, rapid product
development and technological change characterize the market in which Edwards
Lifesciences competes. The present or future products of Edwards Lifesciences
could be rendered obsolete or uneconomical by technological advances by one or
more of Edwards Lifesciences' present or future competitors or by other
therapies, including drug therapies. Edwards Lifesciences must continue to
develop and acquire new products and technologies to remain competitive in the
cardiovascular medical devices industry.
Edwards Lifesciences believes that it competes primarily on the basis of
product reliability and performance, product features that enhance patient
benefit, customer and sales support, and cost-effectiveness.
The cardiovascular segment of the medical device industry is dynamic and
currently undergoing significant change due to cost-of-care considerations,
regulatory reform, industry and customer consolidation, and evolving patient
needs. The ability to provide cost-effective products and services that
improve clinical outcomes is becoming increasingly important for medical
device manufacturers.
Edwards Lifesciences' products and services face substantial competition
from a number of companies. In cardiac surgery, the primary competitors
include St. Jude Medical, Inc., Medtronic, Inc., and Sulzer Medica, Ltd. In
critical care, Edwards Lifesciences' principal competitors include Abbott
Laboratories Inc. and Arrow International, Inc., as well as a number of
smaller companies. In vascular, Edwards Lifesciences' primary competitors
include W.L. Gore and Associates, Inc. and Applied Medical Resources
Corporation. In perfusion products, Edwards Lifesciences' major competitors
include Medtronic, Inc., Sorin Biomedica Ltd. and Terumo Corporation. In
addition, while Edwards Lifesciences is also the leading contract supplier of
perfusion services in the United States, there are many small regional
contract service providers who compete with Edwards Lifesciences for contracts
in those hospitals that outsource perfusion services.
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Sales and Marketing
Edwards Lifesciences has a number of broad product lines which require a
sales and marketing strategy that is tailored to its customers in order to
deliver high quality, cost-effective products and services to all of its
customers worldwide. We believe that Edwards Lifesciences' portfolio includes
some of the most respected product brands in cardiovascular devices today,
including Carpentier-Edwards, Cosgrove-Edwards, Duraflo, Fogarty, Starr-
Edwards and Swan-Ganz. Because of the diverse global needs of the population
that Edwards Lifesciences serves, Edwards Lifesciences' distribution system
includes a direct sales force and independent distributors. In 1999,
approximately 12% of Edwards Lifesciences' net sales were from sales to
Allegiance Corporation, which serves as a distributor of Edwards Lifesciences
products in the United States. The Allegiance distribution agreement extends
until December 31, 2000 and provides for distribution of Edwards Lifesciences'
products by Allegiance on a generally non-exclusive basis for a percentage of
the price paid to Edwards Lifesciences by Allegiance for the products.
Allegiance distributes Edwards Lifesciences products to a variety of
customers, including hospitals, surgical centers and other health care
institutions. Edwards Lifesciences is not dependent on any single end-user
customer and no single end-user customer accounted for more than 10% of
Edwards Lifesciences' net sales in 1999.
Sales personnel work closely with the primary decision makers who purchase
Edwards Lifesciences' products, whether they are physicians, material
managers, nurses, biomedical staff, hospital administrators or purchasing
managers. Additionally, Edwards Lifesciences' sales force actively pursues
approval of Edwards Lifesciences as a qualified supplier for hospital group
purchasing organizations that negotiate contracts with suppliers of medical
products. Edwards Lifesciences already has contracts with a number of national
buying groups and is working with a growing number of regional buying groups
that are emerging in response to cost containment pressures and health care
reform in the United States.
United States
In the United States, Edwards Lifesciences sells substantially all of its
products through its direct sales force. Substantially all of its direct sales
force consists of employees of Edwards Lifesciences. In 1999, 56% of Edwards
Lifesciences' sales were derived from sales to customers in the United States.
International
In 1999, 44% of Edwards Lifesciences' sales were derived internationally
through its direct sales force and independent distributors. Edwards
Lifesciences sells its products in more than 80 countries. Major international
countries in which Edwards Lifesciences' products are sold include: Australia,
Belgium, Canada, France, Germany, Italy, Japan, The Netherlands, Spain and the
United Kingdom. The sales and marketing approach in international geographies
varies depending on each country's size and state of development. See "Edwards
Lifesciences' Relationship with Baxter After the Distribution--Distribution
Agreements."
Raw Materials and Manufacturing
Edwards Lifesciences uses a diverse and broad range of raw and organic
materials in the design, development and manufacture of its products. Edwards
Lifesciences purchases certain of the materials and components used in
manufacturing its products from external suppliers. In addition, Edwards
Lifesciences purchases certain supplies from single sources for reasons of
quality assurance, sole source availability, cost effectiveness or constraints
resulting from regulatory requirements. Edwards Lifesciences works closely
with its suppliers to assure continuity of supply while maintaining high
quality and reliability. Edwards Lifesciences uses a diverse and broad range
of raw and organic materials in the design, development and manufacture of its
products. Edwards Lifesciences purchases certain of the materials and
components used in manufacturing its products from external suppliers. In
addition, Edwards Lifesciences purchases certain supplies from single sources
for reasons of quality assurance, cost effectiveness or constraints resulting
from regulatory requirements. Edwards Lifesciences works closely with its
suppliers to assure continuity of supply while maintaining high quality and
reliability. Alternative supplier options are generally considered and
identified, although Edwards Lifesciences does not typically pursue regulatory
qualification of alternative sources due to the strength of its existing
supplier relationships and the time and expense associated with the regulatory
process. Although a
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change in suppliers could require significant effort or investment by Edwards
Lifesciences in circumstances where the items supplied are integral to the
performance of Edwards Lifesciences' products or incorporate unique
technology, management does not believe that the loss of any existing supply
contract would have a material adverse effect on the Company.
Edwards Lifesciences' non-implantable products are manufactured from man-
made raw materials including resins, chemicals, electronics and metal. Most of
Edwards Lifesciences' heart valve therapy products are manufactured from
natural tissues harvested from animal tissue, as well as man-made materials.
In an effort to reduce potential product liability exposure, certain suppliers
have announced that they intend to limit or terminate sales of certain
materials and parts to companies that manufacture implantable medical devices.
In 1998, Congress enacted the Biomaterials Access Assurance Act to help
ensure a continued supply of raw materials and component parts essential to
the manufacture of medical devices by allowing for rapid dismissal of claims
against suppliers in product liability lawsuits if certain facts and
circumstances exist. This law has not yet had a material impact, and it is not
possible to assess the long-term impact it will have, on the continued
availability of raw materials. The inability to develop satisfactory
alternatives, if required, or a reduction or interruption in supply or a
significant increase in the price of materials or components could have a
material adverse effect on Edwards Lifesciences' business.
Quality Assurance
Edwards Lifesciences is committed to providing high quality products to its
customers. To meet this commitment, Edwards Lifesciences has implemented
modern quality systems and concepts throughout the organization. The quality
system starts with the initial product specification and continues through the
design of the product, component specification processes and the
manufacturing, sales and servicing of the product. The quality system is
designed to build in quality and to utilize continuous improvement concepts
throughout the product life.
Edwards Lifesciences' operations are certified under the applicable
international quality systems standards, such as ISO 9001, ISO 9002, EN46001
and EN46002. ISO 9001 and 9002 require, among other items, an implemented
quality system that applies to component quality, supplier control and
manufacturing operations. In addition, ISO 9001 and EN46001 require an
implemented quality system that applies to product design. These
certifications can be obtained only after a complete audit of a company's
quality system has been conducted by an independent outside auditor. These
certifications require that Edwards Lifesciences' facilities undergo periodic
reexamination.
Research and Development
Edwards Lifesciences is engaged in ongoing research and development to
introduce clinically advanced new products, to enhance the effectiveness, ease
of use, safety and reliability of its existing products and to expand the
applications of its products as appropriate. Edwards Lifesciences is dedicated
to developing novel technologies that will furnish health care providers with
a more complete line of products to treat late-stage cardiovascular disease.
Edwards Lifesciences' research and development activities are carried out
primarily in facilities located in the United States. Edwards Lifesciences'
research and development staff is focused on product design and development,
quality, clinical research and regulatory compliance. To pursue primary
research efforts, Edwards Lifesciences has developed alliances with several
leading research institutions and universities. Edwards Lifesciences also
works with leading clinicians around the world in conducting scientific
studies on Edwards Lifesciences' existing and developing products. These
studies include clinical trials which provide data for use in regulatory
submissions and post-market approval studies involving applications of Edwards
Lifesciences' products.
Edwards Lifesciences spent $55 million on research and development (6% of
total sales) in 1999, approximately $56 million (7% of total sales) in 1998
and approximately $53 million (6% of total sales) in 1997. These funds have
been used primarily to develop new products and to improve and expand the
applications for existing products.
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Proprietary Technology
Patents and other proprietary rights are important to the success of
Edwards Lifesciences' business. Edwards Lifesciences also relies upon trade
secrets, know-how, continuing technological innovations and licensing
opportunities to develop and maintain its competitive position. All employees
and consultants that have access to confidential and proprietary information,
or that are employed to perform duties or services that are likely to result
in inventions, are required to sign either our standard employment agreement
or our standard consulting agreement. In addition, all third parties that are
given access to confidential and proprietary information are required to sign
our standard outgoing confidentiality agreement. Edwards Lifesciences reviews
third-party patents and patent applications in an effort to develop an
effective patent strategy, identify licensing opportunities and monitor the
patent claims of others.
The medical device industry has been engaged in substantial litigation in
recent years regarding patent and other intellectual property rights in the
medical device industry. From time to time, Edwards Lifesciences may be
subject to claims of, and legal actions alleging, infringement of the patent
rights of others. While Edwards Lifesciences has taken numerous steps to
continuously review the patents of others with regard to its products, there
can be no assurance that all pertinent third-party patents have been
identified. An adverse outcome with respect to any one or more of these claims
or actions could have a material adverse effect on Edwards Lifesciences.
Edwards Lifesciences owns approximately 294 issued U.S. patents and 110
pending U.S. patent applications, 444 issued foreign patents and 300 pending
patent applications, and has licensed approximately 59 issued U.S. patents, 31
pending U.S. patent applications, 168 issued foreign patents and 75 pending
foreign patent applications, that relate to aspects of the technology
incorporated in many of Edwards Lifesciences' products. This proprietary
protection often affords Edwards Lifesciences the opportunity to enhance its
position in the marketplace by precluding its competitors from using or
otherwise exploiting Edwards Lifesciences' technology.
Most of Edwards Lifesciences' products are protected in some way by issued
patents and/or pending patent applications. Edwards Lifesciences has several
key patents and pending patent applications in the United States, Europe,
Australia, Japan and Canada on improvements to the Carpentier-Edwards
pericardial valve which enhance and extend the original patent coverage on
such product. Although the original pericardial patent will be expiring in
2002 in most countries, because of design improvements made since the original
filing, management does not expect this to have a significant effect on its
business. Edwards Lifesciences also has many important United States and
foreign patents and pending patent applications related to mitral valve repair
and, in particular, patent coverage on the Cosgrove-Edwards annuloplasty
system and the Carpentier-Edwards physio annuloplasty ring. The AAA Lifepath
System for endovascular repair of aortic abdominal aneurysms is an important
technology which is protected by at least ten issued or allowed United States
patents and foreign applications pending in Europe, Canada, Japan and
Australia. Edwards Lifesciences also has numerous key United States and
foreign patents and patent applications that cover catheters, systems and
methods for measuring and monitoring continuous cardiac output (CCO) and
vascular access products, including combinations of introducers and central
venous catheters. Many of the CCO and vascular access patents were issued only
recently and are expected to protect Edwards Lifesciences' intellectual
property rights in such technologies for the next thirteen to seventeen years.
Edwards Lifesciences' Duraflo treatment technology plays a significant role in
the success of its perfusion products and services. The earliest Duraflo
patents held in the United States and Japan do not expire until 2005-2006, and
Edwards Lifesciences is in the process of developing further improvements. In
addition, Edwards Lifesciences has purchased and licensed extensive United
States and foreign patents and patent applications in the angiogenesis field.
Although some of Edwards Lifesciences' patents are due to expire within the
next five years, Edwards Lifesciences' patent strategy is to file improvement
patent applications and, in some cases, additional patent applications
covering new aspects or modifications of the affected products, or line
extensions of these products. As a result, the duration of the patents
covering Edwards Lifesciences' products can extend up to twenty years
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from the date of filing of the patent application. Edwards Lifesciences
management does not believe that the expiration of any one or more of its
patents that are due to expire in the next five years will cause a material
adverse effect on the sales of Edwards Lifesciences' products. In addition,
Edwards Lifesciences is a party to several license agreements with unrelated
third parties pursuant to which it has obtained, for varying terms, the
exclusive or non-exclusive rights to certain patents held by such third
parties in consideration for cross-licensing rights or royalty payments.
Edwards Lifesciences has also granted various rights in its own patents to
others under license agreements. There can be no assurance that pending patent
applications will result in issued patents. Competitors may challenge the
validity and enforceability of, or circumvent these patents issued to or
licensed by Edwards Lifesciences. Such patents may also be found to be not
infringed and thus insufficiently broad to provide Edwards Lifesciences with a
competitive advantage.
Edwards Lifesciences actively monitors the products of its competitors for
possible infringement of Edwards Lifesciences' owned and/or licensed patents.
Historically, litigation has been necessary to enforce certain patent rights
held by Edwards Lifesciences and Edwards Lifesciences plans to continue to
defend and prosecute its rights with respect to such patents. However, Edwards
Lifesciences' efforts in this regard may not be successful. In addition,
patent litigation could result in substantial cost to and diversion of effort
by Edwards Lifesciences. Edwards Lifesciences also relies upon trade secrets
for protection of its confidential and proprietary information. Others may
independently develop substantially equivalent proprietary information and
techniques, and third parties may otherwise gain access to Edwards
Lifesciences' trade secrets.
It is Edwards Lifesciences' policy to require certain of its employees,
consultants and other parties to execute confidentiality and invention
assignment agreements upon the commencement of employment, consulting or other
relationships with Edwards Lifesciences. However, these agreements may not
provide meaningful protection against, or adequate remedies for, the
unauthorized use or disclosure of Edwards Lifesciences' trade secrets.
Edwards Lifesciences has the following registered trademarks and non-
registered trademarks that are referred to in this information statement:
Registered trademarks:
Novacor(R)
AnastaFlo(R) Duraflo(R) Starr-Edwards(R)
Bentley(R) Edwards MIRA(R) Swan-Ganz(R)
Carpentier-Edwards(R) Fogarty(R) Vantex(R)
Cosgrove-Edwards(R) Lifepath AAA(R) System
Non-registered trademarks:
Century(TM) Metaplus(TM)
Edwards Prima Plus(TM) Side Branch Occlusion(TM)
Edwards Prima(TM) Plus System
Many of these trademarks have also been registered for use in certain
foreign countries where registration is available and Edwards Lifesciences has
determined it is commercially advantageous to do so.
Government Regulation and Other Matters
Regulatory Approvals
In the United States, the FDA, among other government agencies, is
responsible for regulating the introduction of new medical devices. The FDA
regulates laboratory and manufacturing practices, labeling and record keeping
for medical devices, and review of required manufacturers' reports of adverse
experience to identify potential problems with marketed medical devices. Many
of the devices that Edwards Lifesciences develops and markets are in a
category for which the FDA has implemented stringent clinical investigation
and pre-market approval requirements. The process of obtaining FDA approval to
market a product can be resource-intensive, lengthy and costly. FDA review may
involve substantial delays that adversely affect the marketing and sale of
Edwards Lifesciences' products. Any delay or acceleration experienced by
Edwards Lifesciences in obtaining regulatory approvals to conduct clinical
trials or in obtaining required market clearances (especially with respect to
significant products in the regulatory process that have been discussed in
public announcements) may affect Edwards Lifesciences' operations or the
market's expectations for the timing of such events and, consequently, the
market price for Edwards Lifesciences' common stock.
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The FDA has the authority to halt the distribution of certain medical
devices, detain or seize adulterated or misbranded medical devices, or order
the repair, replacement or refund of the costs of such devices. The FDA may
also require notification of health professionals and others with regard to
medical devices that present unreasonable risks of substantial harm to the
public health. The FDA may enjoin and restrain certain violations of the Food,
Drug and Cosmetic Act and the Safe Medical Devices Act pertaining to medical
devices, or initiate action for criminal prosecution of such violations.
Moreover, the FDA administers certain controls over the export of medical
devices from the United States and the importation of devices into the United
States.
Medical device laws are also in effect in the other countries in which
Edwards Lifesciences does business outside of the United States. These range
from comprehensive device approval requirements for some or all of Edwards
Lifesciences' medical device products to requests for product data or
certifications. The number and scope of these requirements are increasing.
Health Care Initiatives
Government and private sector initiatives to limit the growth of health
care costs, including price regulation and competitive pricing, are continuing
in many countries where Edwards Lifesciences does business, including the
United States. As a result of these changes, the marketplace has placed
increased emphasis on the delivery of more cost-effective medical therapies.
Although Edwards Lifesciences believes it is well positioned to respond to
changes resulting from this worldwide trend toward cost containment, proposed
legislation and/or changes in the marketplace could have an adverse impact on
future operating results.
Diagnostic-related groups' reimbursement schedules regulate the amount the
United States government, through the United States Health Care Financing
Administration, will reimburse hospitals and doctors for the in-patient care
of persons covered by Medicare. In response to rising Medicare and Medicaid
costs, several legislative proposals in the United States have been advanced
which would restrict future funding increases for these programs. While
Edwards Lifesciences has been unaware of significant domestic price resistance
directly as a result of the reimbursement policies of diagnostic-related
groups, changes in these reimbursement levels and processes could have an
adverse effect on Edwards Lifesciences' domestic pricing flexibility.
In keeping with the increased emphasis on cost-effectiveness in health care
delivery, the current trend among hospitals and other customers of medical
device manufacturers is to consolidate into larger purchasing groups to
enhance purchasing power. The medical device industry has also experienced
some consolidation, partly in order to offer a broader range of products to
large purchasers. As a result, transactions with customers are larger, more
complex and tend to involve more long-term contracts than in the past. The
enhanced purchasing power of these larger customers may also increase the
pressure on product pricing, although management is unable to estimate the
potential impact at this time.
Legal Matters
Edwards Lifesciences operates in an industry susceptible to significant
product liability claims. In recent years, there has been an increased public
interest in product liability claims for implanted or other medical devices.
These claims may be brought by individuals seeking relief for themselves or,
increasingly, by groups seeking to represent a class. In addition, product
liability claims may be asserted against Edwards Lifesciences in the future
arising out of events not known to management at the present time. Management
believes that Edwards Lifesciences' risk management practices, including
insurance coverage, are adequate to protect against potential product and
professional liability losses.
In 1996, government authorities in Germany began an investigation into
certain business and accounting practices by heart valve manufacturers. As a
part of this investigation, documents were seized from Edwards Lifesciences
and certain other manufacturers. Based upon currently available information,
Edwards Lifesciences does not expect these investigations to have a materially
adverse impact on the company's financial position, results of operations or
liquidity.
Edwards Lifesciences is also subject to various environmental laws and
regulations both within and outside of the United States. The operations of
Edwards Lifesciences, like those of other medical device companies,
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involve the use of substances regulated under environmental laws, primarily in
manufacturing and sterilization processes. While it is difficult to quantify
the potential impact of compliance with environmental protection laws,
management believes that such compliance will not have a material impact on
Edwards Lifesciences' financial position, results of operations or liquidity.
Properties
The locations and uses of the major properties of Edwards Lifesciences are
as follows:
<TABLE>
<C> <C> <S>
North America
Irvine, California (1) Headquarters, Research and Development,
Regulatory and Clinical Affairs and
Manufacturing
Oakland, California (2) Administrative, Research and Development,
Regulatory and Clinical Affairs and
Manufacturing
San Diego, California (2) Administrative, Service Center and Warehouse
Memphis, Tennessee (1) Distribution and Logistics
Midvale, Utah (1) Administrative, Research and Development,
Regulatory Affairs and Manufacturing
Haina, the Dominican Republic (2) Manufacturing
Anasco, Puerto Rico (2) Manufacturing
Europe
Uden, The Netherlands (1) Warehouse, Distribution, Manufacturing and
Offices
Horw, Switzerland (2) Manufacturing
Lausanne, Switzerland (2) European Headquarters
South America
Sao Paulo, Brazil (2) Manufacturing
</TABLE>
- --------
(1) Owned property.
(2) Leased property.
The leases for the leased properties set forth above generally expire
within eight years. The Oakland, California lease expires in 2002; the San
Diego, California lease expires in 2006; the Dominican Republic lease expires
in 2006; the Puerto Rico lease expires in 2008; and the Horw, Switzerland
lease expires in 2001. The Lausanne, Switzerland and Sao Paulo, Brazil leases
will be entered into prior to the distribution date. The leased properties
range in size from approximately 19,000 square feet to 46,000 square feet with
rents ranging from approximately $1.00 to $4.00 per square foot. These leases
generally are not renewable. Each of the existing leases listed above will
require the consent of the landlord for Baxter to assign or sublease the
property to Edwards Lifesciences.
Employees
Edwards Lifesciences employs over 5,000 employees worldwide, the majority
of whom are located at the company's headquarters in Irvine, California, and
at its manufacturing facility in Puerto Rico. Other major concentrations of
employees are located in Europe and Brazil. Edwards Lifesciences emphasizes
competitive compensation, benefits, equity participation and work environment
policies in its efforts to attract and retain qualified personnel. None of
Edwards Lifesciences' North American employees is represented by a labor
union. In various countries outside of North America, there are a limited
number of employees who have relationships with works councils or trade
unions. Edwards Lifesciences considers its relations with its employees to be
good.
EDWARDS LIFESCIENCES' RELATIONSHIP WITH BAXTER AFTER THE DISTRIBUTION
General
Immediately prior to the distribution, Edwards Lifesciences will be a
wholly-owned subsidiary of Baxter. After the distribution, Baxter will not
have any ownership interest in the common stock of Edwards Lifesciences, which
will be an independent, publicly traded company and no Baxter directors will
also be Edwards Lifesciences directors.
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Immediately prior to the distribution, Baxter and Edwards Lifesciences will
enter into certain agreements to define their ongoing relationship after the
distribution and to allocate tax, employee benefits and certain other
liabilities and obligations arising from periods prior to the distribution
date. These agreements are being entered into between Baxter and Edwards
Lifesciences while Edwards Lifesciences is still a wholly owned subsidiary of
Baxter, and certain terms of these agreements are not the same as would have
been obtained through negotiations with an unaffiliated third party.
Reorganization Agreement
Baxter and Edwards Lifesciences will enter into an Agreement and Plan of
Reorganization (the reorganization agreement) providing for, among other
things, the principal corporate transactions required to effect the separation
of the CardioVascular business from the remaining Baxter businesses and the
distribution, and certain other agreements governing the relationship between
Baxter and Edwards Lifesciences after the distribution. The following
description is intended as a summary of all material terms of the
reorganization agreement. We encourage you to read, in its entirety, the
reorganization agreement, which is included as an exhibit to the registration
statement of which this information statement is a part.
Pursuant to the reorganization agreement, Baxter will transfer to Edwards
Lifesciences substantially all of the assets, and Edwards Lifesciences will
assume substantially all of the corresponding liabilities, of the
CardioVascular business (other than cash, third party distribution
relationships where Baxter continues to serve as the distributor for Edwards
Lifesciences, and assets related to Japan). See "Edwards Lifesciences'
Business." The assets of the CardioVascular business will be transferred to
Edwards Lifesciences on an "as is, where is" basis and no representations or
warranties will be made by Baxter with respect to the assets other than
certain product-related indemnities.
Subject to certain exceptions, the reorganization agreement will provide
for cross-indemnities principally designed to place financial responsibility
for the obligations and liabilities of the CardioVascular business with
Edwards Lifesciences and financial responsibility for the obligations and
liabilities of Baxter's retained businesses and its other subsidiaries with
Baxter. Specifically, Edwards Lifesciences has agreed to assume liability for,
and to indemnify Baxter against, any and all liabilities associated with the
CardioVascular business, including any litigation, proceedings or claims
relating to the products and operations of the transferred business whether or
not the underlying basis for such litigation, proceeding or claim arose prior
to or after the distribution date. See "Edwards Lifesciences' Business--
Government Regulation and Other Matters." Baxter has agreed to indemnify
Edwards Lifesciences against any and all liabilities associated with Baxter's
retained businesses and its other subsidiaries. Other than the obligations
contained in the reorganization agreement, the other agreements entered into
in connection with the distribution provide that Baxter and Edwards
Lifesciences will release each other from all claims existing at the time of
the distribution.
The reorganization agreement will also provide that Edwards Lifesciences
will assume and indemnify Baxter for all environmental liabilities that arise
from or are attributable to the operations of the CardioVascular business
regardless of when these liabilities arose. This includes, but is not limited
to, off-site waste disposal liabilities, except that Baxter will retain the
liabilities relating to two off-site disposal locations. In addition, Baxter
has agreed to indemnify Edwards Lifesciences against any and all environmental
liabilities associated with the retained Baxter businesses and its other
subsidiaries.
The reorganization provides that Baxter will receive from Edwards
Lifesciences and its subsidiaries an aggregate of $550 million through either
payments from assets transferred to Edwards Lifesciences or its subsidiaries
or through repayment of intercompany debt existing immediately prior to the
distribution date.
The reorganization agreement will also provide, among other things, that,
in order to avoid potentially adverse tax consequences relating to the
distribution, for a period of two years after the distribution, Edwards
Lifesciences will not:
(1) cease to engage in an active trade or business within the meaning of
the Internal Revenue Code of 1986, as amended;
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(2) issue or redeem any share of stock of Edwards Lifesciences, except for
certain issuances and redemptions for the benefit of Edwards
Lifesciences' employees, or to effect acquisitions by Edwards
Lifesciences in the ordinary course of business, or in connection with
the issuance of any convertible debt by Edwards Lifesciences, or in
accordance with the requirements for permitted purchases of Edwards
Lifesciences common stock as set forth in Section 4.05(1)(b) of Revenue
Procedure 96-30 issued by the IRS; or
(3) liquidate or merge with any other corporation;
unless, with respect to (1), (2) or (3) above, either (a) an opinion is
obtained from counsel to Baxter, or (b) a ruling is obtained from the IRS, in
either case to the effect that such act or event will not adversely affect the
federal income tax consequences of the distribution to Baxter or its
stockholders who receive Edwards Lifesciences stock. Edwards Lifesciences
believes that these limitations will not significantly constrain its
activities or its ability to respond to unanticipated developments. See "The
Distribution--Important Federal Income Tax Consequences."
The reorganization agreement will also provide that if, as a result of
certain transactions occurring after the distribution date involving either
the stock or assets of either Edwards Lifesciences or any of its subsidiaries,
or any combination thereof, the distribution fails to qualify as tax-free
under the provisions of Section 355 of the United States tax code, Edwards
Lifesciences will indemnify Baxter for all taxes, liabilities and associated
expenses, including penalties and interest, incurred as a result of such
failure of the distribution to qualify under Section 355 of the tax code. The
reorganization agreement will further provide that if the distribution fails
to qualify as tax-free under the provisions of Section 355 of the tax code,
other than as a result of a transaction occurring after the distribution date
involving either the stock or assets of Edwards Lifesciences or any of its
subsidiaries, or any combination of stock or assets, then Edwards Lifesciences
will not be liable for those taxes, liabilities or expenses. See "The
Distribution--Important Federal Income Tax Consequences."
The reorganization agreement will also provide for cross-licensing of
certain intellectual property transferred to Edwards Lifesciences or retained
by Baxter. Specifically, to the extent that research and development related
to Baxter's CardioVascular business resulted in the creation of intellectual
property, Baxter will transfer this intellectual property, subject to certain
exceptions, to Edwards Lifesciences as part of the assets being transferred
under the reorganization agreement. Edwards Lifesciences will grant to Baxter
a license for such intellectual property to the extent that Baxter is using
this intellectual property immediately prior to the distribution or to the
extent that Baxter requires the use of this intellectual property for product
extensions developed and manufactured within the three-year period following
the distribution. Conversely, Baxter will grant to Edwards Lifesciences a
license to use certain intellectual property retained by Baxter to the extent
that such intellectual property is being used by Baxter's CardioVascular
business immediately prior to the distribution or to the extent that Edwards
Lifesciences requires the use of this intellectual property for product
extensions developed and manufactured within the three-year period following
the distribution.
The reorganization agreement will also provide for the allocation of
benefits between Baxter and Edwards Lifesciences under existing insurance
policies after the distribution date for claims made or occurrences prior to
the distribution date. The reorganization agreement also sets forth procedures
for the administration of insured claims. In addition, the reorganization
agreement provides that Baxter will use its reasonable efforts to maintain
directors' and officers' insurance at substantially the level of Baxter's
current directors' and officers' insurance policy for a period of six years
with respect to the directors and officers of Baxter who will become directors
and officers of Edwards Lifesciences as of the distribution date for acts
relating to periods prior to the distribution date.
The reorganization agreement will provide that prior to the distribution
date the certificate of incorporation and bylaws of Edwards Lifesciences will
be substantially in the forms attached as exhibits to the registration
statement of which this information statement is a part and that as of the
distribution date the directors of Edwards Lifesciences will be the persons
named in "Edwards Lifesciences Management--Board of Directors."
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The reorganization agreement will also provide that each of Baxter and
Edwards Lifesciences will be granted access to certain records and information
in the possession of the other. In addition, the reorganization agreement
requires Baxter and Edwards Lifesciences to retain for a period of ten years
following the distribution the information in its possession relating to the
other. After the ten year period, Baxter and Edwards Lifesciences must give
prior notice to the other of their intention to dispose of such information.
The reorganization agreement will also address the treatment of employee
benefit matters and other compensation arrangements for certain former and
current Edwards Lifesciences employees and their beneficiaries and dependents
(we refer to these persons collectively as the Edwards Lifesciences
Participants). These provisions of the reorganization agreement contemplate
that Edwards Lifesciences will establish certain profit sharing, retirement
savings and welfare plans effective on the distribution date. The
reorganization agreement will provide that the account balances (including
outstanding loans) of all Edwards Lifesciences Participants in the Baxter
International Inc. and Subsidiaries Incentive Investment Plan, and the plan
assets related to these liabilities, will be transferred to Edwards
Lifesciences' new retirement savings plan. The reorganization agreement also
contemplates that Edwards Lifesciences Participants in the Baxter
International Inc. and Subsidiaries Pension Plan will be fully vested in their
accrued benefits as of the distribution date under such plan and that Baxter
will remain responsible for the liabilities associated with such benefits. The
reorganization agreement will also provide that Baxter will remain responsible
for all liabilities associated with accruals as of the distribution date for
Edwards Lifesciences Participants under the Baxter International Inc. and
Subsidiaries Supplemental Pension Plan and that Edwards Lifesciences will
become responsible for providing all benefits accrued as of the distribution
date for Edwards Lifesciences Participants under the Baxter International Inc.
and Subsidiaries Deferred Compensation Plan. Moreover, the reorganization
agreement will also generally provide that, after the distribution date,
Edwards Lifesciences will assume certain liabilities for benefits under any
welfare and retirement plans related to Edwards Lifesciences Participants,
other than certain claims incurred on or before the distribution date.
The reorganization agreement also provides that as of the distribution
date, neither Baxter nor Edwards Lifesciences will have entered into, and
within the first six months following the distribution date, neither Baxter
nor Edwards Lifesciences will enter into any agreements, understandings,
arrangements or substantial negotiations that would result, individually or
collectively, in a change of ownership of 50% or more of either within the
meaning of Section 355(e) of the tax code.
The reorganization agreement provides that disputes arising under the
reorganization agreement or the other agreements entered into to implement the
distribution will be resolved through good faith negotiation between senior
management or, if still unresolved, through binding arbitration.
Finally, the reorganization agreement will provide that the distribution
will not be made until specified conditions are satisfied or waived by the
Baxter board of directors in its sole discretion. Even if all of the
conditions are satisfied, the reorganization agreement may be terminated and
the distribution abandoned by the Baxter board of directors, in its sole
discretion, without the approval of the Baxter stockholders, at any time prior
to the distribution date. See "The Distribution--Distribution Conditions and
Termination."
Tax Sharing Agreement
Baxter and Edwards Lifesciences will enter into a tax sharing agreement
that will:
1. allocate responsibility for federal, state and foreign tax liabilities
of the Edwards Lifesciences business attributable to periods including,
or ending on or before, the distribution date;
2. allocate liability for transfer taxes arising under the distribution or
related transactions;
3. provide for the allocation of tax attributes in accordance with United
States Treasury Regulations or other applicable authorities;
4. allocate responsibility for tax return filings, records retention, the
payment of tax liabilities and the administration of tax audits which
relate to the Edwards Lifesciences business;
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5. allocate responsibility for property considered abandoned under state
law as of the distribution date; and
6. allocate deductions related to stock acquired under employee
compensation plans prior to, or as a result of, the distribution.
Distribution Agreements
Baxter and Edwards Lifesciences will enter into a number of distribution
agreements, to be effective as of the distribution date, pursuant to which
Baxter will serve as the distributor of Edwards Lifesciences products in
Argentina, Australia, Greece, Ireland, New Zealand, China and in certain
Nordic countries. In most European countries, as well as in India, Baxter's
services will be limited to various physical distribution services. In the
other countries, Baxter will provide more extensive sales and marketing
assistance and will take legal title to products before resale to the end
customers. Baxter may also contract with third-party distributors for the
distribution of Edwards Lifesciences products. In addition, in Russia, the
Czech Republic and the Balkans, Baxter will provide certain sales and
marketing support services to Edwards Lifesciences but will not provide
physical distribution services and will not take title to products.
The initial term of the distribution agreements is generally less than two
years. The distribution agreements may be renewed upon the mutual agreement of
the parties. In the event of a change in control of one of the parties to the
distribution agreements, the other party to the agreement will have the right,
subject to certain notice periods and other restrictions, to terminate such
agreement prior to its normal expiration.
Under certain distribution agreements, Edwards Lifesciences is required
within the applicable territories to distribute all covered products through
Baxter, subject to certain exceptions. In addition, in certain jurisdictions,
Baxter may not market, promote or solicit orders for any product that competes
with any covered product. Baxter may, however, take orders for, stock and sell
competing products in response to customer requests.
The compensation received by Baxter under the distribution agreements
generally will approximate or be based upon Baxter's direct and indirect costs
of distribution, plus, in the case of those territories where Baxter performs
more than mere physical distribution services, a margin comparable to the
amounts reflected in the pro forma financial statement of Edwards Lifesciences
contained elsewhere in this document. See "Edwards Lifesciences' Unaudited Pro
Forma Financial Data" on page 39.
Services and Other Agreements
Baxter and Edwards Lifesciences will enter into several services
agreements, to be effective from and after the distribution date, pursuant to
which Baxter will provide to Edwards Lifesciences certain administrative
services that may be necessary for Edwards Lifesciences to conduct its
business. Baxter will provide a variety of services to Edwards Lifesciences,
including information systems and telecommunications, human resources, finance
and accounting and other administrative services. These agreements will be for
varying terms and, subject to certain exceptions, are generally terminable by
either party prior to the date that is four months before the expiration date.
Under certain circumstances involving a change in control, Edwards
Lifesciences and Baxter may terminate the agreements within a shorter
timeframe. The agreements may be renewed upon expiration by mutual agreement
of the parties. The prices at which Baxter will provide these services
generally will be equal to or based on the actual cost of rendering these
services.
The CardioVascular business in Japan, including certain manufacturing
operations, will not be transferred to Edwards Lifesciences at the time of the
distribution due to Japanese regulatory requirements and business culture
considerations. It will be operated pursuant to a joint venture under which a
Japanese subsidiary of Baxter will retain ownership of the business assets,
but a subsidiary of Edwards Lifesciences will hold a 90% profit interest.
Edwards Lifesciences will have an option to purchase the Japanese business
assets, which option may be exercised no earlier than 26 months following the
distribution date and no later than 60 months following the distribution date.
In addition, Edwards Lifesciences and Baxter will have the opportunity to
terminate the joint venture in the event of the occurrence of certain change
of control events with respect to the other. Edwards Lifesciences will
consolidate the joint venture in its financial statements since it will have
effective control over the joint venture.
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THE DISTRIBUTION
Background and Reasons for the Distribution
Baxter is creating an independent, publicly traded company for its
CardioVascular business because it believes that the combined value of two
separate companies will be greater than the value of Baxter as a whole today.
Edwards Lifesciences expects that the distribution will allow it to compete
more effectively in the intensely competitive and rapidly consolidating
cardiovascular medical device industry. Following the distribution, Baxter
will have the ability to invest more resources in its remaining core
businesses, which it expects will further enhance its ability to bring new
products to market and to expand in global markets.
Improved Ability to Compete in Cardiovascular Medical Device Industry
Edwards Lifesciences will benefit from focusing on treating late-stage
cardiovascular disease. While Edwards Lifesciences has developed leadership
positions in several niche segments of the cardiovascular medical device
industry, its competitive position is being challenged by larger and more
focused "pure play" competitors. As size, breadth and access to emerging
technologies become more important in the rapidly evolving and consolidating
cardiovascular medical device industry, Edwards Lifesciences intends to
accelerate its rate of innovation, and make a significant contribution to its
product development pipeline. Edwards Lifesciences expects this strategy to
ultimately lead to the commercialization of more and improved treatment
options for Edwards Lifesciences' customers and their patients. In addition,
Edwards Lifesciences expects that it will increase funding of internal
development and be more aggressive in pursuing acquisition and strategic
alliance opportunities. The distribution will provide Edwards Lifesciences
with a publicly traded equity security that can be used to provide it with
more flexibility in making acquisitions.
Attraction and Retention of Key Employees
Edwards Lifesciences' management believes that having a publicly traded
equity security will create a highly effective incentive tool for motivating
senior management and attracting and retaining talented employees at all
levels of the company. Following the distribution, the stock price of Edwards
Lifesciences will be heavily influenced by the operational and financial
performance of Edwards Lifesciences. This direct link between performance and
stock price appreciation should create an effective incentive system and
should serve to enhance the levels of dedication, commitment and productivity
of the management and employees of Edwards Lifesciences. The impact of this
form of incentive system on Edwards Lifesciences' performance will grow as
management and employee ownership in the company increases through the use of
stock options and participation in stock incentive programs.
Capital Structure and Dividend Policy Optimization
The distribution will provide both Baxter and Edwards Lifesciences the
opportunity to create capital structures and adopt dividend policies that best
reflect the cash flow, investment requirements, competitive landscape,
stockholder expectations and corporate strategy and business objectives of
each company. By appropriately tailoring the capital structures of Baxter and
Edwards Lifesciences, each should be better able to pursue their strategic
objectives while achieving the lowest overall cost of capital consistent with
the risk profiles and competitive factors inherent in each business.
Manner of Effecting the Distribution
The general terms and conditions relating to the distribution are set forth
in the reorganization agreement between Baxter and Edwards Lifesciences. See
"Edwards Lifesciences' Relationship With Baxter After The Distribution--
Reorganization Agreement."
On the distribution date, Baxter will effect the distribution by delivering
all of the outstanding shares of Edwards Lifesciences common stock to First
Chicago Trust Company of New York, a division of EquiServe, as
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distribution agent, for distribution to the holders of record of Baxter common
stock at the close of business on the record date. The distribution will be
made on the basis of one share of Edwards Lifesciences common stock for every
[five] shares of Baxter common stock.
The actual number of shares of Edwards Lifesciences common stock that will
be distributed will depend on the number of shares of Baxter common stock
outstanding on the record date. The shares of Edwards Lifesciences common
stock will be validly issued, fully paid and nonassessable, and the holders of
such shares will not be entitled to preemptive rights. See "Description of
Edwards Lifesciences Capital Stock." It is expected that certificates
representing shares of Edwards Lifesciences common stock will be mailed to
Baxter stockholders on or about March [ ], 2000.
Certificates or script representing fractional shares of Edwards
Lifesciences common stock will not be issued to Baxter stockholders as part of
the distribution. Instead, each holder of Baxter common stock who would
otherwise be entitled to receive a fractional share will receive cash for
those fractional interests less applicable taxes. The distribution agent will,
on or after the distribution date, aggregate and sell all those fractional
interests on the open market at then market prices and distribute the
aggregate proceeds ratably to Baxter stockholders otherwise entitled to those
fractional interests. Baxter will pay all brokers' fees and commissions in
connection with the sale of fractional interests. See "The Distribution--
Important Federal Income Tax Consequences" for a discussion of the United
States federal income tax treatment of proceeds from fractional share
interests.
Accounting Treatment of Plan of Reorganization
The distribution will be accounted for on a historical cost basis and no
gain or loss will be recorded.
Important Federal Income Tax Consequences
The distribution is conditioned on Baxter receiving a ruling from the IRS
substantially to the effect that, among other things, the distribution should
qualify as a tax-free spin-off to Baxter and to Baxter's United States
stockholders under the tax-free spin-off provisions (Section 355) of the
Internal Revenue Code of 1986, as amended. Baxter's board of directors may
waive this condition.
The ruling is based on current provisions of the Internal Revenue Code,
existing regulations under the tax code and current administrative rulings and
court decisions, all of which are subject to change. We have not attempted to
comment on all federal income tax consequences of the distribution that may be
relevant to particular holders, including holders that are subject to special
tax rules such as dealers in securities, foreign persons, mutual funds,
insurance companies, tax-exempt entities, stockholders who acquire their
Edwards Lifesciences common stock pursuant to the exercise of employee stock
options or otherwise as compensation and holders who do not hold their Baxter
common stock as capital assets. We urge holders of Baxter common stock to
consult their own tax advisors regarding the federal income tax consequences
of the distribution in light of their personal circumstances and the
consequences under applicable state, local and foreign tax laws.
Provided that the distribution qualifies as a tax-free distribution under
the tax-free spin-off provisions of the tax code, as expected based on the IRS
ruling, a Baxter stockholder will not recognize any income, gain or loss as a
result of the distribution, except, as described below, in connection with
fractional share proceeds from the deemed receipt and sale of any Edwards
Lifesciences common stock:
1. A Baxter stockholder's aggregate tax basis for Baxter common stock on
which Edwards Lifesciences common stock is distributed and the Edwards
Lifesciences common stock received by such stockholder in the
distribution (including any fractional shares of Edwards Lifesciences
common stock to which such stockholder may be entitled) will be the same
as the basis of Baxter common stock held by such stockholder immediately
prior to the distribution;
2. A Baxter stockholder's aggregate tax basis will be allocated between his
or her Baxter common stock and Edwards Lifesciences common stock
received in the distribution (including any fractional shares of Edwards
Lifesciences common stock deemed received) in proportion to the fair
market value of both the Baxter common stock and Edwards Lifesciences
common stock on the distribution date;
34
<PAGE>
3. A Baxter stockholder's holding period for the Edwards Lifesciences
common stock received in the distribution (including any fractional
shares of Edwards Lifesciences common stock to which such stockholder
may be entitled) will include the holding period of the Baxter common
stock on which the distribution is made, provided that such Baxter
common stock is held as a capital asset by such stockholder on the
distribution date;
4. A Baxter stockholder who receives fractional share proceeds as a result
of the sale of shares of Edwards Lifesciences common stock by the
distribution agent will be treated as if such fractional share had been
received by the stockholder as part of the distribution and then sold by
such stockholder. Accordingly, such stockholder will recognize gain or
loss equal to the difference between the cash so received and the
portion of the tax basis in Edwards Lifesciences common stock that is
allocable to such fractional share. Such gain or loss will be capital
gain or loss, provided that such fractional share was held by such
stockholder as a capital asset at the time of the distribution; and
5. Baxter will not recognize any gain or loss on the distribution.
If for any reason the distribution does not qualify as a tax-free spin-off
under Section 355 of the tax code, Baxter would be required to recognize gain
equal to the excess of the fair market value of the Edwards Lifesciences
common stock distributed to its stockholders over Baxter's basis in the
Edwards Lifesciences common stock. Baxter has agreed to indemnify Edwards
Lifesciences for any tax liability imposed on Edwards Lifesciences or any of
its subsidiaries as a result of the distribution being determined to be a
taxable transaction other than due to any act or failure to act of Edwards
Lifesciences or any of its subsidiaries. In addition, if the distribution
fails to qualify as a tax-free spin-off under Section 355 of the tax code,
each Baxter stockholder would be generally treated as if such stockholder had
received a taxable dividend in an amount equal to the fair market value of the
Edwards Lifesciences common stock received.
Current United States Treasury Regulations require each Baxter stockholder
who receives Edwards Lifesciences common stock pursuant to the distribution to
attach to his or her federal income tax return for the year in which the
distribution occurs a detailed statement setting forth data as may be
appropriate in order to show the applicability under Section 355 of the tax
code to the distribution. Baxter will provide the appropriate information to
each stockholder of record as of the record date.
Under the tax code, a holder of Baxter common stock may be subject, under
certain circumstances, to backup withholding at a rate of 31% with respect to
the amount of cash, if any, received as a result of the sale of fractional
share interests unless the holder provides proof of an applicable exemption or
correct taxpayer identification number, and otherwise complies with applicable
requirements of the backup withholding rules. Any amounts withheld under the
backup withholding rules are not additional tax and may be refunded or
credited against the holder's federal income tax liability, provided the
required information is furnished to the IRS.
Market for Edwards Lifesciences Common Stock
There is no existing market for Edwards Lifesciences common stock. Edwards
Lifesciences is seeking to list its common stock on the NYSE. If the shares
are accepted for listing, a "when-issued" trading market for Edwards
Lifesciences common stock is expected to develop on or shortly before the
record date. The term "when-issued" means that shares can be traded prior to
the time certificates are actually available or issued. We cannot predict the
trading prices for Edwards Lifesciences common stock before or after the
distribution date. Until the common stock is fully distributed and an orderly
market develops, the trading prices for Edwards Lifesciences' common stock may
fluctuate. Prices for Edwards Lifesciences common stock will be determined in
the trading markets and may be influenced by many factors, including:
. the depth and liquidity of the market for Edwards Lifesciences common
stock;
. developments generally affecting Edwards Lifesciences' business;
. the impact of the factors referred to in "Risk Factors" beginning on page
7;
. investor perceptions of Edwards Lifesciences and its business;
35
<PAGE>
. the financial results of Edwards Lifesciences;
. the dividend policy of Edwards Lifesciences; and
. general economic and market conditions.
We anticipate that Edwards Lifesciences common stock will be traded on the
NYSE under the symbol "EW." The transfer agent and registrar for the Edwards
Lifesciences common stock will be First Chicago Trust Company of New York, a
division of EquiServe.
As of February 1, 1999, Baxter had 60,830 stockholders of record. Except
for those stockholders who would be entitled to receive less than one share of
Edwards Lifesciences common stock, and assuming that each stockholder is a
stockholder of record on the record date, each stockholder will become a
stockholder of record of Edwards Lifesciences. For certain information
regarding options and other equity-based awards involving Edwards Lifesciences
common stock which may become outstanding after the distribution, see "Edwards
Lifesciences Executive Compensation." Shares of Edwards Lifesciences common
stock distributed to Baxter stockholders in the distribution will be freely
transferable under the Securities Act of 1933, except for shares of Edwards
Lifesciences common stock received by persons who may be deemed to be
affiliates of Edwards Lifesciences. Persons who may be deemed to be affiliates
of Edwards Lifesciences after the distribution generally include individuals
or entities that control, are controlled by or are under common control with
Edwards Lifesciences and may include certain officers and directors, or
principal stockholders, of Edwards Lifesciences. After Edwards Lifesciences
becomes a publicly traded company, securities held by persons who are its
affiliates will be subject to resale restrictions under the Securities Act.
Affiliates of Edwards Lifesciences will be permitted to sell shares of the
entity of which such persons are affiliates only pursuant to an effective
registration statement or an exemption from the registration requirements of
the Securities Act, such as the exemption afforded by Rule 144 under the
Securities Act.
Dividend Policy
Edwards Lifesciences has no current plans to pay dividends following the
distribution. Dividends will be paid on Edwards Lifesciences common stock only
if declared by the Edwards Lifesciences board of directors in its sole
discretion following the distribution. The payment and level of cash
dividends, if any, will be based upon a number of factors, including the
operating results, cash flow and financial requirements of Edwards
Lifesciences. The actual amount and timing of dividends, if any, will depend
on Edwards Lifesciences' financial condition, results of operations, business
prospects, capital requirements and any other matters as Edwards Lifesciences'
board of directors may deem relevant.
Distribution Conditions and Termination
We expect that the distribution will be effective on the distribution date,
March [ ], 2000, provided that, among other things:
1. the SEC has declared effective the registration statement on Form 10
under the Exchange Act, as amended, filed by Edwards Lifesciences and no
stop order relating to the registration statement is in effect;
2. Baxter and Edwards Lifesciences have received all necessary permits,
registrations and consents required under the securities or blue sky
laws of states or other political subdivisions of the United States in
connection with the distribution or these permits, registrations and
consents have become effective;
3. Baxter and Edwards Lifesciences have received the favorable tax ruling
from the IRS and the ruling has not been revoked or modified in any
material respect;
4. the NYSE has approved the Edwards Lifesciences common stock for listing
on the NYSE, subject to official notice of issuance;
5. Baxter has completed the transfers of assets and liabilities to Edwards
Lifesciences required to constitute Edwards Lifesciences as described in
this information statement;
36
<PAGE>
6. no order, injunction or decree issued by any court of competent
jurisdiction or other legal restraint or prohibition preventing
consummation of the distribution or any of the transactions related
thereto (including the transfers of assets and liabilities contemplated
by the reorganization agreement) is in effect; and
7. Baxter's board of directors has received opinions of its financial
advisors regarding the fairness of the distribution to stockholders of
Baxter.
The fulfillment of the foregoing conditions will not create any obligation
on the part of Baxter to effect the distribution, and Baxter's board of
directors has reserved the right to amend, modify or abandon the distribution
and the related transactions at any time prior to the distribution date.
Baxter's board of directors may also waive any of these conditions.
Opinions of Financial Advisors
Baxter has engaged Credit Suisse First Boston Corporation (CSFB) and J.P.
Morgan as financial advisors in connection with the distribution. We expect
that the Baxter board of directors will rely, in part, upon the receipt of the
opinions described below in deciding to formally declare the distribution
dividend. The receipt of these opinions is a condition to the distribution.
Baxter's board of directors may waive this condition.
We expect CSFB and J.P. Morgan to deliver to the Baxter board of directors
their written opinions, each dated March [ ], 2000, regarding the fairness of
the distribution to stockholders of Baxter.
Each of CSFB and J.P. Morgan will receive customary fees, including
reimbursement of expenses, for its services as financial advisor related to
the distribution, a portion of which is contingent upon the consummation of
the distribution. Baxter also has agreed to indemnify each of CSFB and J.P.
Morgan against certain liabilities and expenses in connection with its
services as financial advisor.
CSFB and J.P. Morgan and their respective affiliates have acted, and may in
the future act, as underwriters for, and have participated as members of
underwriting syndicates with respect to, offerings of Baxter securities. CSFB
and J.P. Morgan have effected securities transactions for Baxter and performed
financial advisory services in connection with certain acquisitions and
dispositions by Baxter. CSFB and J.P. Morgan have received fees from Baxter in
the past for these services and may receive such fees in the future. Each of
CSFB and J.P. Morgan may in the future serve as an underwriter of Edwards
Lifesciences securities.
37
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA OF EDWARDS LIFESCIENCES
The following table sets forth selected financial information with respect
to Edwards Lifesciences. The information, relating to each of the years ended
December 31, 1995 through 1999, has been derived from annual financial
statements and related notes found elsewhere in this information statement.
The information set forth below should be read in conjunction with "Edwards
Lifesciences Management's Discussion and Analysis of Financial Condition and
Results of Operations" and the "Combined Financial Statements" and related
notes to the financial statements found elsewhere in this information
statement. Historical per share data for net income and dividends have not
been presented because Edwards Lifesciences was not incorporated until
September 1999. Pro forma net income per share data is presented elsewhere in
this information statement. See Note 3 to the "Combined Financial Statements"
and "Edward Lifesciences' Management's Discussion and Analysis of Financial
Condition and Results of Operations" for discussions of the effect of certain
acquisitions on Edwards Lifesciences' revenues, expenses and financial
position.
Selected Historical Financial Data
<TABLE>
<CAPTION>
As of or for the years ended
December 31,
-----------------------------------
1999 1998 1997 1996 1995
------ ------ ------ ------ ------
(in millions)
<S> <C> <C> <C> <C> <C>
Income Statement Data
Net sales............................. $ 905 $ 865 $ 879 $ 837 $ 730
Gross profit.......................... $ 439 $ 399 $ 416 $ 395 $ 366
Net income(a)......................... $ 82 $ 62 $ (52) $ 87 $ 66
Balance Sheet Data
Total assets.......................... $1,437 $1,483 $1,526 $1,473 $1,390
</TABLE>
- --------
(a) See Note 3 to the "Combined Financial Statements" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
for additional information regarding the $132 million in-process research
and development charge in 1997 relating to the acquisition of Research
Medical, Inc.
38
<PAGE>
EDWARDS LIFESCIENCES' UNAUDITED PRO FORMA FINANCIAL DATA
The following unaudited pro forma combined statement of income and
unaudited pro forma combined balance sheet present the combined results of
Edwards Lifesciences and its financial position, assuming that the
transactions contemplated by the distribution had been completed as of January
1, 1999 for income statement purposes and as of December 31, 1999 for balance
sheet purposes.
The unaudited pro forma information has been prepared utilizing the
historical combined financial statements of Edwards Lifesciences. You should
read this information in conjunction with the historical combined financial
statements and related notes included on pages F-1 to F-18 of this information
statement. We have included the unaudited pro forma financial data as required
by the rules and regulations of the SEC and it is for comparative purposes
only. The unaudited pro forma financial data does not purport to be indicative
of the results of Edwards Lifesciences in the future or what the financial
position of results of operations would have been had Edwards Lifesciences
been a separate, stand-alone entity during the period shown.
Unaudited Pro Forma Combined Statement of Income
(in millions, except shares and per share information)
<TABLE>
<CAPTION>
Year ended December 31, 1999
------------------------------------
Pro Forma
Historical Adjustments Pro Forma
---------- ----------- ------------
<S> <C> <C> <C>
Net sales................................. $905 $-- $ 905
Costs and expenses
Cost of goods sold...................... 460 3 (a) 463
Cost of goods sold--transactions with
Baxter................................. 6 -- 6
Marketing and administrative expenses... 189 25 (b) 214
Marketing and administrative expenses--
transactions with Baxter............... 44 -- 44
Research and development expenses....... 41 -- 41
Research and development expenses--
transactions with Baxter............... 14 -- 14
Interest, net........................... -- 29 (c) 29
Goodwill amortization................... 34 -- 34
Other expense........................... 4 -- 4
---- ---- ------------
Total costs and expenses.................. 792 57 849
---- ---- ------------
Income (loss) before income taxes......... 113 (57) 56
Income tax expense (benefit).............. 31 (16)(d) 15
---- ---- ------------
Net income (loss)......................... $ 82 $(41) $ 41
==== ==== ============
Share information
Shares to be issued (e)................. [58,180,903]
============
Net income per share (e)................ $ 0.70
============
</TABLE>
Pro Forma Adjustments
(a) To reflect estimated incremental costs resulting from new or revised
distribution agreements with Baxter in certain foreign locations
subsequent to the distribution. While such distribution agreements are in
the process of being finalized, based on an analysis of the current
intercompany charges, it is anticipated that the draft revised agreements
will result in increased costs to Edwards Lifesciences on a stand-alone
basis.
(b) To reflect estimated incremental costs associated with being an
independent public company, including costs associated with corporate
administrative services such as accounting, tax, treasury, risk
management, insurance, legal, stockholder relations and human resources.
The company's historical combined financial
39
<PAGE>
statements include all costs incurred by the parent company on behalf of the
company. However, there will be incremental and continuing costs directly
attributable to the planned spin-off, as there will be a loss of certain
synergies and benefits of economies of scale that existed while Edwards
Lifesciences was part of Baxter. Management estimated such incremental costs
utilizing the parent company's historical headcount and cost analysis, and
the company's organizational chart, which has been finalized. Management
also utilized knowledge and expertise obtained from executing similar spin-
off transactions in the past, and knowledge of the approximate headcount and
cost structures of the company's competitor companies. The following is a
summary of the estimated incremental costs by significant function (in
millions):
<TABLE>
<S> <C>
. Accounting, tax and legal........................................... $ 8
. Insurance and risk management....................................... 4
. Human resources..................................................... 7
. Treasury, stockholder relations and other costs..................... 6
---
Total............................................................. $25
===
</TABLE>
(c) To reflect the estimated interest expense which would have been incurred by
Edwards Lifesciences based on the incurrence of $(550) million of debt at a
weighted-average interest rate of 5.3%. The company's debt facilities are
not yet finalized. The weighted-average interest rate was estimated by
management using current market interest rates and was based on the assumed
mix of debt balances for Edwards Lifesciences, by country, and the market-
quoted LIBOR for the applicable currency coupled with the company's
anticipated credit spread in each applicable country. An increase or
decrease of 0.125 points in the weighted average interest rate would result
in an increase or decrease in interest expense of approximately $1 million.
(d) To reflect the estimated tax impact at statutory rates, for pro forma
adjustments (a) through (c), as well as the estimated impact of different
tax rates available to Edwards Lifesciences as a stand-alone company. It is
anticipated that Edwards Lifesciences will have different tax rates as a
stand-alone company due to the different tax and legal structures it will
have as a stand-alone company subsequent to spin-off date. Management does
not expect the future effective tax rate to be significantly different from
the 1999 pro forma effective tax rate.
(e) Pro forma net income per share is computed as if the [58,180,903] common
shares of Edwards Lifesciences, estimated to be issuable in the
distribution, had been outstanding for the periods presented. Refer to
footnote (b) and (c) on page 41 regarding the determination of the
anticipated common shares outstanding.
40
<PAGE>
Unaudited Pro Forma Combined Balance Sheet (in millions, except shares and per
share data)
<TABLE>
<CAPTION>
December 31, 1999
------------------------------
Pro Forma Pro
Historical Adjustments Forma
---------- ----------- ------
<S> <C> <C> <C>
Current assets
Accounts receivable, net of allowances of $8
million at December 31, 1999................ $ 133 -- $ 133
Other receivables............................ 22 -- 22
Inventories.................................. 182 -- 182
Short-term deferred income taxes............. 9 -- 9
Prepaid expenses............................. 10 -- 10
------ ----- ------
Total current assets....................... 356 -- 356
------ ----- ------
Property, plant and equipment
Property, plant and equipment................ 496 -- 496
Accumulated depreciation and amortization.... (270) -- (270)
------ ----- ------
Net property, plant and equipment.......... 226 -- 226
------ ----- ------
Other assets
Goodwill and other intangibles............... 839 -- 839
Other........................................ 16 -- 16
------ ----- ------
Total other assets......................... 855 -- 855
------ ----- ------
Total assets............................. $1,437 -- $1,437
====== ===== ======
Current liabilities
Accounts payable and accrued liabilities..... $ 156 -- $ 156
------ ----- ------
Total current liabilities.................. 156 -- 156
------ ----- ------
Long-term debt................................. -- $ 550 (a) 550
------ ----- ------
Other noncurrent liabilities................... 57 -- 57
------ ----- ------
Stockholders' equity
Retained earnings............................ 418 (2)(c)
2(b) 418
Investments by and advances from Baxter
International Inc........................... 833 (550)(a)
(283)(b) --
Common stock, $1 par value, authorized
[400,000,000] shares, outstanding
[58,180,903] shares......................... -- 58 (b) 58
Other equity................................. -- 223 (b)
2 (c) 225
Accumulated other comprehensive income
(loss)...................................... (27) -- (27)
------ ----- ------
Total stockholders' equity ................ 1,224 (550) 674
------ ----- ------
Total liabilities and stockholders'
equity.................................. $1,437 $ -- $1,437
====== ===== ======
</TABLE>
Pro Forma Adjustments
(a) The "Investments by and advances from Baxter International Inc." account
includes common stock, additional paid-in capital and net intercompany
balances with Edwards Lifesciences which will be contributed at the time
of the spin-off. Refer to Note 2 to the Combined Financial Statements for
further information. Approximately $550 million of Baxter's existing debt
will be indirectly assumed by Edwards Lifesciences through the issuance of
new third-party debt. This adjustment represents an estimate based on
available information. The company's debt agreements are in the process of
being finalized. Management does not expect this adjustment to materially
differ from the final amount.
(b) To reflect the anticipated distribution of [58,039,903] shares of common
stock at $1.00 par value share (at an assumed distribution ratio of one
share of Edwards Lifesciences common stock for every [five] shares of
Baxter common stock held on the record date) and the elimination of
Baxter's equity investment effected by the anticipated distribution of all
outstanding shares of Edwards Lifesciences stock to Baxter stockholders.
The anticipated total shares outstanding of [58,180,903] also reflects
shares to be issued to hourly employees, as discussed in footnote (c)
below.
(c) To reflect the anticipated initial contribution of principally common
stock to hourly employees worldwide to be held in a special stock account
under the Edwards Lifesciences Retirement Plan. See further discussion on
pages 61 and 63.
41
<PAGE>
EDWARDS LIFESCIENCES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis presents the factors that had a
material effect on the results of operations of Edwards Lifesciences during
the years ended December 31, 1999, 1998 and 1997. Also discussed is Edwards
Lifesciences' financial position as of December 31, 1999 and 1998. You should
read this discussion in conjunction with the historical and pro forma combined
financial statements and related notes thereto included elsewhere in this
information statement.
Overview
Edwards Lifesciences provides a comprehensive line of products and services
to treat late-stage cardiovascular disease. Edwards Lifesciences is the
world's leader, and has been a pioneer in the development and
commercialization of tissue valves and repair products, used to replace or
repair a patient's diseased or defective heart. Edwards Lifesciences' sales
are categorized in four main product areas: cardiac surgery, critical care,
vascular and perfusion products and services. See "Edwards Lifesciences'
Product and Service Offerings" elsewhere in this information statement. In
addition, Edwards Lifesciences also offers a diverse grouping of product lines
comprised mostly of select distributed products that are sold in international
markets, and miscellaneous pharmaceutical products. Edwards Lifesciences is
headquartered in Irvine, California, and supplies its products and services to
customers in more than 80 countries, both through direct sales and distributor
relationships. Edwards Lifesciences' products are manufactured in locations
throughout the world, including Brazil, the Dominican Republic, Japan, The
Netherlands, Puerto Rico, Switzerland and the United States.
Edwards Lifesciences' cardiac surgery portfolio is comprised of products
relating to heart-valve therapy, mechanical cardiac assist, and cannulae and
cardioplegia products used during open-heart surgery. Edwards Lifesciences is
the world's leader, and has been a pioneer in the development and
commercialization of tissue valves and repair products, used to replace or
repair a patient's diseased or defective heart valve. In the critical care
area, Edwards Lifesciences is a world leader in hemodynamic monitoring systems
that are used to measure a patient's heart function in surgical and intensive
care settings. Edwards Lifesciences' vascular product lines include a line of
balloon catheter-based products, surgical clips and inserts, angioscopy
equipment and artificial implantable grafts, as well as an endovascular system
that is used to treat less invasively life-threatening abdominal aortic
aneurysms. In the perfusion products and services category, Edwards
Lifesciences designs, develops, manufactures and markets a diverse line of
disposable products used during cardiopulmonary bypass procedures, including
oxygenators, blood containers, filters and related devices, as well as bypass
equipment. Edwards Lifesciences is also the world's leading provider of
perfusion services, employing more than 400 certified perfusionists who
perform an aggregate of more than 50,000 perfusion cases for open heart
surgery per year.
Cardiovascular disease is the leading cause of death in the world. Edwards
Lifesciences believes that there is a continual and growing need for the
treatment of cardiovascular disease primarily due to the aging population, the
progressive nature of the disease and the continued economic development of
countries around the world that allows for additional funds to be allocated
for the treatment of chronic health conditions. Edwards Lifesciences' business
strategy is to develop, manufacture and market products and services that
result in improved therapeutic outcomes for patients with late-stage
cardiovascular disease. Edwards Lifesciences plans to aggressively expand its
leading product offerings and develop new products and therapies that improve
the quality of patient care and reduce overall treatment costs.
The health-care marketplace continues to be competitive. There has been
consolidation in Edwards Lifesciences' customer base and among its
competitors, which has resulted in pricing and market share pressures. Edwards
Lifesciences has experienced increases in its labor and material costs, which
are primarily influenced by general inflationary trends. Competitive market
conditions have minimized inflation's impact on the selling prices of Edwards
Lifesciences' products and services. Management expects these trends to
continue. Edwards Lifesciences will continue to manage these factors by
capitalizing on its existing leading positions, developing
42
<PAGE>
new products and services through further commitment to internal research and
development activities, investing capital and human resources to upgrade and
expand facilities, leveraging its cost structure and pursuing acquisitions and
strategic alliances.
Results of Operations
Net Sales Trends
The following is a summary of domestic and international net sales:
<TABLE>
<CAPTION>
Year ended
December 31,
------------------
1999 1998 1997
---- ---- ----
(Dollars in
millions)
<S> <C> <C> <C>
United States......................................... $504 $508 $515
% increase/(decrease)............................. (1%) (1%)
International......................................... 401 357 364
% increase/(decrease)............................. 12% (2%)
---- ---- ----
Total net sales....................................... $905 $865 $879
% increase/(decrease)............................. 5% (2%)
==== ==== ====
</TABLE>
Fluctuations in net sales were primarily due to increases in sales of
cardiac surgery products offset by a decline in perfusion product sales and
perfusion service revenues as well as fluctuations in foreign currency
exchange rates. The fluctuations in foreign currency exchange rates were
primarily related to the movement of the U.S. dollar against the Euro and the
Japanese Yen. Excluding the effects of foreign currency exchange rate
fluctuations, Edwards Lifesciences' net sales worldwide increased 2% in the
year ended December 31, 1999 and increased 1% in the year ended December 31,
1998.
The impact of foreign currency exchange rate fluctuations on net sales is
not necessarily indicative of the impact on net income due to the
corresponding effect of foreign currency exchange rate fluctuations on
operating costs and expenses and Edwards Lifesciences' hedging activities. For
more information, see "Currency Risk" below.
The following is a summary of net sales by product line:
<TABLE>
<CAPTION>
Year ended
December 31,
------------------
1999 1998 1997
---- ---- ----
(Dollars in
millions)
<S> <C> <C> <C>
Cardiac surgery....................................... 306 $273 $247
% increase/(decrease)............................. 12% 11%
Critical care......................................... 242 221 227
% increase/(decrease)............................. 10% (3%)
Vascular.............................................. 61 60 57
% increase/(decrease)............................. 2% 5%
Perfusion products and services....................... 244 269 289
% increase/(decrease)............................. (9%) (7%)
Other................................................. 52 42 59
% increase /(decrease)............................ 24% (29%)
--- ---- ----
Total net sales....................................... 905 $865 $879
% increase /(decrease)............................ 5% (2%)
=== ==== ====
</TABLE>
Cardiac Surgery
Net sales of cardiac surgery products increased 12% in the year ended
December 31, 1999 and increased 11% in the year ended December 31, 1998.
Excluding the impact of foreign currency exchange rate fluctuations, net sales
of cardiac surgery products would have increased 11% in the year ended
December 31, 1999 and 13% in the year ended December 31, 1998.
43
<PAGE>
Increased demand for Edwards Lifesciences' heart-valve therapy products is
the primary reason for the growth in sales for all periods presented. Sales
growth in 1998 also benefited from a full year of sales related to the
acquisition of Research Medical, Inc., in March 1997. Research Medical is a
leading manufacturer of cannulae and cardioplegia products used during open-
heart procedures. Edwards Lifesciences now offers more than 1,200 types of
cannulae and accessories. Management expects that its heart-valve therapy
products will continue to serve as the key driver of sales growth.
Critical Care
Net sales of critical care products increased 10% in the year ended
December 31, 1999 and decreased 3% in the year ended December 31, 1998.
Excluding the impact of foreign currency exchange rate fluctuations, net sales
of critical care products would have increased 6% in the year ended December
31, 1999 and 2% in the year ended December 31, 1998.
The growth in 1999 was due primarily to an increased demand for disposable
pressure monitoring devices and the recent European launch of the first anti-
microbial central venous catheter. Although critical care products have been,
and are expected to continue to be, significant contributors to Edwards
Lifesciences' total sales, Edwards Lifesciences management believes that
future sales growth could be impacted by global pricing pressures and
potential reimbursement decreases in Japan.
Vascular
Net sales of vascular products increased 2% in the year ended December 31,
1999 and increased 5% in the year ended December 31, 1998. Excluding the
impact of foreign currency exchange rate fluctuations, net sales of vascular
products would have been flat in the year ended December 31, 1999 and would
have increased 7% in the year ended December 31, 1998.
The sales growth in 1998 was due to new revenues generated from a third
party arrangement involving Edwards Lifesciences' proprietary PTFE (synthetic
material) technology and an increase in sales of Edwards Lifesciences' Side
Branch Occlusion System that was introduced in July 1997. The Side Branch
Occlusion System is an innovative technology that helps vascular surgeons
efficiently restore circulation in the saphenous vein (a critical vein within
the blood circulatory system located in the legs) by effectively removing
clots and other blockages within the vein itself.
Edwards Lifesciences has made a significant commitment to the development
of endovascular grafts, which are used to treat potentially life-threatening
abdominal aortic aneurysms (AAA) through a minimally invasive approach. In
1999, Edwards Lifesciences commercially launched its Lifepath AAA endovascular
graft in Europe and Australia, which is expected to add to future sales
growth. Edwards Lifesciences is pursuing clinical trials in the United States
and expects to obtain FDA regulatory approval within the next two years.
Perfusion Products and Services
Net sales of perfusion products and services decreased 9% in the year ended
December 31, 1999 and decreased 7% in the year ended December 31, 1998.
Excluding the impact of foreign currency exchange rate fluctuations, net sales
of perfusion products and services would have decreased 10% in the year ended
December 31, 1999 and 6% in the year ended December 31, 1998.
Management believes that the decrease in sales of perfusion products and
services was due primarily to a continued slowing in the number of coronary
artery bypass graft procedures on a worldwide basis as well as significant
continuing pricing pressures. Management believes that the slowdown in the
number of traditional coronary bypass graft procedure surgeries has been
caused by increased acceptance of newer, less-invasive procedures such as
coronary stenting, which often eliminates or defers the need for cardiac
surgery. Additionally, there has been an increase in the number of heart
surgeries performed "off-pump" (the surgery is performed on
44
<PAGE>
a beating heart without cardiopulmonary bypass) and this trend has reduced the
need for perfusion services and the use of many traditional perfusion products
manufactured and sold by Edwards Lifesciences. Also, perfusion products and
services sales declined when Edwards Lifesciences ceased distributing certain
perfusion products in the United States on behalf of Haemonetics, Inc.
effective January 1, 1999. Net sales of product distributed on behalf of
Haemonetics, Inc. were approximately $20 million for the year ended December
31, 1998.
Other
Other net sales increased 24% in the year ended December 31, 1999 and
decreased 29% in the year ended December 31, 1998. Excluding the impact of
foreign currency exchange rate fluctuations, other net sales would have
increased 10% in the year ended December 31, 1999 and would have decreased 26%
in the year ended December 31, 1998.
Other sales include a diverse grouping of product lines comprised primarily
of select distributed products that are sold in international regions, and
miscellaneous pharmaceutical products. This category of sales, which generally
represents less than ten percent of Edwards Lifesciences' total sales, has
fluctuated based on the timing of new or terminated distribution agreements,
foreign currency exchange rate fluctuations and other factors and events.
Gross Margin
<TABLE>
<CAPTION>
Year ended
December 31,
--------------------------
1999 1998 1997
---- ---- -----
<S> <C> <C> <C>
Gross margin percentage........................ 48.5% 46.1% 47.3%
Increase/(decrease).......................... 2.4 pts. (1.2 pts.)
</TABLE>
The gross margin percentage increased 2.4 points in the year ended December
31, 1999 and decreased 1.2 points in the year ended December 31, 1998.
Excluding the impact of foreign currency exchange rate fluctuations, the gross
margin percentage would have increased 0.8 points in the year ended December
31, 1999 and 1.7 points in the year ended December 31, 1998. The increase in
the gross margin percentage for both periods was due to increased sales of
higher-margin cardiac surgery products and by a reduction in sales of lower-
margin perfusion products and services.
Marketing and Administrative Expenses
<TABLE>
<CAPTION>
Year ended
December 31,
--------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Marketing & administrative expenses as a
percentage of sales.............................. 25.7% 25.7% 24.0%
Increase......................................... -- 1.7 pts.
</TABLE>
Marketing and administrative expenses increased as a percentage of sales in
the year ended December 31, 1998 due to an increased investment in Edwards
Lifesciences' direct United States field-sales force as a result of
discontinuing sales of Research Medical products through outside distributors
following the acquisition of Research Medical in March 1997.
Research and Development Expenses
<TABLE>
<CAPTION>
Year ended
December 31,
-----------------
1999 1998 1997
---- ---- ----
(Dollars in
millions)
<S> <C> <C> <C>
Research and development expenses........................ $55 $56 $53
% increase/(decrease)................................ (2%) 6%
Research and development expenses as a percentage of
sales................................................... 6.1% 6.5% 6.0%
</TABLE>
45
<PAGE>
Research and development expenses presented above exclude the in-process
research and development charge relating to the acquisition of Research
Medical in 1997, which is discussed in more detail in Note 3 of "Notes to
Combined Financial Statements." As a percentage of sales, these expenses have
remained relatively constant over the periods presented.
Edwards Lifesciences is engaged in ongoing research and development to
introduce clinically-advanced new products, to maximize the effectiveness,
ease of use, safety and reliability of its existing products and to expand the
applications of its products as appropriate. Edwards Lifesciences has a strong
commitment to bolster its research and development activities in the future
with the goal of developing and commercializing new innovative products and
therapies that enhance performance and patient quality of life and address
cost-containment issues.
Goodwill Amortization
Goodwill amortization remained constant in the years ended December 31,
1999, 1998 and 1997.
Other Income and Expense
Refer to Note 9 to the "Combined Financial Statements" for a summary of the
amounts included in other income and expense. Other income in 1998 principally
consisted of $13 million of net insurance proceeds associated with hurricane
damage at one of the company's manufacturing facilities, net of a $3 million
loss associated with the impairment of a minority equity investment.
Income before Taxes
As a result of the factors discussed above, excluding the charge for in-
process research and development in 1997, income before taxes increased 22% in
the year ended December 31, 1999 and decreased 21% in the year ended December
31, 1998.
Income Taxes
The effective income tax rate for Edwards Lifesciences was approximately
27% in the year ended December 31, 1999, 33% in the year ended December 31,
1998 and 32% in the year ended December 31, 1997 (excluding the 1997 charge
for in-process research and development). The reduction in the tax rate for
the year ended December 31, 1999 was due primarily to more favorable tax
grants in certain jurisdictions.
Net Income
Net income increased 32% in the year ended December 31, 1999 and decreased
23% in the year ended December 31, 1998 (excluding the 1997 charge for in-
process research and development). These changes are consistent with the
changes in income before taxes and the changes in Edwards Lifesciences'
effective income tax rate, each as discussed above.
Liquidity and Capital Resources
Edwards Lifesciences management will assess Edwards Lifesciences' liquidity
in terms of its overall ability to mobilize cash to support ongoing business
levels and to fund its growth. Historically, Edwards Lifesciences has
generated sufficient cash to satisfy its normal operating cash and capital
requirements, and is expected to continue to do so in the future.
Cash flow provided by operations for 1999 was flat when compared to 1998
due primarily to higher inventory levels, offset by increased earnings and
improved accounts receivable collections. Cash flows provided by operations
for 1998 increased approximately 8% due primarily to improved accounts
receivable collections, liability management, partially offset by lower
earnings. In addition, included in cash flows provided by operations for 1998
was approximately $22 million in proceeds relating to the sale of certain
trade receivables in Japan to an independent financial institution. An
insignificant loss was recognized on the sale.
46
<PAGE>
Uses of cash for investing activities included the acquisition of property,
plant and equipment and acquisitions. Capital expenditures have remained
fairly constant for all periods presented. Acquisition spending in 1999
related primarily to the purchase of the Century Heart Lung Machine (HLM)
business of Cobe Cardiovascular Inc. from Sorin Biomedica. Net cash outflows
for acquisitions in 1998 and 1997 related principally to the acquisition of
Research Medical.
As of the distribution date, Edwards Lifesciences expects to have revolving
credit facilities in place amounting to a minimum of $550 million, which will
be used to repay intercompany debt to Baxter, satisfy initial working capital
requirements and fund distributions from Edwards Lifesciences' foreign
operations to Baxter. Assuming a debt level of $550 million, Edwards
Lifesciences' debt as a percent of total capital would have been 44.1% at
December 31, 1999.
In addition to this short-term facility, Edwards Lifesciences management
believes that it has sufficient cash flow from operations and financial
flexibility to attract long-term capital to fund short-term and long-term
growth objectives. However, no assurances can be given that such long-term
capital will be available to Edwards Lifesciences on favorable terms, or at
all.
Euro Conversion
On January 1, 1999, the European Economic and Monetary Union created and
introduced the Euro, the official single currency for the eleven participating
member countries. A transition period is currently in effect which began
January 1, 1999 and will continue through December 31, 2001, during which time
transactions will be executed in both the Euro and the member country's
individual currencies. Effective January 1, 2002, Euro bank notes will be
introduced and as of July 1, 2002, the Euro will be the sole legal tender of
the European Economic and Monetary Union countries.
Edwards Lifesciences has appointed a team of individuals to address all
issues associated with the conversion to the Euro and expects to be prepared
for such conversion as of the designated dates. At the time Edwards
Lifesciences switches to using the Euro as the sole functional currency for
the affected regions, certain modifications that are primarily related to
information systems, will be required. The costs associated with preparing for
the conversion and continued use of the Euro will be expensed as incurred and
are not expected to be material to Edwards Lifesciences' financial position,
results of operations or cash flows. The ultimate impact on Edwards
Lifesciences' business, including the impact on the competitive environment in
which Edwards Lifesciences operates, is currently unknown.
New Accounting and Disclosure Standard
In June 1998, the FASB issued Statement No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which is effective for all quarters of
fiscal years beginning after June 15, 2000. This Statement requires that all
derivatives be recorded in the balance sheet as either assets or liabilities
and be measured at fair value. The accounting for changes in the fair value of
a derivative depends on the intended use of the derivative and the resulting
designation. Management is in the process of evaluating this standard and has
not yet determined the future impact on Edwards Lifesciences' combined
financial statements.
Currency Risk
Edwards Lifesciences operates on a global basis and therefore is subject to
the exposure resulting from foreign currency exchange rate fluctuations. These
exposures arise from transactions denominated in foreign currencies, primarily
from translation of results of operations from outside the United States.
Additionally, such exposures may change over time as changes occur in Edwards
Lifesciences' international operations.
For all periods presented, Edwards Lifesciences has been considered in
Baxter's overall risk management strategy. As part of this strategy, Baxter
managed its foreign currency exchange rate risk to an acceptable level based
on management's judgment of the appropriate trade-off between risk,
opportunity and costs. With respect to Edwards Lifesciences' currency risks,
Baxter primarily utilized options to hedge these exposures.
47
<PAGE>
As a stand-alone company, Edwards Lifesciences' objective will be to manage
its exposure to foreign currency fluctuations to minimize earnings and cash
flow volatility associated with foreign exchange rate changes. In order to
reduce the risk of foreign currency exchange rate fluctuations, Edwards
Lifesciences expects to establish a policy of hedging a substantial portion of
its expected foreign currency denominated cash flow from operations. The
instruments that Edwards Lifesciences expects use for hedging will be readily
marketable traded forward contracts and options with financial institutions.
Edwards Lifesciences expects that the changes in fair value of such contracts
are expected to have a high correlation to the price changes in the related
hedged cash flow. Edwards Lifesciences does not expect that the risk of
transaction gains or losses from changes in the fair value of Edwards
Lifesciences' foreign exchange position will be material because most
transactions will occur in either the functional currency or in a currency
that has a high correlation to the functional currency. The principal
currencies that Edwards Lifesciences expects to hedge, which are the
currencies of the markets that present the primary risk of loss to Edwards
Lifesciences, are the Japanese Yen and the Euro. Any gains and losses on these
hedge contracts are expected to offset changes in the value of the related
exposures. Edwards Lifesciences expects to enter into foreign currency
transactions only to the extent that foreign currency exposure exists. Edwards
Lifesciences does not plan on entering into foreign currency transactions for
speculative purposes. A sensitivity analysis of changes in the fair value of
foreign currency exchange contracts outstanding at December 31, 1999 indicated
that, if the U.S. dollar uniformly weakened by 10% against all currencies, the
fair value of these contracts would decrease by $9 million. A similar analysis
performed with respect to contracts outstanding at December 31, 1998 indicated
that the fair value of such contracts would decrease by $5 million. The amount
for 1999 was greater than that for 1998 due principally to a larger portfolio
of foreign currency exchange contracts outstanding at December 31, 1999 and
higher implied volatilities with respect to the Japanese Yen and the Euro.
48
<PAGE>
EDWARDS LIFESCIENCES MANAGEMENT
Board of Directors
Immediately after the distribution date, Edwards Lifesciences expects that
the Edwards Lifesciences board of directors will consist of the individuals
named in the table below. The Edwards Lifesciences board of directors will be
divided into three classes. Each director will serve for a term expiring at
the annual meeting of stockholders in the year indicated below. For more
information see "Certain Anti-Takeover Effects of Provisions of Edwards
Lifesciences' Certificate of Incorporation and Bylaws and of Delaware Law."
Edwards Lifesciences will be managed under the direction of its board of
directors. The Edwards Lifesciences board of directors will meet on a regular
basis to review Edwards Lifesciences' operations, strategic and business
plans, acquisitions and dispositions, and other significant developments
affecting Edwards Lifesciences, and to act on matters requiring Edwards
Lifesciences board approval. It will also hold special meetings when important
matters require Edwards Lifesciences board action between scheduled meetings.
Members of senior management will be invited to Edwards Lifesciences board
meetings to discuss the progress of and future plans relating to their areas
of responsibility.
<TABLE>
<CAPTION>
Name/Age Term as Director Background
-------- ---------------- ----------
<C> <C> <S>
Michael A. Mussallem Expires [ ] Mr. Mussallem will be the Chairman of
Age 47 the Board and Chief Executive Officer of
Edwards Lifesciences. He first joined
Baxter in 1979 and has been the Group
Vice President of Baxter's
CardioVascular business since 1994 and
Group Vice President of Baxter's
Biopharmaceutical business since 1998.
Vernon R. Loucks Jr. Expires [ ] Mr. Loucks served as a director of
Age 65 Baxter from 1975 through December 1999,
including chairman of the Board since
1987. He was Chief Executive Officer of
Baxter from 1980 through 1998 and was
first elected as an officer of Baxter in
1975. Mr. Loucks is also a director of
Affymetrix Inc., Anheuser-Busch
Companies, Inc., Emerson Electric Co.,
GeneSoft, Inc. and The Quaker Oats
Company.
Philip M. Neal Expires [ ] Mr. Neal is President and Chief
Age 59 Executive Officer and a director of
Avery Dennison Corporation, a multi-
billion dollar Fortune 500 company that
manufactures and markets a wide range of
products for consumer and industrial
markets, including Avery-brand office
supplies and Fasson-brand self-adhesive
materials. Mr. Neal joined Avery
Dennison in 1974, served as President
and Chief Operating Officer from 1990
through April 1998, at which time he was
elected CEO. Mr. Neal serves as a
director of Independent Colleges of
Southern California and the Los Angeles
Area Chamber of Commerce, a trustee of
Pomona College and a Member of the Board
of Governors of Town Hall of California.
David E.I. Pyott Expires [ ] Mr. Pyott is President and Chief
Age 46 Executive Officer and a director of
Allergan, Inc., a global health care
company that provides eye care and
specialty pharmaceutical products
worldwide. Prior to joining Allergan in
1998, he was a division president of
Novartis AG, and before 1996 he held
various positions with Sandoz
International AG and Sandoz Nutrition
Corporation. He is also a member of the
board of directors of Avery Dennison
Corporation and the California
Healthcare Institute, serves on the
Executive Board of the Pharmaceutical
Research & Manufacturers of America and
is on the Executive Council of the
University of California-Irvine Graduate
School of Management.
</TABLE>
49
<PAGE>
Committees of the Board of Directors
To facilitate independent director review, and to make the most effective
use of the directors' time and capabilities, the Edwards Lifesciences bylaws
establish the committees described below. The Edwards Lifesciences board is
permitted to establish other committees from time to time as it deems
appropriate.
The Audit and Public Policy Committee
The Audit and Public Policy Committee will review the scope of the audit by
the independent auditors, inquire into the effectiveness of Edwards
Lifesciences' accounting and internal control functions, and recommend to the
Edwards Lifesciences board any changes in the appointment of independent
auditors which the committee may deem to be in the best interests of Edwards
Lifesciences and its stockholders. The committee will also assist the Edwards
Lifesciences board in establishing and monitoring compliance with the ethical
standards of Edwards Lifesciences. The Audit and Public Policy Committee will
also review the policies of Edwards Lifesciences to assure they are consistent
with its social responsibility to employees, customers and society, including
policies relating to health and safety and ethics. The committee will consist
solely of directors who are independent of management. Members of this
committee are expected to be: [ ]
The Compensation and Planning Committee
The Compensation and Planning Committee will determine the compensation of
officers and outside directors, other than the Chairman of the Board and Chief
Executive Officer (which will be determined by the Edwards Lifesciences
board), exercise the authority of the Edwards Lifesciences board concerning
employee benefit plans and advise the Edwards Lifesciences board on other
compensation and employee benefit matters. In addition, the committee will
make recommendations to the Edwards Lifesciences board regarding candidates
for election as directors of Edwards Lifesciences. The committee will also
advise the board on board committee structure and membership and corporate
governance matters. The committee will consist solely of directors who are
independent of management. Members of this committee are expected to be:
[ ]
Compensation of Directors
Cash compensation of non-employee directors will consist of a $15,000
annual retainer. Chairpersons of committees will receive an additional annual
retainer of $5,000. Employee directors are not compensated separately for
their board or committee activities.
In addition, to align the directors' interests more closely with the
interest of all of Edwards Lifesciences' stockholders, each non-employee
director will receive an additional annual retainer in the form of 7,500
options to purchase Edwards Lifesciences common stock. These options will vest
fifty percent per year over two years. All non-employee directors, serving as
such on the distribution date or joining the board in 2000, will also receive
a one-time restricted common stock grant equal to 5,000 shares shares of
Edwards Lifesciences common stock. The common stock will remain restricted
until the first anniversary of their election to the Edwards Lifesciences
board of directors when it will vest entirely, if they remain on the board on
such anniversary date.
Executive Officers
Set forth below is information with respect to those individuals who
Edwards Lifesciences expects to serve as executive officers of Edwards
Lifesciences immediately following the distribution. Those individuals named
below who are currently officers or employees of Baxter will resign from all
positions with Baxter prior to or as of the distribution date.
Michael A. Mussallem, age 47. Mr. Mussallem will be the Chairman of the
Board and Chief Executive Officer of Edwards Lifesciences. Mr. Mussallem
joined Baxter in 1979 and has been the Group Vice President of Baxter's
CardioVascular business since 1994 and Group Vice President of Baxter's
Biopharmaceutical business since 1998. During his tenure at Baxter, Mr.
Mussallem has held a variety positions with increased responsibility in
engineering, product development and senior management. He was appointed
General Manager of Access Products in 1984, Vice President and General Manager
of Pharmaceuticals in 1986, President of the
50
<PAGE>
Perfusion Products business in 1988 and President of the Critical Care
business in 1993. In 1994, Mr. Mussallem was named Group Vice President for
Baxter's Surgical Group. From 1996 until 1998, he was the Chairman of Baxter's
Asia Pacific Board overseeing Baxter operations throughout Asia. Mr. Mussallem
received his Bachelor of Science degree in chemical engineering from Rose-
Hulman Institute of Technology and was conferred an honorary doctorate by his
alma mater in 1999.
Stuart L. Foster, age 49. Mr. Foster will be the Corporate Vice President,
Global Operations of Edwards Lifesciences. Mr. Foster joined Baxter's
CardioVascular Group in 1994 as President of the Vascular business, and
continues to hold that position today. In 1997, his responsibilities increased
to include global oversight responsibilities for the Critical Care business.
He is also currently responsible for all international operations of the
CardioVascular business and leads the CardioVascular business' Technology
Innovation Team. Prior to joining Baxter, Mr. Foster was Chief Executive
Officer and President of Intramed Laboratories, which was acquired by Baxter
in 1994. Prior to that, he was an executive with SensorMedics Corporation, a
medical device company that he co-founded. Mr. Foster received his Bachelor of
Science degree in biomedical engineering from Rensselaer Polytechnic Institute
and earned his masters degree from the University of Southern California.
Anita B. Bessler, age 52. Ms. Bessler will be the Corporate Vice President,
Cardiac Surgery of Edwards Lifesciences. Ms. Bessler joined Baxter in 1988 as
Vice President and General Manger of Sales and Marketing for Baxter's Hyland
division. Prior to her tenure with Baxter, from 1986 until 1988 she was Senior
Executive Vice President with the USV/Armour Pharmaceutical Division of Rhone
Poulenc Rohrer. From 1976 until 1986, Ms. Bessler held senior management
positions with Revlon's Healthcare Group. She is a member of the External
Advisory Board of the Department of Biomedical Engineering of the Cleveland
Clinic Research Institute. She is a graduate of Indiana University, where she
earned a Bachelor of Science degree in marketing and economics.
Bruce J. Bentcover, age 45. Mr. Bentcover will be the Corporate Vice
President and Chief Financial Officer of Edwards Lifesciences. Mr. Bentcover
joined Baxter's CardioVascular Group in January 2000. From 1997 through 1998
Mr. Bentcover was Chief Operating and Financial Officer of the Women's
Healthcare Management Group, a private physician practice management company
that he co-founded. Prior to that he was Senior Vice President and Chief
Financial Officer of Resort Condominiums International; Vice President--
Finance and Treasurer of Hallmark Cards Inc.; Vice President and Treasurer and
then Vice President--Controller of Ecolab Inc. Mr. Bentcover earned his
Bachelor of Arts degree in political science from Eastern Illinois University
and received his MBA from the University of Chicago.
Bruce P. Garren, age 53. Mr. Garren will be Corporate Vice President and
General Counsel of Edwards Lifesciences. Mr. Garren joined Baxter's
CardioVascular Group in February 2000. Previously, he was Senior Vice
President--General Counsel for Safeskin Corporation, a manufacturer of latex
and synthetic gloves for the healthcare, high-technology and scientific
markets. From 1995 until 1997, he was Vice President--General Counsel for
Tambrands Inc., a manufacturer of various medical devices. He joined Tambrands
in 1985, serving in various other legal counsel positions in the company until
1995. Mr. Garren was an Associate with the law firm of Arnold & Porter in
Washington, D.C. from 1980 to 1985. He is a graduate of Cornell Law School and
a member of the American Bar Association, the American Corporate Counsel
Association and the bar associations of Washington, D.C. and various U.S.
federal courts.
Richard L. Miller, age 51. Mr. Miller will be the Corporate Vice President,
Critical Care of Edwards Lifesciences. Mr. Miller joined American Hospital
Supply Corporation in 1971, which was later acquired by Baxter, as a sales
representative for Scientific Products. Prior to his appointment as President
of the Critical Care business in 1999, he was President of Baxter's Health
Systems from 1994 through 1997 and President, Corporate Health Systems, from
1997 through 1998. During that time, Mr. Miller was a member of Baxter's North
American Board and also led Baxter's North American Sales and Marketing
Taskforce. Mr. Miller received a Bachelor of Arts in biology and chemistry
from the University of Colorado and earned an MBA from Portland University. He
also served in the United States Army Reserve from 1970 until 1976.
Andre-Michel Ballester, age 41. Mr. Ballester will be the Corporate Vice
President, Europe for Edwards Lifesciences. Mr. Ballester joined Baxter in
1986 as a Strategic Planning Analyst for Baxter France and subsequently became
Operations Manager for Baxter France. In 1989, he left the company to become
General
51
<PAGE>
Manager of consumer electronics company Prestinox International. Mr. Ballester
returned to Baxter in 1992 as Director of European Sales and Marketing for the
Critical Care division of Baxter's CardioVascular Group; he was appointed Vice
President of Marketing in 1995 and later assumed responsibility for the
Critical Care division's global marketing and business development activities.
Mr. Ballester currently serves as President of Baxter's CardioVascular Group
Europe and as Chairman of Baxter France. He holds a Master of Science degree
in chemical engineering from the Ecole Centrale Lille in France and an MBA
from INSEAD, Fontainebleau, France.
John H. Kehl, Jr., age 46. Mr. Kehl will be the Corporate Vice President,
Strategy & Business Development of Edwards Lifesciences. Mr. Kehl has held
various positions of increasing responsibility at Baxter since joining its
treasury department in 1975. In 1980, he was promoted to Manager of Investor
Relations and Communications and, in 1985, assumed responsibility for
directing all aspects of Baxter's external communications. Mr. Kehl was
appointed Vice President, Controller for Baxter's CardioVascular business in
1988 with responsibility for finance, information systems and business
planning. He became Vice President of Business Development in 1995, a position
he continues to hold today. In his current capacity, he leads all business
development initiatives, including strategy development and acquisition and
divestiture activities. Mr. Kehl has also served on Baxter's Japan Board that
oversees all operations in Japan. He earned his Bachelor of Arts degree in
business and economics from Loras College and received his MBA from Loyola
University in Chicago.
Robert C. Reindl, age 45. Mr. Reindl will be the Corporate Vice President,
Human Resources of Edwards Lifesciences. From 1993 through 1997, Mr. Reindl
was Vice President of Baxter's Institute for Training and Development. In
1997, he became the Vice President, Human Resources, for Baxter's
CardioVascular business. From 1987 until 1993, Mr. Reindl was a manager with
Arthur Andersen & Co., where he consulted on a variety of human resource and
organizational development issues, as well as designed training programs
focusing on time management, communication, team building and interviewing.
Prior to this, he was a communications instructor at Marietta College and Ohio
University. Mr. Reindl earned his Bachelor of Science degree in communication
from the University of Wisconsin-Stevens Point and his masters degree from
Bowling Green State University in Ohio.
Huimin Wang, M.D., age 43. Dr. Wang will be Corporate Vice President,
Japan. Dr. Wang joined Baxter in 1993 and served as a Senior Manager of
strategy development and, later, Director of product/therapy for Baxter's
Renal division in Japan. In 1997, he became President of medical systems and
devices, responsible for both the CardioVascular and Intravenous Systems
businesses in Japan. Prior to joining Baxter, Dr. Wang was a Senior Associate
with Booz, Allen & Hamilton in Chicago, specializing in strategy development,
organizational change, operations improvement and mergers and acquisitions for
health care providers. From 1990 until 1991, he was Vice President of
Integrated Strategies Inc., a consulting and venture management firm he co-
founded. He also was an Associate with McKinsey & Company. From 1981 until
1986, Dr. Wang was a Resident and Staff Physician in anesthesiology at Keio
University Hospital in Tokyo. Dr. Wang earned his Doctor of Medicine degree
from Kagoshima University in Japan, and his MBA from the University of
Chicago.
Randel W. Woodgrift, age 38. Mr. Woodgrift will be Corporate Vice
President, Manufacturing Operations of Edwards Lifesciences. Since joining
Baxter in 1983, Mr. Woodgrift has held positions of increasing responsibility
in research and development, manufacturing and operations, including
management of the Puerto Rico operation of Baxter's CardioVascular Group. From
1990 to 1993, Mr. Woodgrift held Director positions in U.S. operations and
established CardioVascular's first plant in Mexico. From 1994 to 1997, he was
Vice President, Heart Valve Operations for the United States and Europe. In
1997, his responsibilities were expanded to include all European plants. In
1998, Mr. Woodgrift assumed responsibility for all CardioVascular
manufacturing, logistics, facilities, environmental and health and safety
functions. In 1999, he initiated CardioVascular's first operations in the
Dominican Republic. Mr Woodgrift earned his Bachelor of Science degree in
mechanical engineering from California Polytechnic State University, San Luis
Obispo, a biomedical engineering certification from the University of
California--Irvine and an MBA from Pepperdine University.
52
<PAGE>
EDWARDS LIFESCIENCES EXECUTIVE COMPENSATION
1999 Compensation of Executive Officers
The following table shows the 1999 compensation for services rendered by
the Chairman of the Board and Chief Executive Officer of Edwards Lifesciences
and the individuals who are expected to be the next four most highly
compensated executive officers of Edwards Lifesciences (collectively, referred
to as the "named executive officers") based on their 1999 Baxter compensation,
if any, and their expected 2000 Edwards Lifesciences compensation. The
compensation shown in this table was paid by Baxter or its subsidiaries for
services rendered to Baxter and its subsidiaries. References to "restricted
stock" and "stock options" mean restricted shares of Baxter common stock and
options to purchase Baxter common stock. Amounts shown are for each individual
in his or her last position with Baxter, and do not necessarily reflect the
compensation which these five individuals will earn in their new capacities as
executive officers of Edwards Lifesciences.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term Compensation
------------------------------------------
Annual Compensation Awards Payouts
---------------------- --------------------- -------
Restricted All
Stock Securities LTIP Other
Salary Bonus Other Award(s) Underlying Payouts Compensation
Name and Principal Position Year ($)(1) ($)(1) ($)(2) ($)(3) Options(4) ($)(5) ($)(6)
- --------------------------- ---- ------- ------- ------ ---------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Michael A. Mussallem....... 1999 410,000 310,000 10,049 -0- 118,900 329,766 16,788
Chairman of the Board &
Chief Executive Officer
Anita B. Bessler........... 1999 237,442 96,000 -- -0- 50,800 188,438 6,914
Group Vice President
Stuart L. Foster........... 1999 236,231 96,000 -- -0- 50,800 188,438 7,332
Group Vice President
Bruce J. Bentcover......... 1999 -- -- -- -- -- -- --
Corporate Vice President(7)
Bruce P. Garren............ 1999 -- -- -- -- -- -- --
Corporate Vice President(7)
</TABLE>
- --------
(1) Amounts shown include cash compensation earned by the named executive
officers during 1999, including amounts deferred at the election of those
officers. Bonuses are paid in the year following the year during which
they are earned. The bonuses shown for the named executive officers are
their target bonuses for 1999.
(2) As permitted by the SEC's rules, this column excludes perquisites and
other personal benefits for the named executive officer if the total
incremental cost in 1999 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 1999.
(3) Based on the $62.8125 closing price of Baxter common stock on December 31,
1999, the number and value of the aggregate restricted stock holdings of
the named executive officers on that date are as follows: Mr. Mussallem--
15,918 shares ($999,849); Ms. Bessler--5,295 shares ($332,592); Mr.
Foster--3,800 shares ($238,688); Mr. Bentcover--0 shares ($0); and Mr.
Garren--0 shares ($0). No new grants of restricted stock were made during
1999. Dividends are payable on all outstanding shares of restricted stock
held by all Baxter executives at the same rate and time and in the same
form in which dividends are payable on all outstanding shares of Baxter
common stock.
(4) No Stock Appreciation Rights (SARs) were granted by Baxter in 1999, and
there are no outstanding SARs held by any employee or director of Edwards
Lifesciences. The number of options granted in 1999 includes the options
granted and exercised pursuant to Baxter's Shared Investment Plan, as
described below in footnote 4, to the "Option Grants Table" on page 54.
(5) Amounts shown represent the market value of earned restricted stock which
vested under Baxter's Long- Term Incentive Plan on December 31, 1999. The
vested shares were earned as of December 31, 1998.
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<PAGE>
(6) Amounts shown represent matching contributions made under the Baxter
International Inc. and Subsidiaries Incentive Investment Plan (Baxter
Incentive Investment Plan), a tax-qualified section 401(k) profit sharing
plan, additional matching contributions in Baxter's deferred compensation
plan and the dollar value of split-dollar life insurance benefits. Those
three amounts, expressed in the same order as identified above, for the
named executive officers are as follows: Mr. Mussallem--$4,800, $11,988,
and $288; Ms. Bessler--$4,800, $2,114, and $[ ]; Mr. Foster--$4,800,
$2,532, and $[ ]; Mr. Bentcover--$0, $0, and 0; and Mr. Garren--$0,
$0, and 0.
(7) Messrs. Bentcover and Garren joined Edwards Lifesciences in January and
February 2000, respectively, and did not earn compensation from Edwards
Lifesciences in 1999. They are, however, expected to be among the five
highest paid executive officers of Edwards Lifesciences in 2000.
Stock Option Grants
The following table contains information relating to the Baxter stock
option grants made in 1999 to the named executive officers.
Option Grants Table
Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Potential Realizable Value at
Assumed Annual Rates of
Stock Price Appreciation
Individual Grants for Option Term
------------------------------------------- -----------------------------------------
Number of Percent of
Securities Total Options
Underlying Granted to Exercise or
Options Employees in Base Price Expiration 10%
Name Granted (#) Fiscal Year (%)(1) ($/Sh)(2)(3) Date 0% ($) 5% ($)(4)(5)(6) ($)(4)(5)(6)
---- ----------- ------------------ ------------ ---------- ------ --------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Mr. Mussallem........ 18,900 .2 67.6875 2/13/09 -0- $ 2,083,835 $ 3,318,159
100,000 1.2 63.6250 5/3/99 -0- -- --
- --------------------------------------------------------------------------------------------------------------------------
Ms. Bessler.......... 10,800 .1 67.6875 2/13/09 -0- $ 1,190,763 $ 1,896,091
40,000 .5 63.6250 5/3/99 -0- -- --
- --------------------------------------------------------------------------------------------------------------------------
Mr. Foster........... 10,800 .1 67.6875 2/13/09 -0- $ 1,190,763 $ 1,896,091
40,000 .5 63.6250 5/3/99 -0- -- --
- --------------------------------------------------------------------------------------------------------------------------
Mr. Bentcover........ -- -- -- -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------
Mr. Garren........... -- -- -- -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------
All Stockholders..... N/A N/A N/A N/A $31,080,316,210(5) $49,490,209,190(5)
- --------------------------------------------------------------------------------------------------------------------------
All Optionees........ 8,117,326 100 Various Various -0- $ 869,364,060(6) $ 1,384,316,971(6)
- --------------------------------------------------------------------------------------------------------------------------
Optionee Gain as % of
All Stockholders'
Gain................ N/A N/A N/A N/A 2.8% 2.8%
</TABLE>
- --------
(1) In 1999, Baxter granted options on approximately 8.1 million shares of
Baxter common stock to approximately 3,700 employees at various exercise
prices at different times during the year.
(2) The exercise prices shown for the named executive officers are the closing
prices of Baxter common stock on the dates of the grants, which were
February 15, 1999 and May 3, 1999.
(3) The options shown in this table as granted to the named executive officers
at the exercise price of $67.6875 become exercisable three years from the
date of grant. The exercise price of the options may be paid in cash or in
shares of Baxter common stock. If specified corporate control changes
occur, all outstanding options will become exercisable immediately. The
options shown in this table as granted to the named executive officers at
the exercise price of $63.6250 were granted on May 3, 1999 pursuant to
Baxter's Shared Investment Plan. Under the Shared Investment Plan, the
named executive officers (except Messrs. Bentcover and Garren) and 139
other Baxter executives exercised a one day stock option to purchase a
significant amount of Baxter common stock. The stock option exercises were
financed through
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<PAGE>
full-recourse, personal loans made by commercial banks. The loans are
guaranteed by Baxter. More information on the Shared Investment Plan is
contained in Baxter's proxy statement dated March 24, 2000.
(4) Potential realizable values are calculated net of the option exercise
price but before taxes associated with exercise. The assumed rates of
stock price appreciation are set by rules of the SEC governing proxy
statement disclosure and are not intended to forecast the future
appreciation of Baxter common stock.
(5) The potential realizable values for all stockholders were calculated on
the 290,199,514 shares of Baxter stock outstanding on December 31, 1999.
The potential realizable values were calculated assuming the stockholders
purchased Baxter stock at $67.6875, the closing price on February 15,
1999. Because the Shared Investment Plan options were granted and
exercised at the closing price of Baxter stock on May 3, 1999, there was
no potential realizable value for the option term.
(6) The potential realizable values for all optionees were calculated based on
the approximately 8.1 million options that were granted to employees of
Baxter at various exercise prices at different times during the year. The
potential realizable values were calculated assuming that all of the
options were granted at the $67.6875 exercise price.
Stock Option Exercises
The following table contains information relating to the exercise of Baxter
common stock options by the named executive officers in 1999, as well as the
number and value of their unexercised Baxter common stock options as of
December 31, 1999.
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options at Options at
Fiscal Year-End (#)(2) Fiscal Year End ($)(3)
Shares Acquired Value ------------------------- -------------------------
Name on Exercise (#)(1) Realized ($)(1) Exercisable Unexercisable Exercisable Unexercisable
- ---- ------------------ --------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Mr. Mussallem........... 111,018 575,601 143,449 79,900 2,929,443 455,188
Ms. Bessler............. 56,754 738,014 39,525 38,800 [ ] [ ]
Mr. Foster.............. 40,000 -0- 71,628 38,800 [ ] [ ]
Mr. Bentcover........... -- -- -- -- -- --
Mr. Garren.............. -- -- -- -- -- --
</TABLE>
- --------
(1) The number of shares shown in these columns include the options granted
and exercised on May 3, 1999 pursuant to Baxter's Shared Investment Plan.
See footnote (4) to the Option Grants Table on page 54. Because those
options were granted and exercised at the closing price of Baxter common
stock on May 3, 1999, there was no value realized upon the exercise of
those options.
(2) The sum of the numbers under the Exercisable and Unexercisable columns of
this table represents each named executive officer's total number of
outstanding Baxter options.
(3) The dollar amounts shown under the Exercisable and Unexercisable columns
of this table represent the number of exercisable and unexercisable Baxter
options, respectively, which had an exercise price below the closing price
of Baxter common stock on December 31, 1999, which was $62.8125,
multiplied by the difference between such closing price and the exercise
price of the Baxter options.
Pension Plan and Excess Pension Plan
The table on the following page shows estimated annual retirement benefits
payable to participants under the Baxter International Inc. and Subsidiaries
Pension Plan (Pension Plan) whose employment terminates at normal retirement
age (age 65). The Pension Plan's normal retirement benefit equals (1) 1.75% of
an employee's Final Average Pay multiplied by the employee's number of years
of benefit service, as defined by the Pension Plan, minus (2) 1.75% of an
employee's estimated primary social security benefit, multiplied by the
employee's years of benefit service, as defined by the Pension Plan. An
employee's Final Average Pay is equal to the average of an employee's five
highest consecutive calendar years of earnings out of his or her last ten
calendar years of
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<PAGE>
earnings. In general, the earnings covered by the Pension Plan include salary,
annual cash bonuses and other regular pay. The figures shown include benefits
payable under the Pension Plan and Baxter's related defined benefit excess
pension plan. The estimates assume that benefit payments begin at age 65 under
a single life annuity form. The figures are net of the Social Security offset
specified by the Pension Plan's benefit formula and therefore do not include
Social Security benefits payable from the federal government. The estimated
primary Social Security benefit used in the calculations is that payable for
an individual attaining age 65 in 1999.
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
benefit service, as defined by the Pension Plan 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 an unreduced Pension Plan benefit 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
Final Average Pay(1)($) Participation(1)($)
----------------------- ---------------------------------------
10 15 20 25 30
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
100,000.......................... 14,500 21,700 29,000 36,200 43,400
200,000.......................... 32,000 48,000 64,000 80,000 95,900
300,000.......................... 49,500 74,200 99,000 123,700 148,400
400,000.......................... 67,000 100,500 134,000 167,500 200,900
500,000.......................... 84,500 126,700 169,000 211,200 253,400
600,000.......................... 102,000 153,000 204,000 255,000 305,900
700,000.......................... 119,500 179,200 239,000 298,700 358,400
800,000.......................... 137,000 205,500 274,000 342,500 410,900
900,000.......................... 154,500 231,700 309,000 386,200 463,400
</TABLE>
- --------
(1) As of December 31, 1999, the named executive officers' years of benefit
service and Final Average Pay for purposes of calculating annual
retirement benefits payable under the Pension Plan are as follows:
Mr. Mussallem--19 years and $544,908; Ms. Bessler--11 years and $269,068;
Mr. Foster--9 years and $255,804; Mr. Bentcover--0 years and $0; and Mr.
Garren-- 0 years and $0.
Baxter Common Stock Held By Edwards Lifesciences Employees
Baxter restricted common stock held by Edwards Lifesciences employees will
be [treatment to be determined]. Edwards Lifesciences employees holding Baxter
stock options will, as of the distribution date, be considered terminated and,
as such, vesting and exercise will be in accordance with the terms and
conditions of the outstanding grants.
Future Compensation of Executive Officers
The compensation of Edwards Lifesciences' executive officers for periods
beginning on and after the distribution date will be determined by the Edwards
Lifesciences board of directors or its Compensation Committee.
Compensation Philosophy For Executive Officers
Edwards Lifesciences expects that its philosophy will be to provide
compensation opportunities supporting Edwards Lifesciences' business
objectives and values. Forms and levels of total compensation will be
structured to be competitive when compared to other companies of similar focus
and size. These companies are reported in surveys whose participants include
many companies in the Fortune 500 as well as other companies with which
56
<PAGE>
Edwards Lifesciences and its subsidiaries compete for executive talent. This
philosophy is intended to assist Edwards Lifesciences in attracting, retaining
and motivating executives with superior leadership and management abilities.
Consistent with this philosophy, a total compensation structure will be
determined for each officer, including Mr. Mussallem, consisting primarily of
salary, cash bonus, stock options and benefits. The proportions of these
elements of compensation will vary among the officers depending upon their
levels of responsibility. The senior executive officers will receive a larger
portion of their total compensation through performance-based incentive plans,
which place a greater percentage of their compensation at risk while more
closely aligning their interests with the interests of Edwards Lifesciences'
stockholders.
Edwards Lifesciences' philosophy with respect to the limitation on the tax-
deductibility of executive compensation will be to maximize the benefit of tax
laws for Edwards Lifesciences' stockholders by seeking performance-based
exemptions which are consistent with Edwards Lifesciences' compensation
policies and practices. Edwards Lifesciences will adopt performance goals for
the officer cash bonus plan which are expected to satisfy the deductibility
requirements with respect to any payments under those plans.
Compensation Elements
Salaries will be targeted each year at the median of salaries of executive
officers in comparison companies. In addition, officer salaries will be based
on the officer's individual performance. Bonuses are intended to provide
executive officers with an opportunity to receive additional cash compensation
but only if they earn it through Edwards Lifesciences' achievement of strong
performance results as measured by key financial indicators. Each year, a
bonus target will be established for each executive officer between the 50th
and 75th percentile of the market data of comparison companies. After year-end
results are calculated, each officer's bonus will be determined based on
Edwards Lifesciences' performance against the key financial indicators
established for the year. Achievement of the performance objectives will
determine an officer's opportunity to earn bonus compensation either
significantly above or below the bonus target.
Stock options will be granted under Edwards Lifesciences' 2000 Incentive
Compensation Program and such other stock option plans that may be
established, as described below. They represent a vehicle for more closely
aligning management's and stockholders' interests, specifically motivating
executives to remain focused on the market value of Edwards Lifesciences
Stock.
The number of stock options granted to executive officers is expected to be
market-based. The intent is to provide an opportunity to earn stock-based
compensation at the 75th percentile compared to executives in comparison
companies.
2000 Incentive Compensation Program
Edwards Lifesciences expects to adopt the Edwards Lifesciences 2000
Incentive Compensation Program (Incentive Program). The Incentive Program is
expected to be approved by Baxter as sole stockholder of Edwards Lifesciences
prior to the distribution.
General
The Incentive Program is designed to promote success and enhance the value
of Edwards Lifesciences by linking participants' interests more closely to
those of Edwards Lifesciences stockholders and by providing participants with
an incentive for excellence.
The Incentive Program will be administered by the Compensation Committee of
Edwards Lifesciences. The Compensation Committee must consist of two or more
directors who qualify as non-employee directors under Rule 16b-3 of the
Securities Exchange Act of 1934 and as outside directors under Section 162(m)
of the Code. Incentives may consist of the following: (a) stock options; (b)
stock appreciation rights; (c) restricted stock; (d) stock awards; (e)
performance shares; and (f) other incentives, including cash. Incentives may
be granted to any
57
<PAGE>
employee of Edwards Lifesciences (including directors of Edwards Lifesciences
who are also employees of Edwards Lifesciences) selected from time to time by
the Compensation Committee.
The number of shares of Edwards Lifesciences common stock authorized for
issuance (including conversion for outstanding awards) under the Incentive
Program will not exceed [18.5]% of the outstanding shares of Edwards
Lifesciences common stock as of the distribution date.
Stock Options
Under the Incentive Program, the Compensation Committee may grant non-
qualified and incentive stock options to eligible employees to purchase shares
of Edwards Lifesciences common stock from Edwards Lifesciences. The Incentive
Program gives the Compensation Committee discretion, with respect to any such
stock option, to determine the number and purchase price of the shares subject
to the option, the term of each option and the time or times during its term
when the option becomes exercisable, subject to the following limitations. No
stock option may be granted with a purchase price below the fair market value
of the shares subject to the option on the date of grant and the term may not
exceed 10 years and one day from the date of grant. Except to the extent that
the Compensation Committee determines that another value is more appropriate
given the circumstances, the fair market value of shares on the date of a
grant shall mean the closing sale price of Edwards Lifesciences common stock
as reported on the New York Stock Exchange composite reporting tape. No person
may receive, in any calendar year, stock options which, in the aggregate,
represent more than [1,000,000] shares of Edwards Lifesciences common stock.
The initial option grant to the named executive officers will be as follows:
Mr. Mussallem, [ ] shares; Ms. Bessler, [ ] shares; Mr. Foster, [ ]
shares; Mr. Bentcover, [ ] shares; and Mr. Garren, [ ] shares.
Stock Appreciation Rights
SARs may be granted by the Compensation Committee pursuant to the Incentive
Program in such number and on such terms as the Compensation Committee may
decide, provided that the term of an SAR may not exceed 10 years and one day
from the date of grant. SARs may be granted together with or independently of
any stock option. SARs may be paid in Edwards Lifesciences common stock or
cash, as determined by the Compensation Committee. No person may receive, in
any calendar year, SARs which, in the aggregate, represent more than
[1,000,000] shares of Edwards Lifesciences common stock.
Restricted Stock
Restricted stock consists of the sale or transfer by Edwards Lifesciences
to an eligible employee of one or more shares of Edwards Lifesciences common
stock which are subject to restrictions on their sale or other transfer by the
employee. The price, if any, at which restricted stock will be sold will be
determined by the Compensation Committee, and it may vary from time-to-time
and among employees and may require no payment or be less than the fair market
value of the shares at the date of sale. All shares of restricted stock may be
subject to the attainment of performance goals under Section 162(m) of the tax
code and other restrictions as the Compensation Committee may determine.
Subject to these restrictions and the other requirements of the Incentive
Program, a participant receiving restricted stock will have the rights of a
stockholder (including voting and dividend rights) as to those shares only to
the extent the Compensation Committee designates such rights at the time of
the grant. Not more than [500,000] shares of Edwards Lifesciences common stock
may be issued in the form of restricted stock under the Incentive Program.
Stock Awards
Stock awards consist of the transfer by Edwards Lifesciences to an eligible
employee of shares of Edwards Lifesciences common stock, without payment, as
additional compensation for his or her services to Edwards Lifesciences or a
subsidiary of Edwards Lifesciences. Stock awards are subject to the following
limitations: No person subject to Section 16(a) of the Exchange Act (executive
officers of Edwards Lifesciences) may receive a
58
<PAGE>
stock award, and no person eligible to receive a stock award may receive a
stock award representing more than [50,000] shares of Edwards Lifesciences
common stock in any calendar year.
Performance Shares
Performance shares consist of the grant by Edwards Lifesciences to an
eligible employee of a contingent right to receive payment of shares of
Edwards Lifesciences common stock. The performance shares will be paid in
shares of Edwards Lifesciences common stock to the extent performance goals
set forth in the grant are achieved. All grants of performance shares to a
person subject to Section 16(a) of the Exchange Act (executive officers of
Edwards Lifesciences) will be subject to the attainment of performance goals
under Section 162(m) of the tax code. The number of shares granted and the
performance goals will be determined by the Compensation Committee. No person
may receive in any calendar year performance shares which, in the aggregate,
represent more than [100,000] shares of Edwards Lifesciences common stock.
Other Incentives
Other incentives may consist of a payment in cash or stock by Edwards
Lifesciences to an eligible employee as additional compensation for his or her
services to Edwards Lifesciences or a subsidiary of Edwards Lifesciences. The
form, amount and the terms and conditions of other incentives will be
determined by the Compensation Committee.
Section 162(m) Performance Goals
Under the Incentive Program, grants of restricted stock, performance
shares, and other incentives (as defined in the Incentive Program) may be
subject to the attainment of performance goals under Section 162(m) of the tax
code. The regulations under Section 162(m) require the performance goals
related to grants under the Incentive Program to be approved separately by
Edwards Lifesciences' stockholders. Performance goals for performance based
grants may include, but are not limited to, stock price, sales, return on
equity, cash flow, market share, earnings per share and/or costs.
Non-Transferability of Incentives
Unless otherwise determined by the Compensation Committee, no stock option,
SAR, restricted stock, performance share or other incentive granted under the
Incentive Program will be transferable by its holder, except in the event of
the holder's death, by will or the laws of descent and distribution. During an
employee's lifetime, an incentive may be exercised only by the employee or the
employee's guardian or legal representative. The Compensation Committee may
allow the limited transfer of an incentive to the immediate family of an
employee to facilitate estate planning.
Amendment of the Program
Edwards Lifesciences' board of directors may amend or discontinue the
Incentive Program at any time. However, no amendment or discontinuance may
adversely affect an incentive previously granted. In addition, the board of
directors may not amend the Incentive Program without approval of Edwards
Lifesciences' stockholders to the extent such approval is required by law,
agreement or any exchange on which Edwards Lifesciences common stock is
traded.
Acceleration of Incentives
In the event of a change in control of Edwards Lifesciences (as specified
in the Incentive Program), the restrictions on all outstanding shares of
restricted stock will lapse immediately, all outstanding stock options and
SARs will become exercisable immediately and all performance goals will be
deemed to be met at target and payment made immediately.
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<PAGE>
Other Edwards Lifesciences Stock Option Plans
Edwards Lifesciences also expects to adopt one or more stock option plans
to provide for the grant of non-statutory stock options to certain
consultants, independent contractors and other persons who are not employees
of Edwards Lifesciences and its subsidiaries.
Edwards Lifesciences Change of Control Plan
Edwards Lifesciences expects to adopt the Edwards Lifesciences Change of
Control Plan. Pursuant to agreements entered into under this plan, employees
selected to participate (including each of the named executive officers) will
be entitled to separation pay and benefits following a change of control in
Edwards Lifesciences and the employee's subsequent termination of employment
unless such termination is voluntary and unprovoked or results from death,
disability, retirement or cause. The eligible termination must occur within 24
months of the change of control or the agreement is void. Mr. Mussallem will
be permitted to terminate his employment voluntarily at any time during the
thirteenth month following a change of control and collect the change of
control separation pay and benefits. Each agreement will continue for three
years from the distribution date and automatically extend for one year on each
anniversary of the agreement, unless Edwards Lifesciences notifies the
specific participant in writing that the agreement will not be renewed.
Under this plan, the separation pay will equal either three years'
annualized base salary and target cash bonus or two years' annualized base
salary and target cash bonus (as determined by the Compensation Committee in
its discretion depending on the employee's position). In addition, vesting of
all outstanding equity grants will be accelerated upon a change of control and
other terms and conditions will be governed by the provisions of the Edwards
Lifesciences 2000 Incentive Compensation Program.
In the event that any payments would be subject to an excise tax under the
tax code, Edwards Lifesciences will pay an additional gross-up amount for any
excise tax and federal, state and local income taxes, such that the net amount
of the payments would be equal to the net payments after income taxes had the
excise tax and resulting gross-up not been imposed.
Edwards Lifesciences Retirement Plan for United States Employees
Edwards Lifesciences will adopt a tax-qualified defined contribution
retirement plan (Edwards Lifesciences Retirement Plan) for its United States
employees effective on the distribution date. This plan will include a section
401(k) deferred compensation account (401(k) account), a company matching
contribution account, a performance account for Edwards Lifesciences' hourly
manufacturing employees, an initial stock grant for Edwards Lifesciences'
hourly employees and a transition account for each eligible employee, as
described below.
The defined contribution accounts for transferring employees under the
Baxter Incentive Investment Plan will be transferred to the Edwards
Lifesciences Retirement Plan. The Edwards Lifesciences Retirement Plan will
establish a fund to hold the Baxter common stock currently held on behalf of
Edwards Lifesciences employees in the Baxter Incentive Investment Plan. The
Edwards Lifesciences Retirement Plan will allow participants to redirect the
balances of their Edwards Lifesciences Retirement Plan accounts that are
invested in the Baxter common stock fund but not allow participants to direct
that their plan accounts make new investments in Baxter common stock within
the Edwards Lifesciences Retirement Plan.
401(k) Account and Company Matching Contribution Account
Employees of Edwards Lifesciences will be eligible to contribute to the
Edwards Lifesciences Retirement Plan on or after the distribution date.
Participants may elect to contribute, on a before-tax basis, up to 15% of
their annual eligible compensation as defined by the Edwards Lifesciences
Retirement Plan to their 401(k) accounts. Edwards Lifesciences will match the
first 3% (from 1-3%) of the participant's annual eligible compensation
contributed to the plan on a dollar for dollar basis. Edwards Lifesciences
will match the next 2% (from 4-5%) of the participant's annual eligible
compensation to the plan on a 50% basis.
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<PAGE>
Performance Account
Subject to the terms of the Edwards Lifesciences Retirement Plan, hourly
manufacturing employees of Edwards Lifesciences will be eligible to receive
contributions to their performance accounts under such plan. Edwards
Lifesciences will make discretionary contributions to each performance account
in an amount equal to a target of 3% of the participant's annual eligible
compensation based on achievement of certain performance measures.
Contributions will be made quarterly, in cash, and will be invested according
to each employee's current 401(k) account investment elections if the employee
is a participant in the 401(k); otherwise the contributions will be invested
in the Edwards Lifesciences Common Stock Fund. Such contribution will be
immediately vested, and participants may elect to re-invest them in any of the
other funds within the Retirement Plan.
Initial Stock Grant Account
Edwards Lifesciences will be awarding each hourly manufacturing employee a
contribution of [50] shares of Edwards Lifesciences common stock to be held in
a special account under the Edwards Lifesciences Retirement Plan. The grant
will be immediately vested, but the shares will not be available for loan or
withdrawals, and the special stock account may not be reallocated to other
funds within the 401(k) account until a participant reaches age 59.
Transition Account
Edwards Lifesciences has determined that it will facilitate the transition
of certain longer service employees from the Baxter Pension Plan to the
Edwards Lifesciences Retirement Plan by offering some additional benefits to
employees who meet specific age and service criteria. Contributions to a
transition account under the Edwards Lifesciences Retirement Plan will be made
to five groups of salaried non-exempt and hourly manufacturing employees.
These contributions will be made in cash, and will be invested according to
each employee's current 401(k) account investment elections if the employee is
a participant in the 401(k); otherwise the contributions will be invested in
the Edwards Lifesciences Common Stock Fund. They will be immediately vested,
and participants may elect to re-invest them in any of the other funds within
the Retirement Plan. Annual contributions will be made for eligible
participants until the earlier of when such participant terminates employment
or reaches age 65.
Employees with 75 or more "points" (as determined under the terms of the
Baxter Pension Plan explained on page 56) as of the distribution date will
receive transition contributions equal to 5% of the participant's eligible
compensation.
Employees with 70-74 "points" as of the distribution date will receive
transition contributions equal to 3% of the participant's eligible
compensation.
Employees with 65-69 "points" as of the distribution date will receive
transition contributions equal to 2.5% of the participant's eligible
compensation.
Employees with 60-64 "points" and at least 10 years of "benefit service"
(as determined under the terms of the Baxter Pension Plan explained on page
56) as of the distribution date will receive transition contributions equal to
1% of the participant's eligible compensation.
Employees with 55-59 "points" and at least 10 years of "benefit service"
(as determined under the terms of the Baxter Pension Plan explained on page
56) as of the distribution date will receive transition contributions equal to
one-half of 1% of the participant's eligible compensation.
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Edwards Lifesciences Non-Qualified Plan
Federal income tax laws limit the amount Edwards Lifesciences may
contribute to the accounts of certain highly compensated participants under
the Edwards Lifesciences Retirement Plan. Federal income tax laws also limit
the amount participants may contribute to their accounts under the Edwards
Lifesciences Retirement Plan. Edwards Lifesciences will adopt an unfunded non-
qualified excess plan (Edwards Lifesciences Excess Plan) that will credit
participants affected by the limits with the amount of their contributions
that the participants would have contributed or that Edwards Lifesciences
would have contributed on their behalf to the Edwards Lifesciences Retirement
Plan but for such limits.
Baxter Pension Plan
Eligible Edwards Lifesciences employees (transferring employees) will
continue to participate for purposes of benefit accruals in the Baxter Pension
Plan through the distribution date. All benefit accruals for Edwards
Lifesciences United States employees in the Baxter Pension Plan cease as of
the distribution date and all such employees will be fully vested in their
accrued benefits under the Pension Plan as of such date. Edwards Lifesciences'
United States employees with vested accrued benefits in the Pension Plan will
have those benefits maintained by the Pension Plan until they are eligible or
required to receive them according to the terms of the Plan.
Employee Stock Purchase Plan for United States Employees
Edwards Lifesciences will adopt an employee stock purchase plan for its
United States employees, as described in Section 423 of the tax code. All
active employees of Edwards Lifesciences and its United States subsidiaries
will be eligible to participate in the Plan. The employee stock purchase plan
will make available shares of Edwards Lifesciences common stock for purchase
by eligible employees through payroll deductions at a maximum rate of 12% of
eligible compensation. The purchase price per share will be equal to the
lesser of 85% of the fair market value of Edwards Lifesciences common stock on
the effective date of subscription or 85% of the fair market value of Edwards
Lifesciences common stock on the date of purchase. Purchases will be made
quarterly. [400,000] shares will be reserved for issuance under this Plan.
Transition Options for Salaried Exempt Employees
Edwards Lifesciences has determined that it will facilitate the transition
of certain longer service salaried exempt employees out of the Baxter Pension
Plan by offering additional stock options to salaried exempt employees who
meet specific age and service criteria. Transition stock options will be
provided to five groups of salaried exempt employees. Eligible employees will
receive an annual grant as described below, until the earlier of when the
employee reaches age 65 or terminates employment. The options will have a ten
year term with three year vesting.
Employees with 75 or more "points" (as determined under the terms of the
Pension Plan explained on page 52) as of the distribution date will receive an
annual transition option grant equal in value to 8% of the participant's
eligible compensation (based on a Black Scholes valuation of the options as of
the distribution date).
Employees with 70-74 "points" as of the distribution date will receive an
annual transition option grant equal in value to 6% of the participant's
eligible compensation.
Employees with 65-69 "points" as of the distribution date will receive an
annual transition option grant equal in value to 5.5% of the participant's
eligible compensation.
Employees with 60-64 "points" and at least 10 years of "benefit service"
(as determined under the terms of the Pension Plan explained on page 56) as of
the distribution date will receive an annual transition option grant equal in
value to 4% of the participant's eligible compensation.
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Employees with 55-59 "points" and at least 10 years of "benefit service"
(as determined under the terms of the Pension Plan explained on page 56) as of
the distribution date will receive an annual transition option grant equal in
value to 3.5% of the participant's eligible compensation.
Initial Stock Option Grant For Salaried Employees Worldwide
Edwards Lifesciences will be awarding each salaried exempt and each
salaried non-exempt employee [250] Edwards Lifesciences stock options. This is
a one-time stock option grant. The options will have a ten year term and three
year vesting.
Employee Stock Purchase Plan for Employees Outside the United States
Employees outside the United States are also eligible to participate in an
Employee Stock Purchase Plan. The terms of that plan mirror the stock plan
available to United States employees.
Initial Stock Grant for Hourly Employees Outside the United States
As noted above, hourly employees within the United States will receive a
one-time contribution of [50] shares of Edwards Lifesciences common stock to
be held in a special account under the Edwards Lifesciences Retirement Plan.
Hourly employees outside the United States will also receive an identical
contribution where permitted by local law. In these jursidictions where it is
not permitted hourly employees will receive a one time cash contribution which
will be allocated to each employee's 401(k) account and immediatley invested
in approximately [50] shares of Edwards Lifesciences Whether those shares can
be allocated to the local retirement plan for those employees will be
determined on a country-by-country basis.
Other Retirement Plans for Employees Outside the United States
Various other retirement plans will be offered to Edwards Lifesciences
employees outside the United States according to the terms of local law and as
supplemented by Edwards Lifesciences.
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SECURITY OWNERSHIP OF EDWARDS LIFESCIENCES
The following table sets forth the beneficial ownership of Edwards
Lifesciences common stock immediately following the distribution date based on
an assumed exchange ratio of [five] to one by each of Edwards Lifesciences'
directors, its Chief Executive Officer and the executive officers who are
expected to be Edwards Lifesciences' four most highly compensated executive
officers in 2000 and all directors and executive officers as a group, based
upon information available to Baxter concerning ownership of shares of Baxter
common stock on January 31, 2000. The mailing address of each of these
individuals is c/o Edwards Lifesciences Corporation, 17221 Red Hill Avenue,
Irvine, California 92614. Except as otherwise noted, each individual has sole
investment and voting power with respect to the shares listed.
<TABLE>
<CAPTION>
Number of Shares
Projected to be % of Shares
Name Beneficially Owned Outstanding
---- ------------------ -----------
<S> <C> <C>
Michael A. Mussallem...................... [62,552](1)
Vernon R. Loucks Jr....................... [151,557](2)
Philip M. Neal............................ [ ]
David E.I. Pyott.......................... [ ]
Director..................................
Director..................................
Director..................................
Anita B. Bessler.......................... [18,943]
Stuart L. Foster.......................... [23,701]
Bruce J. Bentcover........................ [ ]
Bruce P. Garren........................... [ ]
All directors and executive officers as a
group
( [ ] persons).........................
</TABLE>
- --------
(1) Includes shares held in joint tenancy with spouse over which the named
individual shares voting or investment power as follows: Mr. Mussallem
[5,339].
(2) Includes [750] shares not held directly by Mr. Loucks but held by his
spouse.
Based on information available to Baxter concerning the ownership of shares
of Baxter common stock at January 1, 2000, no person is projected to own
beneficially more than 5% of the outstanding Edwards Lifesciences common stock
immediately following the distribution date.
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DESCRIPTION OF EDWARDS LIFESCIENCES CAPITAL STOCK
Authorized Capital Stock
The authorized capital stock of Edwards Lifesciences will consist of
400,000,000 shares of common stock, par value $1.00 per share, and 50,000,000
shares of preferred stock, par value $.01 per share. Baxter will not issue any
shares of Edwards Lifesciences preferred stock in connection with the
distribution. Based on the number of shares of Baxter common stock outstanding
as of December 31, 1999, Baxter will issue up to approximately 58,039,903
shares of Edwards Lifesciences common stock to Baxter stockholders in the
distribution. All of the shares of Edwards Lifesciences common stock issued in
the distribution will be validly issued, fully paid and non-assessable. The
following is a summary description of the capital stock of Edwards
Lifesciences. For more complete information, you should read the proposed
forms of the amended and restated certificate of incorporation and amended and
restated bylaws of Edwards Lifesciences that are included as exhibits to the
registration statement of which this information statement is a part.
Edwards Lifesciences Common Stock
Edwards Lifesciences stockholders are entitled to one vote for each share
of common stock held by that stockholder on all matters submitted to a vote of
stockholders. A majority of the votes cast is required for all actions to be
taken by stockholders, except for the election of directors which requires a
plurality of the votes cast, and amendments of certain provisions of the
certificate of incorporation and bylaws as described below under "Certain
Anti-Takeover Effects of Provisions of the Certificate of Incorporation,
Bylaws and Delaware Law--Certificate of Incorporation and Bylaws--Amendment of
Certain Provisions of the Certificate of Incorporation and Bylaws."
Edwards Lifesciences stockholders will not have cumulative voting rights in
the election of directors. Edwards Lifesciences stockholders will not have any
preemptive, subscription, redemption, sinking fund or conversion rights.
Edwards Lifesciences stockholders are entitled to the dividends that may be
declared by the Edwards Lifesciences board out of funds legally available for
dividends, subject to preferences that may apply to holders of any outstanding
shares of Edwards Lifesciences preferred stock. If there is a liquidation,
dissolution or winding-up of Edwards Lifesciences, Edwards Lifesciences will
distribute the assets that are legally available for distribution to
stockholders ratably among the holders of Edwards Lifesciences common stock
outstanding at that time, subject to prior distribution rights of creditors
and to the preferential rights of any outstanding shares of Edwards
Lifesciences preferred stock.
Edwards Lifesciences Preferred Stock
Under the Edwards Lifesciences certificate of incorporation, the Edwards
Lifesciences board is authorized to provide for the issuance of Edwards
Lifesciences preferred stock, in one or more series. The Edwards Lifesciences
board is authorized to determine the designations, voting powers, preferences
and rights of any series of preferred stock, and any qualifications,
limitations or restrictions of any series of preferred stock. The Edwards
Lifesciences board expects to designate a series of preferred stock in
connection with the proposed rights agreement described below.
Edwards Lifesciences Rights Agreement
Prior to the distribution, Edwards Lifesciences expects that its board will
adopt a rights agreement between Edwards Lifesciences and First Chicago Trust
Company of New York, a division of EquiServe, as rights agent. If adopted, the
board will cause Edwards Lifesciences to issue one preferred share purchase
right with each share of Edwards Lifesciences common stock issued at the close
of business on the record date for the distribution. Each right will entitle
the registered holder to purchase from Edwards Lifesciences one one-hundredth
of a share of Series A Junior Participating Preferred Stock for $[ ], subject
to the adjustments specified in the rights agreement. The terms of the rights
will be set forth in the rights agreement. The description set forth below is
intended as a summary of the rights and the rights agreement. For more
complete information, you should read the form of rights agreement that is
included as an exhibit to the registration statement of which this information
statement is a part.
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The rights become exercisable upon the earliest to occur of:
. 10 days after the first public announcement that any person or group of
affiliated or associated persons has acquired beneficial ownership of 15%
or more of the outstanding shares of Edwards Lifesciences common stock,
subject to certain exceptions (an "Acquiring Person"); and
. 10 business days, unless delayed by the board, after the commencement by
any person of a tender or exchange offer if, upon the consummation of the
tender or exchange offer, that person would be the beneficial owner of
15% or more of the outstanding shares of Edwards Lifesciences common
stock.
The earliest of the dates specified in the preceding sentence is called the
"Rights Distribution Date."
Until the rights become exercisable, they will only be represented by the
stock certificates for the Edwards Lifesciences common stock and will not
trade independently, but only with the associated shares of Edwards
Lifesciences common stock. If the rights become exercisable, separate
certificates representing the rights will be distributed to holders and the
rights will then trade independently from the Edwards Lifesciences common
stock. Until a right is exercised, the holder of the right, as such, will have
no rights as a stockholder of Edwards Lifesciences, including, without
limitation, the right to vote or to receive dividends. Preferred shares
purchasable upon exercise of the rights will not be redeemable. The rights are
not exercisable until the Rights Distribution Date. The rights will expire ten
years from the date of issuance, unless the expiration date is extended or
unless the rights are earlier redeemed or exchanged by Edwards Lifesciences,
as described below.
Because of the nature of the dividend, liquidation and voting rights of the
Series A preferred stock, the value of one one-hundredth interest in a share
of Series A preferred stock purchasable upon exercise of each right should
approximate the value of one share of Edwards Lifesciences common stock. Each
preferred share will be entitled to a minimum preferential quarterly dividend
payment of $1 per share and an aggregate dividend of 100 times the dividend
declared per share of Edwards Lifesciences common stock. If there is a
liquidation of Edwards Lifesciences, the holders of the preferred shares will
be entitled to a minimum preferential liquidation payment of $100 per share.
Each preferred share will have 100 votes and will vote together with the
Edwards Lifesciences common stock. Finally, if there is any merger,
consolidation or other transaction in which shares of Edwards Lifesciences
common stock are exchanged, each preferred share will be entitled to receive
100 times the amount received per share of Edwards Lifesciences common stock.
Edwards Lifesciences will not issue fractional shares of preferred stock,
other than fractions that are integral multiples of one one-hundredth of a
share of preferred stock, which may, at Edwards Lifesciences election, be
evidenced by depositary receipts. In lieu of fractional shares, an adjustment
in cash will be made based on the market price of the preferred shares on the
last trading day prior to the date of exercise. The rights are protected by
customary anti-dilution provisions.
If any person or group of affiliated or associated persons becomes an
Acquiring Person, as defined in the rights agreement, each holder of a right,
other than rights beneficially owned by the Acquiring Person which will be
voided, will have the right to receive upon exercise of the right the number
of shares of Edwards Lifesciences common stock having a market value of two
times the exercise price of the right. If Edwards Lifesciences is acquired in
a merger or other business combination transaction or 50% or more of its
consolidated assets or earning power are sold after a person or group of
affiliated or associated persons has become an Acquiring Person, each holder
of a right will have the right to receive, upon the exercise of the right, the
number of shares of common stock of the acquiring company that at the time of
the transaction will have a market value of two times the exercise price of
the right.
At any time after any person or group of affiliates or associated persons
becomes an Acquiring Person and prior to the acquisition by such person or
group of 50% or more of the outstanding shares of Edwards Lifesciences common
stock, the Edwards Lifesciences board may exchange the rights, other than
rights that have become void, in whole or in part, at an exchange ratio of one
share of Edwards Lifesciences common stock, or one one-hundredth of a
preferred share, or of a share of a class or series of Edwards Lifesciences
preferred stock having equivalent rights, preferences and privileges, per
right, subject to adjustment.
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In general, Edwards Lifesciences may redeem the rights in whole, but not in
part, at a price of $.01 per right at any time until ten days following the
first public announcement that a person or group of affiliated or associated
persons has become an Acquiring Person. Immediately upon the board's
authorization of a redemption, the rights will terminate and the only right of
the holders of the rights will be to receive the redemption price.
The terms of the rights may be amended by the Edwards Lifesciences board
without the consent of the holders of the rights. However, from and after such
time as any person or group of affiliated or associated persons becomes an
Acquiring Person, the Edwards Lifesciences board may not amend the terms of
the rights in a manner adversely affecting the interests of the holders of the
rights.
The rights will have an anti-takeover effect because the rights will cause
substantial dilution to a person or group that attempts to acquire Edwards
Lifesciences on terms not approved by the Edwards Lifesciences board. The
rights should not interfere with any merger or other business combination
approved by the Edwards Lifesciences board because the rights may be redeemed
by Edwards Lifesciences until the tenth day following the first public
announcement that a person or group has become an Acquiring Person.
CERTAIN ANTI-TAKEOVER EFFECTS OF
PROVISIONS OF EDWARDS LIFESCIENCES' CERTIFICATE OF INCORPORATION AND
BYLAWS AND OF DELAWARE LAW
Certificate of Incorporation and Bylaws
Edwards Lifesciences' certificate of incorporation and bylaws contain
provisions that could make it more difficult to acquire Edwards Lifesciences
by means of a tender offer, proxy contest or otherwise. The description set
forth below is intended as a summary only; for more complete information you
should read the proposed forms of the certificate of incorporation and the
bylaws that are included as exhibits to the registration statement, of which
this information statement is a part.
Classified Board of Directors
Edwards Lifesciences' certificate of incorporation provides that the
Edwards Lifesciences directors, other than those who may be elected by the
holders of any series of preferred stock under specified circumstances, will
be divided into three classes of directors, with the classes to be as nearly
equal in number as possible, and with each class serving a staggered term.
Immediately after the distribution, the Edwards Lifesciences board will
consist of the persons referred to in "Management--Directors." The certificate
of incorporation provides that the term of office of the first class will
expire at the 2001 annual meeting of stockholders. The term of office of the
second class will expire at the 2002 annual meeting of stockholders. The term
of office of the third class will expire at the 2003 annual meeting of
stockholders.
The classification of directors will make it more difficult for
stockholders to change the composition of the Edwards Lifesciences board. At
least two annual meetings of stockholders, instead of one, will be required to
change a majority of the Edwards Lifesciences board. Such a delay may help
ensure that the Edwards Lifesciences board, if confronted by a stockholder's
attempt to force a stock repurchase at a premium above market price, a proxy
contest or an extraordinary corporate transaction, would have sufficient time
to review the proposal as well as any available alternatives to the proposal
and to act in what they believe to be the best interests of the stockholders.
However, the classification provisions could have the effect of discouraging a
third party from initiating a proxy contest, making a tender offer or
otherwise attempting to obtain control of Edwards Lifesciences, even though
such an attempt might be beneficial to Edwards Lifesciences and its
stockholders. In addition, the classification of the Edwards Lifesciences
board could increase the likelihood that incumbent directors will retain their
positions. Finally, because the classification provisions may discourage
accumulations of large blocks of Edwards Lifesciences' stock by purchasers
whose objective is to take control of Edwards Lifesciences and remove a
majority of the Edwards Lifesciences board, the classification of the Edwards
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Lifesciences board could reduce the likelihood of fluctuations in the market
price of Edwards Lifesciences common stock that might result from
accumulations of large blocks. Accordingly, stockholders could be deprived of
certain opportunities to sell their shares of Edwards Lifesciences common
stock at a higher market price than they might otherwise obtain.
Number of Directors; Filling Vacancies; Removal
Edwards Lifesciences' certificate of incorporation provides that the
Edwards Lifesciences board will fix the number of Edwards Lifesciences
directors, subject to any rights of holders of Edwards Lifesciences preferred
stock to elect additional directors under specific circumstances. In addition,
the certificate of incorporation provides that any vacancy that results from
an increase in the number of directors or for any other reason may be filled
only by a majority of directors then in office, subject to any rights of
holders of Edwards Lifesciences preferred stock. Accordingly, absent an
amendment to the Edwards Lifesciences certificate of incorporation, the
Edwards Lifesciences board could prevent a stockholder from increasing the
size of the Edwards Lifesciences board and filling the newly created
directorships with that stockholder's own nominees. Under Delaware General
Corporation Law, unless otherwise provided in the certificate of
incorporation, directors serving on a classified board may be removed by the
stockholders only for cause.
No Stockholder Action by Written Consent; Special Meetings
Edwards Lifesciences' certificate of incorporation prohibits stockholder
action by written consent in lieu of a meeting. The bylaws provide that
special meetings of the stockholders may be called only by the chairman of the
board or the secretary or by resolution of the directors, and shall be called
upon a request signed by a majority of the directors.
The provisions of Edwards Lifesciences' certificate of incorporation
prohibiting stockholder action by written consent may have the effect of
delaying consideration of a stockholder proposal until the next annual meeting
unless a special meeting is called at the request of a majority of the board.
These provisions would also prevent the holders of a majority of the voting
power of the voting stock from unilaterally using the written consent
procedure to take stockholder action. Moreover, a stockholder could not force
stockholder consideration of a proposal over the opposition of the Edwards
Lifesciences board by calling a special meeting of stockholders prior to the
time a majority of the board believes such consideration to be appropriate.
Advance Notice of Stockholder Nominations and Stockholder Proposals Required
The Edwards Lifesciences bylaws establish an advance notice procedure for
stockholders to make nominations of candidates for election as directors, or
bring other business before an annual meeting of stockholders.
The advance notice procedures provide that the only persons who are
eligible for election as Edwards Lifesciences directors are those who are
nominated by, or at the direction of, the Edwards Lifesciences board, or by a
stockholder who has given timely written notice to the secretary prior to the
meeting at which directors are to be elected. The advance notice procedures
provide that at an annual meeting the only business that may be conducted is
that which has been brought before the meeting by, or at the direction of, the
Edwards Lifesciences board or by a stockholder who has given timely written
notice to Edwards Lifesciences' secretary of that stockholder's intention to
bring that business before the meeting. Under the advance notice procedures,
for a stockholder to timely provide notice of any stockholder nominations at
an annual meeting, Edwards Lifesciences must receive the notice not less than
75 days nor more than 100 days prior to the first anniversary of the previous
year's annual meeting. However, if Edwards Lifesciences advances the date of
any other annual meeting by more than 30 days from the anniversary date of the
meeting, a stockholder must provide notice not later than the 10th day after
Edwards Lifesciences mails or publicly announces the notice of the date of the
annual meeting. Under the advance notice procedures, for a stockholder to
timely provide notice of any stockholder nominations at a special meeting at
which directors are to be elected, Edwards Lifesciences must receive the
notice not less than 75 days nor more than 100 days prior to the special
meeting or by the 10th day after Edwards Lifesciences publicly announces the
date of the special meeting.
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A stockholder's notice to Edwards Lifesciences proposing to nominate a
person for election as a director must contain certain information including,
without limitation, the name and address of the nominating stockholder, the
class and number of shares of stock of Edwards Lifesciences that are owned by
that stockholder and all information regarding the proposed nominee that would
be required to be included in a proxy statement soliciting proxies for the
proposed nominee. A stockholder's notice to Edwards Lifesciences relating to
other proposed business must contain certain information about the proposed
business and about the proposing stockholder, including, without limitation, a
brief description of the business, the reasons for conducting the business at
the meeting, the name and address of the proposing stockholder, the class and
number of shares of stock of Edwards Lifesciences beneficially owned by such
stockholder and any material interest of that stockholder in the business so
proposed. If the chairman of the board or other officer presiding at the
meeting determines that a person was not nominated or other business was not
properly brought before the meeting, that person will not be eligible for
election as a director or that business will not be conducted at the meeting,
as the case may be.
The advance notice procedures regarding election of directors afford
Edwards Lifesciences' board an opportunity to consider the qualifications of
the proposed nominees and, to the extent deemed necessary or desirable by the
Edwards Lifesciences board regarding other proposed business, provide a more
orderly procedure for conducting annual meetings of stockholders. In addition,
these advance notice procedures will provide the Edwards Lifesciences board
with an opportunity to inform stockholders in advance of a meeting, to the
extent deemed necessary or desirable by the Edwards Lifesciences board, of any
business proposed to be conducted at the meeting and any board recommendation
regarding the proposed business, so that stockholders can better decide
whether to attend the meeting or to grant a proxy regarding the disposition of
the proposed business.
Although the bylaws do not give the Edwards Lifesciences board any power to
approve or disapprove of stockholder nominations for the election of directors
or other proposals, they may preclude a contest for the election of directors
or the consideration of stockholder proposals if the proper procedures are not
followed. In addition, these procedures may discourage or deter a third party
from conducting a solicitation of proxies to elect its own slate of directors
or to approve its own proposal, without regard to whether consideration of
those nominees or proposals might be harmful or beneficial to Edwards
Lifesciences and its stockholders.
Amendment of Certain Provisions of the Certificate of Incorporation and
Bylaws
Under Delaware General Corporation Law, the stockholders have the right to
adopt, amend or repeal the bylaws and, with the approval of the board of
directors, the certificate of incorporation of a corporation. In addition,
under Delaware General Corporation Law, if the certificate of incorporation so
provides, the bylaws may be adopted, amended or repealed by the board of
directors. Edwards Lifesciences' certificate of incorporation provides that
the affirmative vote of the holders of at least 80% of the voting power of the
outstanding shares of voting stock, voting together as a single class, is
required to amend provisions of the certificate of incorporation relating to:
. the prohibition of stockholder action without a meeting;
. the number, election and term of Edwards Lifesciences' directors;
. super-majority voting requirements to amend the charter; and
. the issuance of rights.
The bylaws may be amended by the Edwards Lifesciences board or by the
affirmative vote of the holders of at least 80% of the voting power of the
outstanding shares of voting stock, voting together as a single class. These
super-majority voting requirements will have the effect of making more
difficult any amendment by stockholders of the bylaws or of any of the
provisions of the certificate of incorporation described above, even if a
majority of Edwards Lifesciences' stockholders believe that an amendment would
be in their best interests.
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Delaware Law
Anti-Takeover Legislation
Section 203 of the Delaware General Corporation Law provides that, subject
to the exceptions specified in that section, a corporation may not engage in
any business combination with any interested stockholder for a three-year
period following the time that such stockholder becomes an interested
stockholder unless:
. prior to that time, the board of directors of the corporation approved
either the business combination or the transaction that resulted in the
stockholder becoming an interested stockholder;
. upon consummation of the transaction that resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of the corporation outstanding at the time
the transaction commenced (excluding certain shares); or
. at or subsequent to that time, the business combination is approved by
the board of directors of the corporation and by the affirmative vote of
at least two-thirds of the outstanding voting stock that is not owned by
the interested stockholder.
Except as specified in Section 203 of the Delaware General Corporation Law,
an "interested stockholder" is defined to include:
. any person that is the owner of 15% or more of the outstanding voting
stock of the corporation, or is an affiliate or associate of the
corporation and was the owner of 15% or more of the outstanding voting
stock of the corporation, at any time within three years immediately
prior to the relevant date; and
. the affiliates and associates of any person described in the preceding
clause.
Under certain circumstances, Section 203 of the Delaware General
Corporation Law makes it more difficult for a person who would be an
interested stockholder to effect various business combinations with a
corporation for a three-year period. It is anticipated that the provisions of
Section 203 may encourage persons interested in acquiring Edwards Lifesciences
to negotiate in advance with the Edwards Lifesciences board, since those
persons could avoid the stockholder approval requirement if a majority of the
directors then in office approves either the business combination or the
transaction that results in the stockholder becoming an interested
stockholder.
LIMITATION OF LIABILITY AND INDEMNIFICATION OF EDWARDS LIFESCIENCES DIRECTORS
AND OFFICERS
Limitation of Liability of Directors
Edwards Lifesciences' certificate of incorporation provides that a director
of Edwards Lifesciences will not be personally liable to Edwards Lifesciences
or its stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability:
. for any breach of the director's duty of loyalty to Edwards Lifesciences
or its stockholders;
. for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
. under Section 174 of the Delaware General Corporation Law, which concerns
unlawful payments of dividends, stock purchases or redemptions; or
. for any transaction from which the director derived an improper personal
benefit.
While Edwards Lifesciences' certificate of incorporation provides directors
with protection from awards for monetary damages for breaches of their duty of
care, it does not eliminate their duty of care. Accordingly, the certificate
of incorporation will have no effect on the availability of equitable remedies
such as an injunction or rescission based on a director's breach of his or her
duty of care. The provisions of the certificate of incorporation described
above apply to an officer of Edwards Lifesciences only if he or she is a
director of Edwards Lifesciences and is acting in his or her capacity as
director, and do not apply to officers of Edwards Lifesciences who are not
directors.
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Indemnification of Directors and Officers
The Edwards Lifesciences certificate of incorporation provides that each
person who is, or was, or has agreed to become a director or officer of
Edwards Lifesciences, and each person who serves, or may have served, at the
request of Edwards Lifesciences as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
will be indemnified by Edwards Lifesciences to the fullest extent permitted
from time to time by Delaware law, as the same exists or may hereafter be
amended. Directors and officers will not be indemnified with respect to an
action commenced by such directors or officers against Edwards Lifesciences or
by such directors or officers as a derivative action.
The certificate of incorporation of Edwards Lifesciences provides that the
right to indemnification and the payment of expenses conferred in the
certificate of incorporation will not be exclusive of any other right which
any person may have or may in the future acquire under any agreement, vote of
stockholders, vote of disinterested directors or otherwise. The certificate of
incorporation permits Edwards Lifesciences to maintain insurance on behalf of
any person who is, or was, a director, officer, employee or agent of Edwards
Lifesciences, or is serving at the request of Edwards Lifesciences as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any expense, liability or
loss, whether or not Edwards Lifesciences would have the power to indemnify
such person against that liability under the certificate of incorporation or
Delaware law.
Edwards Lifesciences intends to obtain directors and officers liability
insurance providing coverage to its directors and officers.
EDWARDS LIFESCIENCES' 2001 ANNUAL MEETING OF STOCKHOLDERS
The Edwards Lifesciences bylaws provide that an annual meeting of
stockholders will be held each year on a date specified by the Edwards
Lifesciences board of directors. The first annual meeting of Edwards
Lifesciences stockholders after the distribution is expected to be held on May
10, 2001. In order to be considered for inclusion in Edwards Lifesciences'
proxy materials for the 2001 annual stockholders meeting, any proposals by
stockholders must be received at Edwards Lifesciences' principal executive
offices at 17221 Red Hill Avenue, Irvine, California 92614, prior to January
10, 2001. Edwards Lifesciences anticipates commencing the mailing of proxies
for the 2001 annual stockholders meeting on or about March 9, 2001. In
addition, stockholders at the Edwards Lifesciences 2001 annual meeting may
consider stockholder proposals or nominations brought by a stockholder of
record on the record date for the 2001 annual meeting, who is entitled to vote
at such annual meeting and who has complied with the advance notice procedures
established by the Edwards Lifesciences bylaws. A stockholder proposal or
nomination intended to be brought before the Edwards Lifesciences 2001 annual
meeting must be received by Edwards Lifesciences' secretary on or after
January 30, 2001 and on or prior to February 24, 2001. See "Certain Anti-
Takeover Effects of Provisions of Edwards Lifesciences' Certificate of
Incorporation and Bylaws and of Delaware Law--Certificate of Incorporation and
Bylaws."
ADDITIONAL INFORMATION
We have filed with the SEC a registration statement, of which this
information statement constitutes a part, under the Securities Exchange Act of
1934 with respect to the Edwards Lifesciences common stock being received by
Baxter stockholders in the distribution. This information statement does not
contain all of the information set forth in the registration statement. For
further information with respect to our business and the common stock being
received by Baxter stockholders in the distribution, please refer to the
registration statement. While we have provided a summary of the material terms
of the contents of certain contracts and other documents, the summary does not
describe all of the details of the contracts and other documents. In each
instance where a copy of a contract or other document has been filed as an
exhibit to the registration statement, please refer to the registration
statement. Each statement in this information statement regarding a contract
or
71
<PAGE>
other document is qualified in all respects by such exhibit. You may read and
copy all or any portion of the registration statement at the offices of the
SEC at Judiciary Plaza, 450 Fifth Street, Washington, D.C. 20549, and copies
of all or any part of the registration statement may be obtained from the
Public Reference Section of the SEC, Washington, D.C. 20549 upon the payment
of the fees prescribed by the SEC. Please call the SEC at 1-800-SEC-0330 for
further information about the public reference rooms. The SEC maintains a Web
site, http://www.sec.gov, that contains reports, proxy and information
statements and other information regarding registrants, such as Baxter and
Edwards Lifesciences, that file electronically with the SEC. Upon completion
of this offering, Edwards Lifesciences will become subject to the information
and periodic reporting requirements of the Securities Exchange Act of 1934,
and, in accordance therewith, will file periodic reports, proxy statements and
other information with the SEC. These periodic reports, proxy statements and
other information will be available for inspection and copying at the SEC's
public reference rooms and the SEC's Web site.
Edwards Lifesciences intends to furnish its stockholders with annual
reports containing consolidated financial statements (beginning with fiscal
year 2000) audited by independent accountants.
You should rely only on the information contained in this information
statement and other documents referred to in this information statement.
Baxter and Edwards Lifesciences have not authorized anyone to provide you with
information that is different. This information statement is being furnished
by Baxter solely to provide information to Baxter stockholders who will
receive Edwards Lifesciences common stock in the distribution. It is not, and
is not to be construed as, an inducement or encouragement to buy or sell any
securities of Baxter or Edwards Lifesciences. Baxter and Edwards Lifesciences
believe that the information presented herein is accurate as of the date
hereof. Changes will occur after the date hereof, and neither Baxter nor
Edwards Lifesciences will update the information except to the extent required
in the normal course of their respective public disclosure practices and as
required pursuant to the federal securities laws.
72
<PAGE>
EDWARDS LIFESCIENCES CORPORATION
INDEX TO COMBINED FINANCIAL STATEMENTS AND SCHEDULE
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Accountants.......................................... F-2
Combined Balance Sheets.................................................... F-3
Combined Statements of Income.............................................. F-4
Combined Statements of Cash Flows.......................................... F-5
Combined Statements of Equity and Comprehensive Income..................... F-6
Notes to Edwards Lifesciences Corporation Combined Financial Statements.... F-7
Schedule II -- Valuation and Qualifying Accounts........................... S-1
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors and Shareholders of
Baxter International Inc.
In our opinion, the combined financial statements listed on the
accompanying index present fairly, in all material respects, the financial
position of Edwards Lifesciences Corporation (the Company, a division of
Baxter International Inc.) at December 31, 1999, 1998 and 1997 and the results
of its operations and its cash flows for each of the three years in the period
ended December 31, 1999, in conformity with accounting principles generally
accepted in the United States. In addition, in our opinion, the financial
statement schedule listed in the accompanying index presents fairly, in all
material respects, the information set forth therein when read in conjunction
with the related combined financial statements. These financial statements and
financial statement schedule are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements and financial statement schedule based on our audits. We conducted
our audits of these statements in accordance with generally accepted auditing
standards in the United States, which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements
are free of material misstatements. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.
PricewaterhouseCoopers LLP
Chicago, Illinois
February 18, 2000
F-2
<PAGE>
EDWARDS LIFESCIENCES CORPORATION
COMBINED BALANCE SHEETS
(in millions)
<TABLE>
<CAPTION>
December 31,
--------------
1999 1998
------ ------
<S> <C> <C>
Current assets
Accounts receivable, net of allowances of $8 million at
December 31, 1999 and December 31, 1998..................... $ 133 $ 141
Other receivables............................................ 22 28
Inventories.................................................. 182 156
Short-term deferred income taxes............................. 9 14
Prepaid expenses............................................. 10 14
------ ------
Total current assets....................................... 356 353
------ ------
Property, plant and equipment
Property, plant and equipment................................ 496 480
Accumulated depreciation and amortization.................... (270) (253)
------ ------
Net property, plant and equipment.......................... 226 227
------ ------
Other assets
Goodwill and other intangibles............................... 839 886
Other........................................................ 16 17
------ ------
Total other assets......................................... 855 903
------ ------
Total assets............................................. $1,437 $1,483
====== ======
Current liabilities
Accounts payable and accrued liabilities..................... $ 156 $ 157
------ ------
Total current liabilities.................................. 156 157
------ ------
Other noncurrent liabilities................................... 57 55
Contingencies and commitments..................................
Equity
Retained earnings............................................ 418 336
Investments by and advances from (payments to) Baxter
International Inc., net..................................... 833 960
Accumulated other comprehensive income (loss)................ (27) (25)
------ ------
Total equity............................................... 1,224 1,271
------ ------
Total liabilities and equity............................. $1,437 $1,483
====== ======
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-3
<PAGE>
EDWARDS LIFESCIENCES CORPORATION
COMBINED STATEMENTS OF INCOME
(in millions)
<TABLE>
<CAPTION>
Years ended
December 31,
---------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Net sales..................................................... $905 $865 $879
Costs and expenses
Cost of goods sold.......................................... 460 455 455
Cost of goods sold--transactions with Baxter................ 6 11 8
Marketing and administrative expenses....................... 189 187 168
Marketing and administrative expenses--transactions with
Baxter..................................................... 44 35 43
Research and development expenses........................... 41 40 41
Research and development expenses--transactions with Baxter. 14 16 12
In-process research and development......................... -- -- 132
Goodwill amortization....................................... 34 34 34
Other expense (income)...................................... 4 (6) 1
---- ---- ----
Total costs and expenses...................................... 792 772 894
---- ---- ----
Income (loss) before income taxes............................. 113 93 (15)
Income tax expense............................................ 31 31 37
---- ---- ----
Net income (loss)............................................. $ 82 $ 62 ($52)
==== ==== ====
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-4
<PAGE>
EDWARDS LIFESCIENCES CORPORATION
COMBINED STATEMENTS OF CASH FLOWS
(in millions)
<TABLE>
<CAPTION>
Years ended December 31,
----------------------------------
1999 1998 1997
---------- ---------- ----------
(Brackets denote cash outflows)
<S> <C> <C> <C>
Cash flow provided from operations
Net income (loss)........................ $ 82 $ 62 $ (52)
Adjustments
Depreciation and amortization.......... 84 82 80
In-process research and development.... -- -- 132
Other.................................. 12 14 (3)
Changes in balance sheet items
Accounts receivable.................... 14 9 (6)
Inventories............................ (14) (1) 10
Accounts payable and accrued
liabilities........................... (1) 6 4
Other.................................. (1) 4 (2)
---------- ---------- ----------
Cash flow provided by operations......... 176 176 163
---------- ---------- ----------
Investment transactions
Capital expenditures..................... (42) (40) (42)
Acquisitions (net of cash received)...... (7) (12) (16)
---------- ---------- ----------
Investment transactions, net............. (49) (52) (58)
---------- ---------- ----------
Financing transactions
Investments by and advances from
(payments to)
Baxter International Inc., net.......... (127) (124) (105)
---------- ---------- ----------
Financing transactions, net.............. (127) (124) (105)
---------- ---------- ----------
Change in cash and equivalents............. -- -- --
Cash and equivalents at beginning of
period.................................... -- -- --
---------- ---------- ----------
Cash and equivalents at end of period...... $ -- $ -- $ --
========== ========== ==========
Disclosure of noncash activity
Acquisition of business with Baxter
International Inc. common stock......... $ -- $ -- $ 223
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-5
<PAGE>
EDWARDS LIFESCIENCES CORPORATION
COMBINED STATEMENTS OF EQUITY AND COMPREHENSIVE INCOME
(in millions)
<TABLE>
<CAPTION>
Investments by
and advances
from (payments Accumulated
to) Baxter other
Total Retained International comprehensive Comprehensive
equity earnings Inc., net income (loss) Income (loss)
------ -------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Balance at December 31,
1996.................. $1,284 $326 $ 966 $ (8)
Net loss............. (52) (52) $(52)
----
Other comprehensive
income (loss):
Currency
translation
adjustments....... (16)
Unrealized net loss
on marketable
security, net of
tax benefit of $2. (3)
----
Other
comprehensive
income (loss)... (19) (19) (19)
----
Investments by and
advances from
(payments to) Baxter
International Inc.,
net:
Cash............... (105) (105)
Acquisition of
business with
Baxter
International Inc.
common stock...... 223 223
------ ---- ----- ----
Comprehensive income
(loss)................ $(71)
====
Balance at December 31,
1997.................. 1,331 274 1,084 (27)
Net income........... 62 62 $ 62
----
Other comprehensive
income:
Currency
translation
adjustments....... --
Unrealized net gain
on marketable
security, net of
tax of $1......... 2
----
Other
comprehensive
income.......... 2 2 2
----
Investments by and
advances from
(payments to) Baxter
International Inc.,
net................. (124) (124)
------ ---- ----- ----
Comprehensive income... $ 64
====
Balance at December 31,
1998.................. 1,271 336 960 (25)
Net income........... 82 82 $ 82
Other comprehensive
income:
Currency
translation
adjustments....... (1)
Unrealized net loss
on marketable
security, net of
tax benefit of $1. (1)
----
Other
comprehensive
income (loss)... (2) (2) (2)
----
Investments by and
advances from
(payments to) Baxter
International Inc.,
net................. (127) (127)
------ ---- ----- ---- ----
Comprehensive income... $ 80
====
Balance at December 31,
1999.................. $1,224 $418 $ 833 $(27)
====== ==== ===== ====
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-6
<PAGE>
EDWARDS LIFESCIENCES CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS
On July 11, 1999, the board of directors of Baxter International Inc.
(Baxter) approved a plan to spin off its CardioVascular business to Baxter
stockholders. Management expects that shares of the new cardiovascular
company, Edwards Lifesciences Corporation (Edwards Lifesciences or the
company,) will be distributed to Baxter stockholders (the distribution) in the
first quarter of 2000 and that the spin-off will be tax-free. The distribution
will result in Edwards Lifesciences operating as an independent entity with
publicly traded common stock.
Edwards Lifesciences is a global leader in providing a comprehensive line
of products and services to treat late-stage cardiovascular disease. Edwards
Lifesciences' sales are categorized in four main product areas: (a) cardiac
surgery, (b) critical care, (c) vascular and (d) perfusion products and
services. In addition, Edwards Lifesciences also offers a diverse grouping of
product lines comprised mostly of pharmaceuticals and selected distributed
products. Edwards Lifesciences' cardiac surgery portfolio is comprised of
products relating to heart valve therapy, mechanical cardiac assist, and
cannulae and cardioplegia products used during open-heart surgery. The
critical care product category primarily includes hemodynamic monitoring
systems used to measure a patient's heart function in surgical and intensive
care settings. The vascular product area includes balloon catheter-based
products, surgical clips and inserts, angioscopy equipment, artificial
implantable grafts, and an endovascular system used for less-invasive
abdominal aortic aneurysms. The perfusion products and services area includes
disposable products used during cardiopulmonary bypass procedures and contract
perfusion services.
Baxter will have no ownership interest in Edwards Lifesciences after the
spin-off, but will continue to conduct business pursuant to various
agreements, which are outlined in Note 7. However, unless released by third
parties, Baxter will remain liable for certain lease and other obligations and
liabilities that are transferred to and assumed by Edwards Lifesciences.
Edwards Lifesciences will be obligated by the reorganization agreement to
indemnify Baxter against liabilities related to those transferred obligations
and liabilities.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies is presented to assist the
reader in understanding and evaluating the combined financial statements.
These policies are in conformity with accounting principles generally accepted
in the United States (GAAP) and have been applied consistently in all material
respects. The preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements, the
reported amounts of revenues and expenses during the reporting period, and
related disclosures. Actual results could differ from those estimates.
Basis of presentation
Baxter does not account for its businesses on the basis of separate legal
entities. The accompanying combined financial statements include those assets,
liabilities, revenues and expenses directly attributable to the company's
operations. All material intercompany balances have been eliminated. The
combined financial statements include allocations of certain Baxter corporate
assets, liabilities and expenses to Edwards Lifesciences. These amounts have
been allocated to the company on the basis that is considered by management to
reflect most fairly or reasonably the utilization of the services provided to
or the benefit obtained by the company. Management believes the methods used
to allocate these amounts are reasonable. However, the financial information
included herein does not necessarily reflect what the financial position and
results of operations of the company would have been had it operated as a
stand-alone public entity during the periods covered, and may not be
indicative of future operations or financial position. Estimated pretax
incremental
F-7
<PAGE>
selling, general and administrative costs associated with being an independent
public company total approximately $25 million on an annual basis. The
following is a summary of the estimated annual incremental costs by
significant function:
<TABLE>
<CAPTION>
(in millions)
<S> <C>
Accounting, tax and legal.................................................. $ 8
Insurance and risk management.............................................. 4
Human resources............................................................ 7
Treasury, stockholder relations and other costs............................ 6
---
Total...................................................................... $25
===
</TABLE>
Estimated incremental annual pretax interest expense is $29 million. The
company's debt agreements are not yet finalized. This management estimate is
based on the incurrence of $550 million of debt at a weighted-average interest
rate of 5.3%.
Fiscal year of international operations
Certain operations outside the United States and its territories are
included in the combined financial statements on the basis of fiscal years
ending November 30 in order to facilitate timely combination.
Foreign currency translation
The results of operations for non-U.S. subsidiaries, other than those
located in highly inflationary countries, are translated into U.S. dollars
using the average exchange rates during the year, while assets and liabilities
are translated using period-end rates. Resulting translation adjustments are
recorded as currency translation adjustments within other comprehensive
income. Where foreign affiliates operate in highly inflationary economies,
non-monetary amounts are remeasured at historical exchange rates while
monetary assets and liabilities are remeasured at the current rate with the
related adjustments reflected in the combined statements of income.
Revenue recognition
The company's practice is to recognize revenues from product sales when
title transfers and for services as performed. For certain products, the
company maintains consigned inventory at customer locations. For these
products, revenue is recognized at the time the company is notified that the
inventory has been used by the customer.
Inventories
Inventories are stated at the lower of cost (first-in, first-out method) or
market value. Market value for raw materials is based on replacement costs
and, for other inventory classifications, on net realizable value.
Inventories consisted of the following:
<TABLE>
<CAPTION>
December
31,
---------
1999 1998
---- ----
(in
millions)
<S> <C> <C>
Raw materials......................................................... $ 29 $ 33
Work in process....................................................... 28 36
Finished products..................................................... 125 87
---- ----
Total inventories..................................................... $182 $156
==== ====
</TABLE>
Reserves for excess and obsolete inventory were approximately $12 million
at December 31, 1999 and $10 million at December 31, 1998.
Property, plant and equipment
Property, plant and equipment are stated at cost. Depreciation and
amortization are principally calculated for financial reporting purposes on
the straight-line method over the estimated useful lives of the related
assets,
F-8
<PAGE>
which range from 20 to 50 years for buildings and improvements and from three
to 15 years for machinery and equipment. Leasehold improvements are amortized
over the life of the related facility leases or the asset, whichever is
shorter. Straight-line and accelerated methods of depreciation are used for
income tax purposes.
Property, plant and equipment consisted of the following:
<TABLE>
<CAPTION>
as of December 31 1999 1998
- ----------------- ----- -----
(in
millions)
<S> <C> <C>
Land.............................................................. $ 27 $ 28
Buildings and leasehold improvements.............................. 79 82
Machinery and equipment........................................... 281 274
Equipment with customers.......................................... 96 81
Construction in progress.......................................... 13 15
----- -----
Total property, plant and equipment, at cost...................... 496 480
Accumulated depreciation and amortization......................... (270) (253)
----- -----
Net property, plant and equipment................................. $ 226 $ 227
===== =====
</TABLE>
Depreciation expense was $37 million in 1999, $35 million in 1998, and $33
million in 1997. Repairs and maintenance expense was $8 million in 1999, $10
million in 1998 and $7 million in 1997.
Goodwill and other intangible assets
Goodwill represents the excess of cost over the fair value of net assets
acquired and is amortized on a straight-line basis over estimated useful lives
ranging from 15 to 40 years.
Other intangible assets include purchased patents, trademarks and other
identified rights and are amortized on a straight-line basis over their legal
or estimated useful lives, whichever is shorter (generally not exceeding 17
years).
Goodwill and other intangible assets are summarized as follows:
<TABLE>
<CAPTION>
as of December 31 1999 1998
- ----------------- ------ ------
(in millions)
<S> <C> <C>
Goodwill........................................................ $1,115 $1,116
Accumulated amortization........................................ (371) (337)
------ ------
Net goodwill.................................................... 744 779
------ ------
Other intangibles............................................... 184 184
Accumulated amortization........................................ (89) (77)
------ ------
Net other intangibles........................................... 95 107
------ ------
Goodwill and other intangibles.................................. $ 839 $ 886
====== ======
</TABLE>
Management reviews the carrying amounts of goodwill and other intangibles
whenever events and circumstances indicate that the carrying amounts of an
asset may not be recoverable. Impairment indicators include, among other
conditions, cash flow deficits, historic or anticipated declines in revenue or
operating profit and adverse legal or regulatory developments. If it is
determined that such indicators are present and the review indicates that the
assets will not be fully recoverable, based on undiscounted estimated cash
flows over the remaining amortization periods, their carrying values are
reduced to estimated fair market value. Estimated fair market value is
determined primarily using the anticipated cash flows discounted at a rate
commensurate with the risk involved. For the purpose of identifying and
measuring impairment, assets are grouped at the lowest level for which there
are identifiable cash flows that are largely independent of the cash flows
generated by other asset groups. Based upon management's assessment of the
future undiscounted operating cash flows of acquired businesses, the carrying
values of goodwill and other intangibles at December 31, 1999, have not been
impaired.
F-9
<PAGE>
Income taxes
Edwards Lifesciences' operations were historically included in Baxter's
consolidated U.S. federal and state income tax returns and in the tax returns
of certain Baxter foreign subsidiaries. The provision for income taxes has
been determined as if Edwards Lifesciences had filed separate tax returns
under its existing structure for the periods presented. Accordingly, the
effective tax rate of Edwards Lifesciences in future years could vary from its
historical effective rates depending on Edwards Lifesciences' future legal
structure and tax elections. All income taxes are settled with Baxter on a
current basis through the "Investments by and advances from (payments to)
Baxter International Inc., net" account.
Derivatives
For all periods presented, Edwards Lifesciences has been considered in
Baxter's overall risk management strategy. Baxter's accounting policies with
respect to derivatives are summarized below as they apply to Edwards
Lifesciences.
Gains and option premiums relating to qualifying foreign currency hedges of
anticipated transactions are deferred and recognized in income as offsets of
gains and losses resulting from the underlying hedged transactions. Gains
relating to terminations of qualifying hedges are deferred and recognized in
income at the same time as the underlying hedged transactions. In
circumstances where the underlying anticipated transaction is no longer
expected to occur, any remaining deferred amounts are recognized immediately
in income. Foreign currency contracts not qualifying for hedge treatment are
marked to market at each balance sheet date with resulting gains and losses
recognized in earnings. Cash flows from derivatives are classified in the same
category as the cash flows from the related hedged activity. Foreign currency
financial instruments are used to hedge economic risks and are not used for
trading purposes.
Investments by and Advances from (payments to) Baxter International Inc., net
Investments by and advances from (payments to) Baxter International Inc.,
net includes common stock, additional paid-in capital and net intercompany
balances with Edwards Lifesciences which will be contributed at the time of
the spin-off. Baxter does not manage the activity in this account on the basis
of separate legal entities. There is no distinction in this account between
net investments in and net advances to Edwards Lifesciences as there was no
term associated with the cash infusions and no intent or expectation that the
infusions would be remitted to Baxter.
Comprehensive income (loss)
Comprehensive income (loss) encompasses all changes in equity other than
those arising from transactions with stockholders, and consists of net income,
currency translation adjustments and unrealized net gains and losses on
marketable equity securities. The company does not provide for U.S. income
taxes on foreign currency translation adjustments since it does not provide
for such taxes on undistributed earnings of foreign subsidiaries. The net
unrealized gain on a marketable security of $2 million for 1998 (net-of-tax)
principally consisted of a reclassification adjustment for an impairment loss
included in net income during the year.
Recent accounting pronouncement
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement No. 133, "Accounting for Derivative Instruments and Hedging
Activities" (Statement No. 133) which was to be effective for all fiscal
quarters of fiscal years beginning after June 15, 1999. In June 1999, the FASB
issued Statement No. 137, "Accounting for Derivative Instruments -- Deferral
of the Effective Date of FASB Statement No. 133" (Statement No. 137).
Statement No. 137 deferred the effective date of Statement No. 133 to all
fiscal quarters of fiscal years beginning after June 15, 2000. Statement No.
133 requires that all derivatives be recorded in the balance sheet as either
assets or liabilities and be measured at fair value. The accounting for
changes in the fair
F-10
<PAGE>
value of a derivative will depend on the intended use of the derivative and
the resulting designation. Management is in the process of evaluating this
standard and has not yet determined the future impact on the company's
financial statements.
3. ACQUISITIONS
All acquisitions during the three years ended December 31, 1999 were
accounted for under the purchase method. Results of operations of acquired
companies are included in the company's results of operations as of the
respective acquisition dates. The purchase price of each acquisition was
allocated to the net assets acquired based on estimates of their fair values
at the date of the acquisition. The excess of the purchase price over the fair
values of the net tangible assets and liabilities and identifiable intangibles
acquired was allocated to goodwill.
Research Medical, Inc.
In March 1997, Edwards Lifesciences acquired Research Medical, Inc.
(Research Medical), a manufacturer of specialized products used in open-heart
surgery for approximately $239 million. Approximately $223 million of the
purchase price was in the form of 4,801,711 shares of Baxter International
Inc. common stock, issued from treasury. As further discussed below, $132
million of the purchase price was allocated to in-process research and
development (IPR&D), and, under generally accepted accounting principles,
immediately expensed. Approximately $40 million and $38 million of the
purchase price was allocated to existing product technology and goodwill,
respectively, and is being amortized on a straight-line basis over 14 years
and 20 years, respectively.
In-process Research and Development
The amount allocated to IPR&D was determined on the basis of independent
appraisals using the income approach, which measures the value of an asset by
the present value of its future economic benefits. Estimated cash flows for
each project category were discounted to their present values at rates of
return that incorporate the risk-free rate, the expected rate of inflation,
and risks associated with the particular projects, including their stages of
completion. Projected revenue and cost assumptions were determined considering
the company's historical experience and industry trends and averages. At the
date of acquisition, it was determined that the technology acquired had no
alternative future use. No value was assigned to any IPR&D project unless it
was probable of being further developed.
Approximately $76 million of the total IPR&D charge pertained to minimally
invasive surgical (MIS) procedures, with the remainder relating principally to
heparin removal technology, autologous fibrin delivery kit and sealant
technologies, retrograde reprofusion system technologies and ischemic limb
reperfusion system technologies. The status of development, stage of
completion, assumptions, nature and timing of remaining efforts for
completion, risks and uncertainties, and other key factors varied by
individual project. Discount rates on individual projects ranged from 14
percent to 20 percent, with a discount rate of 16 percent used for the MIS
procedures project. Material net cash inflows for the most significant
projects were forecasted to commence between 1998 and 2000. Assumed research
and development expenditures prior to the various dates of product
introductions totaled approximately $2 million.
The products under development were at various stages of development, and
substantial further research and development, pre-clinical testing and
clinical trials would be required to determine their technical feasibility and
commercial viability. Any delay in the development, introduction or marketing
of the products under development could result either in such products being
marketed at a time when their cost and performance characteristics would not
be competitive in the marketplace or in a shortening of their commercial
lives. If the products are not completed on time, the expected returns on the
investment could be significantly and unfavorably impacted.
F-11
<PAGE>
As part of the post-acquisition integration and research and development
(R&D) rationalization process, management reassessed all of Research Medical's
ongoing R&D projects. Based on these subsequent analyses of the costs versus
potential future benefits of continuing the Research Medical projects, several
of the R&D projects in-process at acquisition date were terminated in late
1997. Such projects related principally to heparin removal technology,
autologous fibrin delivery kit and sealant technologies, retrograde
reprofusion system technologies and ischemic limb reperfusion system
technologies. The total IPR&D charge recorded at acquisition date relating to
these projects subsequently terminated totaled approximately $56 million.
With respect to the MIS procedures project, at the time of acquisition, the
MIS industry was still in an embryonic state, with virtually no commercially
available product offerings. It was believed that over the next several years,
a significant transition from traditional surgical to MIS procedures would
occur in the marketplace. Several competitors were in the process of
developing products for the emerging MIS sector. While at the date of
acquisition, Research Medical had introduced only a couple of basic MIS
products to the marketplace, the company had a number of promising MIS
products in the process of being developed. Such products under development
required substantial further research and development and would require
regulatory approval prior to becoming available for sale. At the date of
acquisition, it was expected that net cash inflows would commence in the year
after acquisition and increase significantly over the following two to five
years.
The expected timetable for significant net cash inflows from the MIS
procedures IPR&D has been significantly and unfavorably impacted by the effect
of a significantly slower than anticipated transition from traditional
surgical procedures to MIS procedures in the marketplace. While sales are
currently being generated, the current and anticipated future level is
significantly less than projected in the original timetable. In addition, the
expected future R&D costs to be incurred to generate such future revenues are
significantly more than anticipated at the time of acquisition. Management's
current net present value of estimated future net cash inflows is
substantially less than that estimated at acquisition date. It is currently
not clear whether originally projected sales are delayed or whether the
originally anticipated levels will not be achieved. Substantial research and
development, and sales and marketing costs will need to be expended to achieve
the projections. It is possible that, even with such substantial efforts, the
MIS market will never develop to the initially anticipated size. It is also
possible that management will reduce its investments in the MIS sector in the
future based on its ongoing assessment of the marketplace and re-
prioritization of strategic initiatives.
Acquisition reserves
Approximately $14 million of reserves were established with respect to the
acquisition of Research Medical. Of this total, approximately $1 million was
reserved to eliminate 17 positions at Research Medical, principally in the
sales and marketing and research and development functions, and approximately
$13 million was established principally to terminate certain distribution
contracts relating to the acquired company. The reserves were fully utilized
as of December 31, 1998 and such utilization was in accordance with the
original plans.
Pro forma information (unaudited)
Had the acquisition of Research Medical taken place on January 1, 1997,
combined net sales and net income would not have been materially different
from the reported amounts in 1997 and, therefore, pro forma information is not
presented.
F-12
<PAGE>
4. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities consisted of the following:
<TABLE>
<CAPTION>
as of December 31 1999 1998
----------------- ---- ----
(in
millions)
<S> <C> <C>
Accounts payable, principally trade............................ $ 41 $ 44
Employee compensation and withholdings......................... 52 47
Property, payroll and other taxes.............................. 9 10
Other accrued liabilities...................................... 41 45
Other accounts payable......................................... 13 11
---- ----
Accounts payable and accrued liabilities....................... $156 $157
==== ====
</TABLE>
5. LEASE OBLIGATIONS
Certain facilities and equipment are leased under operating leases expiring
at various dates. Most of the operating leases contain renewal options. Total
expense for all operating leases was $9 million in 1999, $8 million in 1998
and $9 million in 1997.
Future minimum lease payments (including interest) under noncancelable
operating leases at December 31, 1999 were as follows:
<TABLE>
<CAPTION>
Operating
leases
-------------
(in millions)
<S> <C>
2000........................................................ $ 8
2001........................................................ 4
2002........................................................ 3
2003........................................................ 2
2004........................................................ 2
Thereafter.................................................. --
----
Total obligations and commitments........................... $ 19
====
</TABLE>
6. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
Concentrations of credit risk
In the normal course of business, Edwards Lifesciences provides credit to
customers in the health-care industry, performs credit evaluations of these
customers and maintains reserves for potential credit losses which, when
realized, have been within the range of management's allowance for doubtful
accounts.
Foreign exchange risk management
For all periods presented, Edwards Lifesciences has been considered in
Baxter's overall risk management strategy. As part of this strategy, Baxter
uses certain financial instruments to reduce its exposure to adverse movements
in foreign exchange rates. These financial instruments are not used for
trading purposes. The financial instruments contain credit risk in that the
banking counterparty may be unable to meet the terms of the agreements. Such
risk is minimized by limiting counterparties to major financial institutions
and by management's monitoring of credit risk. In addition, where appropriate,
Baxter has arranged collateralization and master-netting agreements to
minimize the risk of loss.
As part of implementing its strategy, Baxter enters into foreign exchange
contracts, principally options, with terms generally less than two years, to
hedge anticipated but not yet committed sales expected to be denominated in
foreign currencies. Baxter has allocated to Edwards Lifesciences the net
income associated with certain of
F-13
<PAGE>
such contracts in the amounts of $1 million in 1999 and $3 million in both
1998 and 1997. The approximate notional amounts associated with the allocated
portion of these foreign exchange contracts was $349 million and $177 million
at December 31, 1999 and 1998, respectively. The allocations were determined
based on Edwards Lifesciences' hedged sales relative to Baxter's total hedged
sales, by applicable currency. With respect to Edwards Lifesciences' foreign
currency exposures, Baxter principally hedges the Japanese Yen and the Euro.
Fair values of financial instruments
<TABLE>
<CAPTION>
Carrying Approximate
amounts fair values
--------- ------------
as of December 31 1999 1998 1999 1998
- ----------------- ---- ---- ----- -----
(in millions)
<S> <C> <C> <C> <C>
Investments in affiliates.............................. $ 1 $ 1 $ 1 $ 1
Foreign currency hedges................................ 7 2 1 2
</TABLE>
The carrying values of accounts receivable and payable and accrued
liabilities approximate fair value due to the short-term maturities of these
assets and liabilities.
7. RELATED PARTY TRANSACTIONS
Baxter has provided to Edwards Lifesciences certain legal, treasury,
employee benefits, insurance and administrative services. Charges for these
services, which have been recorded in cost of sales, marketing and
administrative expenses and research and development expenses, as applicable,
are based on actual costs incurred by Baxter and totaled $64 million, $62
million and $63 million in 1999, 1998 and 1997, respectively. The bases for
the amounts charged to Edwards Lifesciences varied depending on the nature of
the service, but generally were determined using headcount, sales, payroll,
square footage or other appropriate data, or were determined based on actual
utilization of services. Management believes that the bases used for
allocating services is reasonable. However, the terms of these transactions
may differ from those that would result from transactions with unrelated third
parties or had Edwards Lifesciences performed these functions on their own.
Edwards Lifesciences participates in a centralized cash management program
administered by Baxter. Short-term advances from Baxter or excess cash sent to
Baxter has been treated as an adjustment to the "Investments by and advances
from (payments to) Baxter International Inc., net" account as of and through
the respective balance sheet dates. No interest is charged on this balance.
Effective on the distribution date, Baxter and Edwards Lifesciences will
enter into a series of administrative services agreements pursuant to which
Baxter and Edwards Lifesciences will continue to provide, for a specified
period of time, certain administrative services which each entity historically
has provided to the other. These agreements require both parties to pay each
other a fee which approximates the actual costs of these services.
Additionally, subsequent to the spin-off, Edwards Lifesciences will have
continuing relationships with Baxter as a customer and supplier for certain
products. See "Edwards Lifesciences' Relationship with Baxter after the
Distribution" included elsewhere in this Information Statement, for detailed
descriptions of the related agreements.
8. RETIREMENT AND OTHER BENEFIT PROGRAMS
Edwards Lifesciences employees participated in Baxter-sponsored non-
contributory, defined benefit pension plans covering substantially all
employees in the U.S. and Puerto Rico and employees in certain other
countries. The benefits were based on years of service and the employee's
compensation during 5 of the last 10 years of employment as defined by the
plans. Baxter and Edwards Lifesciences have announced their intent to freeze
benefits under the U.S. plan at the date of the spin-off for the Edwards
Lifesciences employees. Edwards Lifesciences has also announced that it will
not have a defined benefit pension plan in the U.S. to replace the Baxter
plan. The pension liability related to Edwards Lifesciences' U.S. employees'
service prior to the spin-off
F-14
<PAGE>
date will remain with Baxter. With respect to the Puerto Rico plan, Baxter
plans to transfer the assets and liabilities relating to Edwards Lifesciences'
employees to Edwards Lifesciences at spin-off date. Edwards Lifesciences
intends to continue to have a non-contributory, defined benefit pension plan
in Puerto Rico after the spin-off date.
Pension expense for the Baxter-sponsored plans in the U.S. and Puerto Rico
relating to Edwards Lifesciences' employees was $5 million, $4 million, $3
million in 1999, 1998 and 1997, respectively. The assumed discount rate
applied to benefit obligations to determine 1999 and 1998 pension expense was
7.25% and 7.5%, respectively. The assumed long-term rate of return on assets
was 10.5% for 1999 and 1998. The assumed rate of compensation increase was
4.5% and 4.0% for the U.S. and Puerto Rico plan, respectively, in both 1999
and 1998.
In addition to pension benefits, Edwards Lifesciences participated in
Baxter-sponsored contributory health-care and life insurance benefits for
substantially all domestic retired employees. Baxter and Edwards Lifesciences
have announced that they will freeze benefits under these plans at the date of
the spin-off for Edwards Lifesciences employees. Edwards Lifesciences has
announced its intention not to establish new health-care and life insurance
plans for employees retiring subsequent to the spin-off date. Expense
associated with these benefits relating to Edwards Lifesciences employees was
less than $1 million in each of the years 1999, 1998 and 1997.
Most U.S. employees have been eligible to participate in a qualified 401(k)
plan. Participants could contribute up to 12% of their annual compensation
(subject to IRS limitation) to the plan and Baxter matched participants'
contributions, up to 3% of an individual participant's compensation. Matching
contributions relating to Edwards Lifesciences employees were approximately $3
million in each of 1999, 1998 and 1997.
9. OTHER EXPENSE (INCOME)
Components of other expense (income) are as follows:
<TABLE>
<CAPTION>
years ended December 31: 1999 1998 1997
------------------------ ---- ---- ----
(in millions)
<S> <C> <C> <C>
Asset dispositions and writedowns, net................... $ 1 $ 6 $--
Insurance and legal settlements.......................... (1) (13) --
Foreign exchange......................................... 2 1 --
Other.................................................... 2 -- 1
--- ---- ----
Total other expense (income)............................. $ 4 $ (6) $ 1
=== ==== ====
</TABLE>
10. INCOME TAXES
Income before tax expense by category is as follows:
<TABLE>
<CAPTION>
years ended December 31: 1999 1998 1997
------------------------ ---- ---- ----
(in millions)
<S> <C> <C> <C>
U.S...................................................... $ 92 $66 $(42)
International............................................ 21 27 27
---- --- ----
Income before income tax expense......................... $113 $93 $(15)
==== === ====
</TABLE>
F-15
<PAGE>
Income tax expense by category and by income statement classification is as
follows:
<TABLE>
<CAPTION>
years ended December 31: 1999 1998 1997
------------------------ ---- ---- ----
(in millions)
<S> <C> <C> <C>
Current
U.S.
Federal................................................. $ 13 $ 16 $ 18
State and local, including Puerto Rico.................. 8 11 16
International............................................ 8 4 7
---- ---- ----
Current income tax expense................................ 29 31 41
Deferred
U.S.
Federal................................................. 2 -- (3)
State and local, including Puerto Rico.................. -- -- (1)
International........................................... -- -- --
---- ---- ----
Deferred income tax expense............................... 2 -- (4)
---- ---- ----
Income tax expense........................................ $ 31 $ 31 $ 37
==== ==== ====
</TABLE>
The income tax shown above was calculated as if Edwards Lifesciences were a
stand-alone entity.
The components of deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
years ended December 31: 1999 1998 1997
------------------------ ---- ---- ----
(in millions)
<S> <C> <C> <C>
Deferred tax assets
Accrued expenses..................................... $ 8 $ 12 $ 8
Other................................................ 1 2 2
---- ---- ----
Total deferred tax assets.......................... 9 14 10
Deferred tax liabilities
Asset basis differences.............................. 47 43 45
Other................................................ 1 1 1
---- ---- ----
Total deferred tax liabilities..................... 48 44 46
---- ---- ----
Net deferred tax assets (liabilities).................. $(39) $(30) $(36)
==== ==== ====
</TABLE>
Income tax expense differs from income tax expense calculated by using the
U.S. federal income tax rate for the following reasons:
<TABLE>
<CAPTION>
years ended December 31: 1999 1998 1997
------------------------ ---- ---- ----
(in millions)
<S> <C> <C> <C>
Income tax expense at statutory rate................... $ 40 $ 33 $ (5)
Tax-exempt operations.................................. (24) (12) (16)
Nondeductible goodwill................................. 12 12 12
State and local taxes.................................. 3 4 4
Foreign tax expense.................................... -- (6) (4)
In-process R&D expense................................. -- -- 46
---- ---- ----
Income tax expense..................................... $ 31 $ 31 $ 37
==== ==== ====
</TABLE>
The company has manufacturing operations outside the United States, namely
in Puerto Rico and Switzerland, which benefit from reductions in local tax
rates under various tax incentives. As a result of the spin-
F-16
<PAGE>
off of the company from Baxter and other actions, the company will seek to
renegotiate these existing tax incentives. It is expected that comparable tax
grants will be secured on a stand-alone basis in due course.
11. LEGAL PROCEEDINGS
Upon the distribution, Edwards Lifesciences will assume the defense of
litigation involving cases and claims related to the Edwards Lifesciences
business. Edwards Lifesciences has not been named as a defendant in such
matters but will be defending and indemnifying Baxter Healthcare Corporation,
as contemplated by the reorganization agreement, for all related expenses and
potential liabilities. It is possible that Edwards Lifesciences may be added
as a defendant in existing cases and claims.
The cases and claims relate primarily to products and services currently or
formerly manufactured or performed, as applicable, by Edwards Lifesciences.
Such cases and claims raise difficult and complex factual and legal issues and
are subject to many uncertainties and complexities, including, but not limited
to, the facts and circumstances of each particular case or claim, the
jurisdiction in which each suit is brought, and differences in applicable law.
Accordingly, in certain cases, Edwards Lifesciences is not able to estimate
the amount of its liabilities with respect to such matters.
Upon resolution of any pending legal matters, Edwards Lifesciences may
incur charges in excess of presently established reserves. While such a charge
could have a material adverse impact on Edwards Lifesciences' net income or
net cash flows in the period in which it is recorded or paid, management
believes that no such charge would have a material adverse effect on Edwards
Lifesciences' combined financial position.
Edwards Lifesciences believes that the liability and defense costs relating
to its legal matters will be within self-insured retentions or substantially
covered by insurance, subject to exclusions, conditions, policy limits and
potential insurer insolvency.
12. STOCK-BASED COMPENSATION PLANS
Certain employees of Edwards Lifesciences participated in stock-based
compensation plans sponsored by Baxter. Such plans principally included fixed
stock option plans and employee stock purchase plans. Baxter applies APB
Opinion No. 25, "Accounting for Stock Issued to Employees," and related
interpretations in accounting for such plans. Accordingly, no compensation
cost has been recognized by Baxter for its fixed stock option plans and its
stock purchase plans. These plans are the sole responsibility of Baxter and,
accordingly, no information is presented herein.
Employees who transfer to the cardiovascular business will be required to
exercise any vested options within 90 days from the date of spin-off, which is
currently anticipated to occur during the first quarter of 2000. All unvested
options will be canceled 90 days after the date of spin-off.
13. SEGMENT INFORMATION
The company manages its business on the basis of one reportable segment.
Refer to Note 1 for a description of the company's business. The company's
products and services share similar distribution channels and customers and
are sold principally to hospitals and physicians. Management evaluates its
various global product portfolios on a revenue basis, which is presented
below, and profitability is generally evaluated on an enterprise-wide basis
due to shared infrastructures. Edwards Lifesciences' principal markets are the
United States, Europe and Japan.
F-17
<PAGE>
Geographic area data includes net sales based on product shipment
destination and long-lived asset data is presented based on physical location.
<TABLE>
<CAPTION>
as of or for the year ended December 31 1999 1998 1997
--------------------------------------- ---- ---- ----
(in millions)
<S> <C> <C> <C>
Net Sales by Geographic Area
United States............................................. $504 $508 $515
Japan..................................................... 166 138 154
Other countries........................................... 235 219 210
---- ---- ----
Totals.................................................... $905 $865 $879
==== ==== ====
Net Sales by Major Product and Service Area
Cardiac Surgery........................................... $306 $273 $247
Vascular.................................................. 61 60 57
Critical Care............................................. 242 221 227
Perfusion Products and Services........................... 244 269 289
Other..................................................... 52 42 59
---- ---- ----
Totals.................................................... $905 $865 $879
==== ==== ====
Long-Lived Assets by Geographic Area
United States............................................. $196 $198 $189
Other countries........................................... 30 29 28
---- ---- ----
Totals.................................................... $226 $227 $217
==== ==== ====
</TABLE>
Sales to Allegiance Corporation, a subsidiary of Cardinal Health, Inc.,
represented approximately 12 percent, 13 percent and 10 percent of the
company's total net sales in 1999, 1998 and 1997, respectively.
F-18
<PAGE>
SCHEDULE II
Valuation and Qualifying Accounts
<TABLE>
<CAPTION>
Additions
----------------------
Balance at Charged to Charged to Deductions Balance
beginning costs and other from at end of
of period expenses accounts(a) reserves period
---------- ---------- ----------- ---------- ---------
(In millions of dollars)
<S> <C> <C> <C> <C> <C>
Year ended December 31,
1999:
Allowance for doubtful
accounts and returns. $ 8 $ 5 -- $(5) $ 8
Inventory reserves.... 10 9 1 (8) 12
Litigation reserves... 1 1 -- -- 2
---------------------------------------
Year ended December 31,
1998:
Allowance for doubtful
accounts and returns. 6 8 -- (6) 8
Inventory reserves.... 13 4 -- (7) 10
Litigation reserves... 1 1 -- (1) 1
---------------------------------------
Year ended December 31,
1997:
Allowance for doubtful
accounts and returns. 6 6 (1) (5) 6
Inventory reserves.... 15 3 -- (5) 13
Litigation reserves... -- 1 -- -- 1
Deferred tax asset
valuation allowance.. 1 -- -- (1) --
---------------------------------------
</TABLE>
- --------
(a) Valuation accounts of acquired or divested companies and foreign currency
translation adjustments. Reserves are deducted from assets to which they
apply.
S-1
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the registrant has duly caused this Amendment No. 2 to the
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized.
/s/ Michael A. Mussallem
By: ________________________________
Name: Michael A. Mussallem
Title: Chief Executive Officer
Date: February 18, 2000
<PAGE>
<TABLE>
<CAPTION>
(b) Exhibits
<C> <S>
Form of Amended and Restated Certificate of Incorporation of Edwards
3.1 Lifesciences Corporation
Form of Amended and Restated Bylaws of Edwards Lifesciences
3.2 Corporation
3.3 Form of Certificate of Designation for Edwards Lifesciences
Corporation Series A Junior Participating Preferred Stock (included
as Exhibit A to Exhibit 10.9)
Specimen form of certificate representing Edwards Lifesciences
4.1** Corporation common stock
10.1 Form of Agreement and Plan of Reorganization, to be entered into
between Edwards Lifesciences Corporation and Baxter International
Inc.
10.2 Form of Tax Sharing Agreement, to be entered into between Edwards
Lifesciences Corporation and Baxter International Inc.
Form of Edwards Lifesciences Corporation Long-Term Incentive
10.3** Compensation Plan
10.5** Form of Edwards Lifesciences Corporation Excess Plan
Form of Edwards Lifesciences Corporation U.S. Employee Stock Purchase
10.6 Plan
10.7 Form of Edwards Lifesciences Corporation Deferred Compensation Plan
10.8** Form of Edwards Lifesciences Corporation Change of Control Plan
10.9 Form of Rights Agreement between Edwards Lifesciences Corporation and
First Chicago Trust Company of New York, a division of Equiserve as
Rights Agent, dated as of [March ], 2000
10.10 Services and Distribution Agreement between Edwards Lifesciences LLC,
as successor in interest to Baxter Healthcare Corporation, and
Allegiance Healthcare Corporation, dated as of October 1, 1996.
CONFIDENTIAL INFORMATION APPEARING IN THIS DOCUMENT HAS BEEN OMITTED
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN
ACCORDANCE WITH SECTION 24(b) OF THE THE SECURITIES EXCHANGE ACT OF
1934, AS AMENDED AND RULE 24b-2 PROMULGATED THEREUNDER. OMITTED
INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
10.11* Form of Employment Agreement
10.12* Form of Consulting Agreement
10.13 Form of Outgoing Confidentiality Agreement
21.1 Subsidiaries of Edwards Lifesciences Corporation
27.1 Financial Data Schedule--December 31, 1999
27.2* Financial Data Schedule--December 31, 1998
27.3* Financial Data Schedule--December 31, 1997
</TABLE>
NOTE
*previously filed
**to be filed by amendment
<PAGE>
Exhibit 3.1
AMENDED and RESTATED
CERTIFICATE OF INCORPORATION of
Edwards Lifesciences Corporation
*****
Edwards Lifesciences Corporation a Delaware corporation, initially incorporated
on September 10, 1999, has duly adopted by action of its Board of Directors and
stockholders the following amended and restated Certificate of Incorporation in
accordance with the provisions of Sections 242 and 245 of the General
Corporation Law of Delaware.
FIRST: The name of the Corporation is Edwards Lifesciences Corporation.
SECOND: The registered office of the Corporation in the State of Delaware is
located at 1209 Orange Street in the City of Wilmington, County of New Castle.
The name of the registered agent of the Corporation is The Corporation Trust
Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of
Delaware.
FOURTH: The total number of shares of stock which the Corporation shall have
authority to issue is Four Hundred Million (400,000,000) shares, of which Fifty
Million (50,000,000) shares, par value $.01 per share, shall be preferred stock
(the "Preferred Stock") and of which Three Hundred Fifty Million (350,000,000)
shares, par value $1.00 per share, shall be common stock (the "Common Stock").
Authority is hereby granted to and vested in the Board of Directors of the
Corporation to issue Preferred Stock in one or more series and in connection
therewith to fix by resolutions providing for the issuance of such series the
number of shares to be included in each such series, and the designations,
powers, preferences and rights of the shares of each such series and the
qualifications, limitations or restrictions thereof, to the full extent now and
hereafter permitted by the laws of the State of Delaware. Without limiting the
generality of the grant of authority contained in the preceding sentence, the
Board of Directors is authorized to determine any or all of the following, and
the shares of each series may vary from the shares of any other series in any or
all of the following respects:
1. The number of shares of such series (which may subsequently be
increased, except as otherwise provided by the resolutions of the
Board of Directors providing for the issue of such series, or
decreased to a number not less than the number of shares then
outstanding) and the distinctive designation thereof;
2. The dividend rights, if any, of such series, the dividend preferences,
if any, as between such series and any other class or series of stock,
whether and the extent to which shares of such series shall be
entitled to participate in dividends with shares of any other series
or class of stock, whether and the extent to which dividends on such
series shall be cumulative, and any limitations, restrictions or
conditions on the payment of such dividends;
<PAGE>
3. The time or times during which, the price or prices at which, and any
other terms or conditions on which the shares of such series may be
redeemed, if redeemable;
4. The rights of such series, and the preferences, if any, as between
such series and any other class or series of stock, in the event of
any voluntary or involuntary liquidation, dissolution or winding up of
the Corporation and whether and the extent to which shares of any such
series shall be entitled to participate in such event with any other
class or series of stock;
5. The voting powers, if any, in addition to the voting powers prescribed
by law of shares of such series and, to the extent not prohibited by
applicable law, voting powers which may exceed one vote per share, and
the terms of exercise of such voting powers;
6. Whether shares of such series shall be convertible into or
exchangeable for shares of any other series or class of stock, or any
other securities, and the terms and conditions, if any, applicable to
such rights; and
7. The terms and conditions, if any, of any purchase, retirement or
sinking fund which may be provided for the shares of such series.
FIFTH: Subject to the rights of the holders of the Preferred Stock or any series
thereof to elect additional directors under specific circumstances, the number
of directors which shall constitute the whole Board of Directors of the
Corporation shall be the number from time to time fixed by the Board of
Directors. A decrease in the number of directors shall not affect the term of
office of any director then in office.
Subject to the rights of the holders of the Preferred Stock or any series
thereof to fill any newly-created directorships or vacancies, any vacancy on the
Board of Directors that results from an increase in the number of directors, or
for any other reason, may be filled by a majority of the directors then in
office, although less than a quorum, or by a sole remaining director.
Subject to the rights of the holders of any series of Preferred Stock, any
director may be removed from office at any time, but only for cause and only by
the affirmative vote of at least a majority of the then outstanding shares
entitled to vote for the election of such director.
Unless the Corporation's Bylaws specify otherwise, the election of directors of
the Corporation need not be by written ballot.
SIXTH: The directors, other than those who may be elected by the holders of any
series of Preferred Stock under specific circumstances, shall be divided into
three classes, as nearly equal in number as possible, and designated as Class I,
Class II and Class III. The initial term of office of the Class I directors
shall expire at the 2001 annual meeting of stockholders, the initial term of
office of the Class II directors shall expire at the 2002 annual meeting of
stockholders and the initial term of office of the Class III directors shall
expire at the 2003 annual meeting of stockholders. Members of each class shall
hold office until their successors shall have been duly elected and qualified.
At each annual meeting of stockholders, beginning with the 2001 annual meeting
of stockholders, the successors of the class of directors whose terms are
expiring shall be elected for a term expiring at the third succeeding annual
meeting of stockholders or thereafter in each case until their respective
successors are duly elected and qualified, subject to death, resignation,
retirement or removal from office.
Page 2
<PAGE>
Any new positions created as a result of the increase in the number of directors
shall be allocated to make the classes of directors as nearly equal as possible.
Any director elected to fill a term resulting from an increase in the number of
directors shall have the same term as the other members of such director's
class. A director elected to fill any other vacancy shall have the same
remaining term as that of such director's predecessor.
Notwithstanding the foregoing, whenever the holders of any one or more series of
preferred stock issued by the Corporation shall have the right, voting
separately by series, to elect directors at an annual or special meeting of
stockholders, the election, term of office, filling of vacancies and other
features of such directorships shall be governed by the terms of the Certificate
of Incorporation applicable thereto, and such directors so elected shall not be
divided into classes pursuant to this Article SIXTH unless expressly provided by
such terms.
SEVENTH: The Board of Directors shall have such powers as are permitted by the
General Corporation Law of Delaware, including, without limitation, without the
assent or vote of the stockholders, to make, alter, amend, change, add to, or
repeal the Bylaws of the Corporation; to fix and vary the amount to be reserved
as working capital; to authorize and cause to be executed mortgages and liens
upon all the property of the Corporation or any part thereof; to determine the
use and disposition of any surplus or net profits over and above the capital
stock paid in; and to fix the times for the declaration and payment of
dividends.
EIGHTH: Notwithstanding anything contained in this Certificate of Incorporation
to the contrary, the affirmative vote of at least eighty percent (80%) of the
voting power of the then outstanding Voting Stock (as defined below), voting
together as a single class, shall be required to amend or repeal, or adopt any
provisions inconsistent with, the Bylaws of the Corporation or Articles FIFTH,
SIXTH and TWELFTH of this Certificate of Incorporation. For the purposes of
this Certificate of Incorporation, "Voting Stock" shall mean the outstanding
shares of capital stock of the Corporation entitled to vote generally in the
election of directors.
NINTH: No person who is, or was at any time but is no longer serving as, a
director of the Corporation shall be personally liable to the Corporation or its
stockholders for monetary damages for any breach of fiduciary duty by such
person as a director; provided that the provisions of this Article NINTH shall
not eliminate or limit the liability of a director (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the General Corporation Law
of the State of Delaware or (iv) for any transaction from which the director
derived an improper personal benefit. If the General Corporation Law of the
State of Delaware is amended to authorize corporate action further eliminating
or limiting the personal liability of directors, then the liability of a
director of the Corporation shall be eliminated or limited to the fullest extent
permitted by the General Corporation Law of the State of Delaware, as so
amended. No amendment to or repeal of this Article NINTH shall have the effect
of increasing the liability or alleged liability of any director of the
Corporation for or with respect to any act or omission of such director
occurring prior to such amendment or repeal.
TENTH: The Corporation shall indemnify and advance expenses to each person who
serves as an officer or director of the Corporation or a subsidiary of the
Corporation and each person who serves or may have served at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise from any liability
incurred as a result of such service to the fullest extent permitted by the
General Corporation Law of Delaware as it may from time to time be amended,
except with respect to an action commenced by such director or officer against
the Corporation or by such director or officer as a derivative action by or in
the right of the Corporation.
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Each person who is or was an employee or agent of the Corporation and each
officer or director who commences any action against the Corporation or a
derivative action by or in the right of the Corporation may be similarly
indemnified and receive an advance of expenses at the discretion of the Board of
Directors.
The indemnification and advancement of expenses provided by, or granted pursuant
to, the Certificate of Incorporation shall not be deemed exclusive of any other
rights to which those seeking indemnification or advancement of expenses may be
entitled under any agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in their official capacity and as to action in
another capacity while holding such office.
The Corporation may purchase and maintain insurance on behalf of any person who
is or was a director, officer, employee or agent of the Corporation, or is or
was serving at the request of this Corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, against any liability asserted against him and incurred by him in
any such capacity, or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against such liability under
this Certificate of Incorporation or Delaware law.
The indemnification and advancement of expenses provided by, or granted pursuant
to, this Certificate of Incorporation shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
ELEVENTH: The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, and all rights conferred upon the
stockholders herein are granted subject to this reservation. No amendment to
this Certificate of Incorporation or repeal of any article of this Certificate
of Incorporation shall increase the liability or alleged liability or reduce or
limit the right to indemnification of any directors, officers, employees or
agents of the Corporation for acts or omissions of such person occurring prior
to such amendment or repeal.
TWELFTH: Effective from and after the date upon which the Corporation shall
first have more than one stockholder, no action which requires the vote or
consent of stockholders of the Corporation may be taken without a meeting and
vote of stockholders and the power of stockholders to consent thereafter in
writing without a meeting to the taking of any action is specifically denied.
IN WITNESS WHEREOF, Edwards Lifesciences Corporation has caused this Amended and
Restated Certificate of Incorporation to be signed by Michael A. Mussallem, its
Chairman of the Board and Chief Executive Officer, this _____day of ________,
2000.
Edwards Lifesciences Corporation
By_____________________
Michael A. Mussallem
Chairman of the Board and
Chief Executive Officer
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<PAGE>
Exhibit 3.2
Edwards Lifesciences Corporation
AMENDED AND RESTATED BYLAWS
EFFECTIVE APRIL 3, 2000
ARTICLE I
STOCKHOLDERS
SECTION 1. PLACE OF HOLDING MEETINGS. All meetings of the stockholders shall
- ---------- --------------------------
be held at the principal executive offices of the Corporation, or such other
place as shall be determined by the Board of Directors.
SECTION 2. ELECTION OF DIRECTORS.
- ---------- ----------------------
(a) The annual meeting of stockholders for the election of directors and
the transaction of other business shall be held at such time and date as shall
be determined by the Board of Directors.
(b) Only persons who are nominated in accordance with the following
procedures shall be eligible for election as directors of the Corporation,
except as may be otherwise provided in the Certificate of Incorporation of the
Corporation with respect to the right of holders of Preferred Stock of the
Corporation to nominate and elect a specified number of directors in certain
circumstances. Nominations of persons for election to the Board of Directors
may be made at any annual meeting of stockholders, or at any special meeting of
stockholders called for the purpose of electing directors, (i) by or at the
direction of the Board of Directors (or any duly authorized committee thereof)
or (ii) by any stockholder of the Corporation (A) who is a stockholder of record
or beneficial owner on the date of the giving of the notice provided for in this
Section 2 and on the record date for the determination of stockholders entitled
to vote at such meeting and (B) who complies with the notice procedures set
forth in this Section 2.
(c) In addition to any other applicable requirements, for a nomination to
be made by a stockholder, such stockholder must have given timely notice thereof
in proper written form to the secretary of the Corporation.
(d) To be timely, a stockholder's notice to the secretary must be delivered
to or mailed and received at the principal executive offices of the Corporation
(i) in the case of an annual meeting, not less than seventy-five (75) days nor
more than one hundred (100) days prior to the anniversary date of the
immediately preceding annual meeting of stockholders; provided, however, that in
------------------
the event that the annual meeting is called for a date that is not within thirty
(30) days before or after such anniversary date, notice by the stockholder in
order to be timely must be so received not later than the close of business on
the tenth (10/th/) day following the day on which such notice of the date of the
annual meeting was mailed or such public disclosure of the date of the annual
meeting was made, whichever occurs first, and (ii) in the case of a special
meeting of stockholders called for the purpose of electing directors, not later
than the close of business on the tenth (10/th/) day following the day on which
notice of the date of the special meeting was mailed or public disclosure of the
date of the special meeting was made, whichever occurs first.
<PAGE>
(e) To be in proper written form, a stockholder's notice to the secretary
must set forth (i) as to each person whom the stockholder proposes to nominate
for election as a director (A) the name, age, business address and residence
address of the person, (B) the principal occupation or employment of the person,
(C) the class or series and number of shares of capital stock of the Corporation
which are owned beneficially or of record by the person and (D) any other
information relating to the person that would be required to be disclosed in a
proxy statement or other filings required to be made in connection with the
solicitations of the proxies for election of directors pursuant to Section 14 of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
rules and regulations promulgated thereunder, or any successor provisions
thereto; and (ii) as to the stockholder giving the notice (A) the name and
record address of such stockholder, (B) the class or series and number of shares
of capital stock of the Corporation which are owned beneficially or of record by
such stockholder, (C) a description of all arrangements or understandings
between such stockholder and each proposed nominee and any other person or
persons (including their names) pursuant to which the nomination(s) are to be
made by such stockholder, (D) a representation that such stockholder intends to
appear in person or by proxy at the meeting to nominate the persons named in its
notice and (E) any other information relating to such stockholder that would be
required to be disclosed in a proxy statement or other filings required to be
made in connection with solicitations of proxies for election of directors
pursuant to Section 14 of the Exchange Act and the rules and regulations
promulgated thereunder, or any successor provisions thereto. Such notice must
be accompanied by a written consent of each proposed nominee to being named as a
nominee and to service as a director if elected.
(f) No person shall be eligible for election as a director of the
Corporation, at any annual meeting of stockholders or at any special meeting of
stockholders called for the purpose of electing directors, unless nominated in
accordance with the procedures set forth in this Section 2. If the chairman of
the meeting determines that a nomination was not made in accordance with the
foregoing procedures, the chairman shall declare to the meeting that the
nomination was defective and such defective nomination shall be disregarded.
(g) The determination of whether shares of capital stock of the Corporation
are owned beneficially under this Section 2 shall be made in the manner
applicable to proposals submitted pursuant to Rule 14a-8 of the Exchange Act, or
any successor provisions thereto.
SECTION 3. VOTING. Each stockholder entitled to vote in accordance with the
- ---------- ------
terms of the Certificate of Incorporation, these Bylaws or Delaware law shall,
unless the Certificate of Incorporation or Delaware law otherwise provides, be
entitled to one vote, in person or by proxy, for each share of stock entitled to
vote held by such stockholder, but no proxy shall be voted after three years
from its date unless such proxy provides for a longer period. The vote for
directors, and upon the demand of any stockholder, the vote upon any question
before the meeting, shall be by ballot. Except for the election of directors,
which shall be decided by a plurality of the shares present in person or
represented by proxy at the meeting and entitled to vote thereat, all matters
shall be decided by the affirmative vote of a majority of shares present in
person or represented by proxy at any meeting duly called and entitled to vote
thereat, except as otherwise provided by the Certificate of Incorporation and/or
Delaware law.
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A stockholder may authorize another person or persons to act for such
stockholder as proxy (i) by executing a writing authorizing such person or
persons to act as such, which execution may be accomplished by such stockholder
or such stockholder's authorized officer, director, employee or agent signing
such writing or causing his or her signature to be affixed to such writing by
any reasonable means, including, but not limited to, facsimile signature, or
(ii) by transmitting or authorizing the transmission of a telegram, cablegram or
other means of electronic transmission (a "Transmission") to the person who will
be the holder of the proxy or to a proxy solicitation firm, proxy support
service organization or like agent duly authorized by the person who will be the
holder of the proxy to receive such Transmission, which Transmission must either
set forth or be submitted with information from which it can be determined that
such Transmission was authorized by such stockholder. The Secretary or such
other person or persons as shall be appointed from time to time by the Board of
Directors shall examine Transmissions to determine if they are valid. If it is
determined that a Transmission is valid, the person or persons making that
determination shall specify the information upon which such person or persons
relied. Any copy, facsimile telecommunication or other reliable reproduction of
such writing or such a Transmission that is a complete reproduction of the
entire original writing or Transmission may be substituted or used in lieu of
the original writing or Transmission for any and all purposes for which the
original writing or Transmission could be used.
The secretary shall prepare and make, at least ten (10) days before each meeting
of stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten (10) days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of meeting,
or, if not so specified, at the place where the meeting is to be held. The list
shall also be produced and kept at the time and place of the meeting during the
whole time thereof and may be inspected by any stockholder who is present. The
stock ledger shall be the only evidence as to who are the stockholders entitled
to examine the stock ledger, the list of stockholders or the books of the
corporation, or to vote in person or by proxy at any meeting of stockholders.
SECTION 4. QUORUM. Except as provided in the next section hereof, any
- ---------- ------
number of stockholders together holding a majority of the stock issued and
outstanding and entitled to vote thereat, who shall be present in person or
represented by proxy at any meeting duly called, shall constitute a quorum for
the transaction of business. If a quorum is present when a meeting is convened,
the subsequent withdrawal of stockholders, even though less than a quorum
remains, shall not affect the ability of the remaining stockholders lawfully to
transact business.
SECTION 5. ADJOURNMENT OF MEETINGS. If less than a quorum shall be in
- ---------- ------------------------
attendance at any time for which the meeting shall have been called, the meeting
may, after the lapse of at least half an hour, be adjourned from time to time by
a majority of the stockholders present or represented and entitled to vote
thereat. If notice of such adjourned meeting is sent to the stockholders
entitled by statute to receive the same, and such notice contains a statement of
the purpose of the meeting, that the previous meeting failed for lack of a
quorum, and that under the provisions of this Section it is proposed to hold the
adjourned meeting with a quorum of
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<PAGE>
those present, then any number of stockholders, in person or by proxy, shall
constitute a quorum at such meeting unless otherwise provided by statute.
In addition, the chairman of the meeting may adjourn the meeting from time to
time, whether or not there is such a quorum (or, in the case of specified
business to be voted on by a class or series, the chairman or a majority of the
shares of such class or series so represented may adjourn the meeting with
respect to such specified business). Notice need not be given of any such
adjourned meeting if the date, time and place thereof are announced at the
meeting at which the adjournment is taken. At the adjourned meeting any
business may be transacted that might have been transacted at the original
meeting. If the adjournment is for more than thirty (30) days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the adjourned meeting in accordance with Section 7 of this Article I.
--------- ---------
SECTION 6. SPECIAL MEETINGS: HOW CALLED. Special meetings of the stockholders
- ---------- -----------------------------
for any purpose or purposes may be called only (a) by the chairman of the board
and chief executive officer or the secretary, and shall be called by the
chairman of the board and chief executive officer or the secretary upon a
request in writing therefor, stating the purpose or purposes thereof, delivered
to the chairman of the board and chief executive officer or the secretary,
signed by a majority of the directors or (b) by resolution adopted by a majority
of the Board of Directors. The business transacted at a special meeting of
stockholders shall be limited solely to the matters relating to the purpose or
purposes stated in the Corporation's notice of meeting.
SECTION 7. NOTICE OF STOCKHOLDERS' MEETINGS. Written or printed notice stating
- ---------- ---------------------------------
the time and place of regular or special meetings of the stockholders and the
general nature of the business to be considered shall be mailed by the
secretary, or such other officer as the Board of Directors may designate, to
each stockholder entitled to vote thereat at his address as it appears on the
records of the Corporation, at least ten (10) days but not more than sixty (60)
days before the date of such meeting. Such notice shall be deemed to be
delivered when deposited in the United States mail, postage thereon prepaid,
addressed to the stockholder at such stockholder's address as it appears on the
stock transfer books of the Corporation.
SECTION 8. CONDUCT OF THE MEETINGS.
- ---------- ------------------------
(a) The chairman of the board, or his or her designee, shall preside over
meetings of stockholders and shall have absolute authority over matters of
procedure, and there shall be no appeal from the ruling of the chairman. If the
chairman, in his or her absolute discretion, deems it advisable to dispense with
the rules of parliamentary procedure as to any one meeting of stockholders or
part thereof, the chairman shall so state and shall clearly state the rules
under which the meeting or appropriate part thereof shall be conducted.
(b) If disorder should arise which prevents continuation of the legitimate
business of the meeting, the chairman may quit the chair and announce the
adjournment of the meeting; and upon his or her doing so, the meeting is
immediately adjourned.
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(c) The chairman may ask or require that anyone not a bona fide stockholder
or proxy leave the meeting.
(d) A resolution or motion shall be considered for vote only if (i)
proposed by a stockholder or duly authorized proxy, and seconded by an
individual, who is a stockholder or a duly authorized proxy, other than the
individual who proposed the resolution and (ii) all other requirements under
law, the Corporation's Certificate of Incorporation, these Bylaws or otherwise
for consideration of such a resolution or motion have been duly satisfied as
determined by the chairman in his or her absolute discretion, from which there
shall be no appeal.
SECTION 9. ANNUAL MEETINGS.
- ---------- ----------------
(a) No business may be transacted at an annual meeting of stockholders,
other than business that is either (i) specified in the notice of meeting (or
any supplement thereto) given by or at the direction of the Board of Directors
(or any duly authorized committee thereof), (ii) otherwise properly brought
before the annual meeting by or at the direction of the Board of Directors (or
any duly authorized committee thereof) or (iii) otherwise properly brought
before the annual meeting by any stockholder of the Corporation (A) who is a
stockholder of record or beneficial owner on the date of the giving of the
notice provided for in this Section 9 and on the record date for the
determination of stockholders entitled to vote at such annual meeting and (B)
who complies with the notice procedures set forth in this Section 9.
(b) In addition to any other applicable requirements, for business to be
properly brought before an annual meeting by a stockholder, such stockholder
must have given timely notice thereof in proper written form to the secretary of
the Corporation, which notice is not withdrawn by such stockholder at or prior
to such annual meeting.
(c) To be timely, a stockholder's notice to the secretary must be
delivered to or mailed and received at the principal executive offices of the
Corporation not less than seventy-five (75) days nor more than one hundred (100)
days prior to the anniversary date of the immediately preceding annual meeting
of stockholders; provided, however, that in the event that the annual meeting is
-------- -------
called for a date that is not within thirty (30) days before or after such
anniversary date, notice by the stockholder in order to be timely must be so
received not later than the close of business on the tenth (10/th/) day
following the day on which such notice of the date of the annual meeting was
mailed or such public disclosure of the date of the annual meeting was made,
whichever occurs first.
(d) To be in proper written form, a stockholder's notice to the secretary
must set forth as to each matter such stockholder proposes to bring before the
annual meeting (i) a brief description of the business desired to be brought
before the annual meeting and the reasons for conducting such business at the
annual meeting, (ii) the name and record address of such stockholder, (iii) the
class or series and number of shares of capital stock of the Corporation which
are owned beneficially or of record by such stockholder, (iv) a description of
all arrangements or understandings between such stockholder and any other person
or persons (including their names) in connection with the proposal of such
business by such stockholder and any material interest of such
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<PAGE>
stockholder in such business and (v) a representation that such stockholder
intends to appear in person or by proxy at the annual meeting to bring such
business before the meeting.
(e) No business shall be conducted at the annual meeting of stockholders
except business brought before the annual meeting in accordance with the
procedures set forth in this Section 9. If the chairman of the annual meeting
---------
determines that business was not properly brought before the annual meeting in
accordance with the foregoing procedures, the chairman shall declare to the
meeting that the business was not properly brought before the meeting and such
business shall not be transacted.
(f) The determination of whether shares of capital stock of the Corporation
are owned beneficially under this Section 9 shall be made in the same manner
applicable to proposals submitted pursuant to Rule 14a-8 of the Exchange Act, or
any successor provisions thereto.
ARTICLE II
DIRECTORS
SECTION 1. QUALIFICATION AND QUORUM. No person shall be eligible for election
- --------- ------------------------
or appointment as a director who, at the time of his election or appointment is
70 1/2 years old, or older. One-third of the total number of directors (rounded
upwards, if necessary, to the next whole number) shall constitute a quorum for
the transaction of business at any meeting of the Board of Directors. If at any
meeting of the Board of Directors there shall be less than a quorum present, a
majority of those present may adjourn the meeting from time to time until a
quorum is obtained, and no further notice thereof need be given other than by
announcement at said meeting which shall be so adjourned. The Board of
Directors, or any committee thereof, may also transact business without a
meeting if all members of the Board of Directors or such committee, as the case
may be, consent thereto in writing (which may be in counterparts), and the
written consent or consents are filed with the minutes of the proceedings of the
Board of Directors or such committee.
The act of the majority of the directors present at any meeting at which a
quorum is present shall be the act of the Board of Directors, unless otherwise
provided by the laws of the State of Delaware, the Certificate of Incorporation
or these Bylaws.
SECTION 2. REGULAR MEETINGS. A regular annual meeting of the Board of
- --------- ----------------
Directors shall be held, without call or notice, in connection with the annual
meeting of stockholders, for the purpose of organizing the Board of Directors,
electing officers and transacting any other business that may properly come
before such meeting. Additional regular meetings of the Board of Directors may
be held without call or notice at such times as shall be determined by the Board
of Directors.
SECTION 3. ELECTION OF OFFICERS. At the first meeting or at any subsequent
- ---------- --------------------
meeting called for the purpose, the directors shall elect a chairman of the
board and chief executive officer as well as a secretary, and may elect a
president, one or more executive vice presidents, one or more senior vice
presidents, one or more group vice presidents, one or more corporate vice
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presidents, one or more vice presidents, a treasurer, and one or more assistant
secretaries, who need not be directors. Each such officer shall hold office
until the next annual election of officers, and until his successor is duly
elected and qualified, or until such officer's earlier resignation, removal or
death.
SECTION 4. SPECIAL MEETINGS: HOW CALLED: NOTICE. Special meetings of the board
- --------- ------------------------------------
may be called by the chairman of the board and chief executive officer, and
shall be called by the chairman of the board and chief executive officer or the
secretary on the written request of any two directors, in each case on twenty-
four (24) hours notice to each director. Such notice, which need not specify
the purpose of the meeting or the matters to be considered thereat, may be given
as provided in Article VIII, personally (including by telephone) or by telegram
or other written communication delivered to the residence or office of the
director. Such personal notice or written communication shall be effective when
delivered.
SECTION 5. PLACE OF MEETING. The directors may hold their meetings and have
- ---------- ----------------
one or more offices, and keep the books of the Corporation, outside the State of
Delaware, at any office or offices of the Corporation, or at any place as they
may from time to time by resolution determine.
SECTION 6. TELEPHONIC MEETINGS. Directors, or any committee of directors
- ---------- -------------------
designated by the Board of Directors, may participate in a meeting of the Board
of Directors or such committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting pursuant to this
Section shall constitute presence in person at such meeting.
SECTION 7. GENERAL POWERS OF DIRECTORS. The Board of Directors shall have the
- --------- ---------------------------
management of the business of the Corporation, and subject to the restrictions
imposed by law, by the Certificate of Incorporation or by these Bylaws, may
exercise all the powers of the Corporation, including any powers incidental
thereto.
SECTION 8. COMPENSATION OF DIRECTORS. Directors shall not receive any stated
- --------- -------------------------
salary for their services as directors, but the Board of Directors may by
resolution authorize compensation together with expenses of attendance at
meetings. Such compensation may take the form of cash, stock options or other
compensation. Nothing herein contained shall be construed to preclude any
director from serving the Corporation in any other capacity as an officer, agent
or otherwise, and receiving compensation therefor.
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<PAGE>
ARTICLE III
COMMITTEES
SECTION 1. The Board of Directors shall create an audit and public policy
- ---------
committee, and a compensation and planning committee, and may create such other
committees as the board, from time to time, deems desirable. Each committee
shall consist of three or more of the directors of the Corporation and, to the
extent provided in the resolutions creating the committees or in these Bylaws,
shall have the powers of the Board of Directors in the management of the
business and affairs of the Corporation.
SECTION 2. The audit and public policy committee shall consist solely of
- ---------
directors who are independent of management and free from any relationships
that, in the opinion of the Board of Directors, would interfere with their
exercise of independent judgment as a committee member. The Policy Statement on
Audit Committees issued by the New York Stock Exchange, as in effect from time
to time, shall be applicable in determining which directors are "independent"
for this purpose.
The audit and public policy committee shall assist the Board of Directors in
fulfilling its responsibilities for the Corporation's accounting and financial
reporting practices and provide a channel of communication between the Board of
Directors and the Corporation's independent auditors. The committee also shall
review the policies and practices of the Corporation to assure that they are
consistent with its social responsibility to employees, to customers and to
society.
To accomplish the above purposes, the audit and public policy committee shall:
(a) Review with the independent auditors the scope of their annual and
interim examinations, placing particular attention where either the committee or
the auditors believe such attention should be directed, and to direct the
auditors to expand (but not to limit) the scope of their audit whenever such
action is, in the opinion of the committee, necessary or desirable. The
independent auditors shall have sole authority to determine the scope of the
audit which they deem necessary for the formation of an opinion on financial
statements;
(b) Consult with the auditors during any annual or interim audit on any
situation which the auditors deem advisable for resolution prior to the
completion of their examination;
(c) Meet with the auditors to appraise the effectiveness of the audit
effort. Such appraisal shall include a discussion of the overall approach to
and the scope of the examination, with particular attention on those areas on
which either the committee or the auditors believe emphasis is necessary or
desirable;
(d) Determine through discussions with the auditors and otherwise, that no
restrictions were placed by management on the scope of the examination or its
implementation;
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<PAGE>
(e) Inquire into the effectiveness of the Corporation's accounting and
internal control functions through discussions with the auditors and appropriate
officers of the Corporation and exercise supervision of the Corporation's
policies which prohibit improper or illegal payments;
(f) Review with the auditors and management any registration statement
which shall be filed by the Corporation in connection with the public offering
of securities and such other public financial reports as the committee or the
Board of Directors shall deem desirable;
(g) Report to the Board of Directors on the results of the committee's
activities and recommend to the Board of Directors any changes in the
appointment of independent auditors which the committee may deem to be in the
best interests of the Corporation and its stockholders;
(h) Monitor the Corporation's policies and practices relating to the health
and safety of employees and customers as well as the ethical standards of the
Corporation; and
(i) Have such other powers and perform such other duties as the board
shall, from time to time, grant and assign to it.
SECTION 3. The compensation and planning committee shall consist solely of
- ---------
directors who are independent of management, as defined in Section 2.
(a) The committee shall (1) determine the compensation of officers, other
than the chairman of the board and chief executive officer and advise the Board
of Directors of such determination, (2) exercise the authority of the Board of
Directors concerning employee benefit plans, including those plans which are
limited in their application to officers and senior management, (3) make
recommendations to the Board of Directors concerning the compensation of the
chairman of the board and chief executive officer, and (4) advise the Board of
Directors and the chairman of the board and chief executive officer on other
compensation and employee benefit matters.
(b) In addition, the committee shall assist and advise the Board of
Directors in connection with board membership, board committee structure and
membership. To accomplish these purposes, the committee shall:
(1) Develop general criteria for use in selecting potential new board
members and assist the Board in identifying and attracting qualified candidates
for election to the board;
(2) Recommend to the Board annually a slate of nominees to be proposed by
the Board to the stockholders as nominees for election as directors and, from
time to time, recommend persons to fill any vacancy on the Board;
(3) Recommend to the Board any changes in number, authority and duties of
board committees and the chairmen and members who should serve thereon;
(4) In the event of the death, incapacity, resignation or other absence
(temporary or permanent) of the chairman of the board and chief executive
officer, the committee shall confer
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and recommend for election by the full Board an acting or successor chairman of
the board and chief executive officer; and
(5) Make recommendations to the Board concerning compensation payable for
board membership, as well as other benefits available to board members.
The compensation and planning committee shall have such other powers and perform
such other duties as the Board shall, from time to time, grant and assign to it.
SECTION 4. The following provisions shall apply to all committees of the Board
- ---------
of Directors:
(a) Any power or authority granted to a committee by these Bylaws may also
be exercised by the Board of Directors;
(b) Each member of a committee shall hold office until the next regular
annual meeting of the Board of Directors following his designation and until his
successor is designated as a member of a committee, or until the committee is
dissolved by a majority of the whole board or the member is removed as
hereinafter provided;
(c) Meetings of a committee may be called by any member thereof, the
chairman of the board and chief executive officer, the secretary or any
assistant secretary upon twenty-four (24) hours notice to each member stating
the place, date and hour of the meeting, which notice may be written or oral.
Such notice shall be deemed to be delivered (i) if mailed, when deposited in the
United States mail, postage prepaid, addressed to the member of the committee at
his business address, provided it is mailed four (4) days prior to the meeting
or (ii) if transmitted by facsimile, when confirmation of transmission is
received. Any member of a committee may waive notice of any meeting and no
notice of any meeting need be given to any member thereof who attends in person.
The notice of a meeting of a committee need not state the business proposed to
be transacted at the meeting;
(d) The lesser of a majority of the members or two members of a committee
shall constitute a quorum for the transaction of business at any meeting thereof
and action of a committee must be authorized by the affirmative vote of a
majority of the members present at a meeting at which a quorum is present;
(e) Any action that may be taken by a committee at a meeting may be taken
without a meeting if a consent in writing, setting forth the action to be taken,
shall be signed by all the members of a committee and filed with the minutes of
the committee, which action shall be effective as of the date stated in such
consent;
(f) Any vacancy on a committee may be filled by a resolution adopted by a
majority of the Board of Directors;
(g) Any member of a committee may be removed at any time with or without
cause by resolution adopted by a majority of the Board of Directors;
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<PAGE>
(h) The chairman of each committee of the Board of Directors shall be
appointed from among the members of such committee by the Board of Directors.
The chairman of the committee shall, if present, preside at all meetings of a
committee. A committee may fix its own rules of procedure which shall not be
inconsistent with these Bylaws. Each committee shall keep regular minutes of
its proceedings and report its proceedings at the next meeting of the Board of
Directors; and
(i) The chairman of the board and chief executive officer shall act in an
advisory capacity to all committees.
ARTICLE IV
OFFICERS
SECTION 1. The officers of the Corporation shall be the chairman of the board
- ---------
and chief executive officer and the secretary, and may include a president, one
or more executive vice presidents, one or more senior vice presidents, one or
more group vice presidents, one or more corporate vice presidents, one or more
vice presidents, a treasurer, one or more assistant secretaries and such other
officers as may from time to time be elected or appointed by the Board of
Directors. Any number of offices may be held by the same person.
SECTION 2. CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER. The chairman of
- --------- ---------------------------------------------------
the board and chief executive officer shall be the chief executive officer of
the Corporation and shall have the responsibility for the management of the
Corporation and such other powers and duties as may be assigned to him or her
from time to time by the board. The chairman of the board and chief executive
officer shall, when present, preside at all meetings of the stockholders and of
the Board of Directors. He or she shall act as liaison from and as spokesperson
for the board. He or she shall participate in long range planning for the
Corporation. He or she may sign shares of the Corporation, any deeds,
mortgages, bonds, contracts or other instruments which the Board of Directors
has authorized to be executed, or which are in the ordinary course of business
of the Corporation. He or she may vote, either in person or by proxy, all the
shares of the capital stock of any company which the Corporation owns or is
otherwise entitled to vote at any and all meetings of the stockholders of such
company and shall have the power to accept or waive notice of such meetings. He
or she shall in general perform all duties incident to the office and such other
duties as shall be prescribed by the Board of Directors from time to time.
SECTION 3. PRESIDENT. The president shall have such duties and authority as
- --------- ---------
the chairman of the board and chief executive officer may determine from time to
time. In the absence or disability of the chairman of the board and chief
executive officer, the president shall exercise all powers and discharge all of
the duties of the chairman of the board and chief executive officer, including
the general supervision and control of all the business and affairs of the
Corporation. The President may sign any deeds, mortgages, bonds, contracts or
other instruments which the Board of Directors has authorized to be executed or
which are in the ordinary course of business of the Corporation. The President
may vote, either in person or by proxy, all the shares of the capital
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<PAGE>
stock of any company which the Corporation owns or is otherwise entitled to vote
at any and all meetings of the stockholders of such company and shall have the
power to accept or waive notice of such meetings.
SECTION 4. VICE PRESIDENTS. In the absence or disability of the chairman of
- --------- ---------------
the board and chief executive officer and the president, the functions of the
chairman of the board and chief executive officer shall be performed by the
executive vice president who was first elected to that office and who is not
then absent or disabled, or, if none, the senior vice president who was first
elected to that office and who is not then absent or disabled, or, if none, the
group vice president who was first elected to that office and who is not then
absent or disabled, or, if none, the corporate vice president who was first
elected to that office and who is not then absent or disabled, or, if none, the
vice president who was first elected to that office and who is not then absent
or disabled. Each executive vice president, senior vice president, group vice
president, corporate vice president and vice president shall have such powers
and shall discharge such duties as may be assigned to him or her from time to
time by the chairman of the board and chief executive officer or the president
and may sign any deeds, mortgages, bonds, contracts or other instruments which
the Board of Directors has authorized to be executed or which are in the
ordinary course of business. Each executive vice president, senior vice
president, group vice president, corporate vice president and vice president may
vote, either in person or by proxy, all the shares of the capital stock of any
company which the Corporation owns or is otherwise entitled to vote at any and
all meetings of the stockholders of such company and shall have the power to
accept or waive notice of such meetings.
SECTION 5. SECRETARY. The secretary shall give, or cause to be given, notice
- --------- ---------
of all meetings of stockholders and directors, and all other notices required by
law or by these Bylaws, and in the case of his or her absence or refusal or
neglect so to do, any such notice may be given by any person thereunto directed
by the chairman of the board and chief executive officer or the directors, upon
whose requisition the meeting is called as provided in these Bylaws. The
Secretary shall record all the proceedings of the meetings of the stockholders
and of the directors in a book to be kept for that purpose, and shall perform
such other duties as may be assigned to him or her by the Board of Directors,
the chairman of the board and chief executive officer, or the president. The
Secretary shall have the custody of the seal of the Corporation and shall affix
the same to all instruments requiring it, when authorized by the Board of
Directors, the chairman of the board and chief executive officer, or the
president, and attest the same. The Secretary shall have charge of the original
stock books, transfer books and stock ledgers, and act as transfer agent in
respect of the stock and the securities of the Corporation in the absence of
designation by the Board of Directors of a corporate transfer agent, and shall
perform all of the other duties incident to the office of secretary. The
Secretary may vote, either in person or by proxy, all the shares of the capital
stock of any company which the Corporation owns or is otherwise entitled to vote
at any and all meetings of the stockholders of such company and shall have the
power to accept or waive notice of such meetings.
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SECTION 6. ASSISTANT SECRETARY. Each assistant secretary shall have such
- --------- -------------------
powers and perform such duties as shall be assigned to him or her by the Board
of Directors or delegated to him or her by the secretary, and in the absence or
inability of the secretary to act, shall have the same general powers as the
secretary.
SECTION 7. TREASURER. The treasurer shall perform such duties as shall be
- --------- ---------
delegated to him or her by the Board of Directors, the chairman of the board and
chief executive officer or the president.
ARTICLE V
RESIGNATIONS AND FILLING OF VACANCIES
SECTION 1. RESIGNATIONS. Any director, member of a committee or other officer
- --------- ------------
may resign at any time. Such resignations shall be made in writing and shall
take effect at the time specified therein and, if no time be specified, at the
time of the receipt of such resignation by the chairman of the board and chief
executive officer or secretary. The acceptance of the resignation shall not be
necessary to make it effective.
SECTION 2. FILLING OF VACANCIES. If the office of any member of a committee or
- --------- --------------------
other officer becomes vacant, the vacancy may be filled only by the remaining
directors in office, who, by a majority vote, may appoint any qualified person
to fill such vacancy. Any vacancy on the Board of Directors, resulting from an
increase in the number of directors or for any other reason, may be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director. A person appointed to fill a vacancy shall hold office
for the unexpired term or until the next election of the class to which the
director has been assigned, and until his successor shall be elected and
qualified.
ARTICLE VI
CAPITAL STOCK
SECTION l. CERTIFICATES OF STOCK. Certificates of stock, numbered and with the
- --------- ---------------------
seal of the Corporation affixed, signed by the chairman of the board and chief
executive officer, the president or any vice president, and the secretary or an
assistant secretary or the treasurer, shall be issued to each stockholder
certifying the number of shares owned by such stockholder in the Corporation.
Any of or all the signatures on these certificates may be facsimile. In case
any officer or transfer agent who has signed or whose facsimile signature has
been placed upon a certificate shall have ceased to be such officer or transfer
agent before such certificate is issued, it may be issued by the Corporation
with the same effect as if such person were such officer or transfer agent at
the date of issue.
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<PAGE>
SECTION 2. LOST, STOLEN OR DESTROYED CERTIFICATES. A new certificate of stock
- --------- --------------------------------------
may be issued in the place of any certificate theretofore issued by the
Corporation, alleged to have been lost, stolen or destroyed, and the directors
may, in their discretion, require the owner of the lost, stolen or destroyed
certificate, or such stockholder's legal representative, to give the Corporation
a bond, in such sum as they may direct, sufficient to indemnify the Corporation
against any claim that may be made against it on account of the alleged loss,
theft or destruction of any such certificate or the issuance of such new
certificate.
SECTION 3. TRANSFER OF SHARES. The shares of stock of the Corporation shall be
- --------- ------------------
transferable only upon its books by the holders thereof in person or by their
duly authorized attorneys or legal representatives, and upon such transfer the
old certificates shall be surrendered to the Corporation by the delivery thereof
to the person in charge of the stock and transfer books and ledgers, or to such
other person as the directors may designate, by whom they shall be canceled, and
new certificates shall thereupon be issued. A record shall be made of each
transfer, and whenever a transfer shall be made for collateral security, and not
absolutely, it shall be so expressed in the entry of the transfer.
SECTION 4. DETERMINATION OF RECORD DATE.
- --------- ----------------------------
(a) In order that the Corporation may determine the stockholders entitled
(i) to notice of or to vote at any meeting of stockholders or any adjournment
thereof, (ii) to receive payment of any dividend or other distribution or
allotment of any rights, (iii) to exercise any rights in respect of any change,
conversion or exchange of stock or (iv) to take, receive or participate in any
other lawful action, the Board of Directors may fix, in advance, a record date,
which shall not be more than sixty (60) nor less than ten (10) days before the
date of such meeting, nor more than sixty (60) days prior to any other action.
(b) If no record date is fixed:
(i) The record date for determining stockholders entitled to notice
of or to vote at a meeting of stockholders shall be at the close of business on
the day next preceding the day on which notice is given, or, if notice is
waived, at the close of business on the day next preceding the day on which the
meeting is held.
(ii) The record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto.
(c) A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
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<PAGE>
SECTION 5. DIVIDENDS. Subject to the applicable provisions of the Certificate
- --------- ---------
of Incorporation, if any, and Delaware law, the directors may declare dividends
upon the capital stock of the Corporation as and when they deem expedient.
ARTICLE VII
AMENDMENTS
SECTION 1. AMENDMENTS OF BYLAWS. The stockholders by the affirmative vote of
- --------- --------------------
at least eighty percent (80%) of the outstanding shares of capital stock of the
Corporation entitled to vote in elections of directors of the Corporation
considered as one class, or the directors by the affirmative vote of a majority
of the directors present at any meeting at which a quorum is present, may amend
or alter any of these Bylaws, provided the substance of the proposed amendment
shall have been stated in the notice of the meeting. "Voting Stock" means the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors of the Corporation.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
SECTION 1. CORPORATE SEAL. The corporate seal of the Corporation shall be
- --------- --------------
circular in form and shall contain the name of the Corporation, and the words
"Corporate Seal, Delaware." Said seal may be used by causing it or facsimile
thereof to be impressed or affixed or reproduced or otherwise.
SECTION 2. FISCAL YEAR. The fiscal year of the Corporation shall be the
- --------- -----------
calendar year.
SECTION 3. REGISTERED OFFICE. A registered office of the Corporation shall be
- --------- -----------------
established and maintained at the office of The Corporation Trust Company, in
the City of Wilmington and County of New Castle, and such company shall be the
registered agent of this Corporation in the State of Delaware.
SECTION 4. BANK ACCOUNTS, CHECKS, DRAFTS, NOTES. The Corporation shall
- --------- ------------------------------------
maintain such bank accounts and checks upon such accounts shall be signed and/or
countersigned by such officers as may be designated by resolution of the Board
of Directors. Notes or other evidences of indebtedness issued in the name of
the Corporation shall be signed by such officer or officers, agent or agents of
the Corporation, and in such manner as shall from time to time be determined by
resolution of the Board of Directors.
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<PAGE>
SECTION 5. NOTICE AND WAIVER OF NOTICE. Whenever any notice is required by
- --------- ---------------------------
these Bylaws to be given, personal notice is not meant unless expressly so
stated, and any notice so required shall be deemed to be sufficient if given by
depositing the same in a post office box in a sealed post paid wrapper,
addressed to the person entitled thereto at his last known post office address,
and such notice shall be deemed to have been given on the day of such mailing.
Any notice required to be given under these Bylaws may be waived by the person
entitled thereto. Stockholders not entitled to vote shall not be entitled to
receive notice of any meetings except as otherwise provided by statute.
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<PAGE>
EXHIBIT 10.1
DRAFT: FEBRUARY 14, 2000
-----
REORGANIZATION AGREEMENT
Dated as of March 15, 2000
by and between
BAXTER INTERNATIONAL INC.
and
EDWARDS LIFESCIENCES CORPORATION
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ARTICLE I - DEFINITIONS AND INTERPRETATION................................... 2
1.1. Definitions.......................................................... 2
1.2. Interpretation....................................................... 19
ARTICLE II - THE DISTRIBUTION................................................ 20
2.1. Issuance and Delivery of Edwards Shares.............................. 21
2.2. Distribution of Edwards Shares....................................... 21
2.3. Treatment of Fractional Shares....................................... 21
2.4. Baxter Board Action.................................................. 21
2.5. Additional Approvals................................................. 22
ARTICLE III - FOREIGN TRANSFERS.............................................. 22
3.1. Edwards World Trade.................................................. 22
3.2. Puerto Rico (936).................................................... 22
3.3. Puerto Rico (MS&P)................................................... 23
3.4. Dominican Republic................................................... 24
3.5. Mexico............................................................... 24
3.6. Brazil............................................................... 25
3.7. Canada............................................................... 25
3.8. China................................................................ 26
3.9. Taiwan............................................................... 26
3.10. Singapore and the Philippines........................................ 27
3.11. Malaysia............................................................. 27
3.12. Thailand............................................................. 28
3.13. Korea................................................................ 28
3.14. India................................................................ 28
3.15. Intentionally Blank.................................................. 29
3.16. Switzerland.......................................................... 29
3.17. EU Holdings (Denmark)................................................ 30
3.18. Germany.............................................................. 31
3.19. Austria.............................................................. 32
3.20. France............................................................... 33
3.21. Italy................................................................ 33
3.22. Belgium/Luxembourg................................................... 34
3.23. Netherlands.......................................................... 34
3.24. Uden................................................................. 35
3.25. Spain................................................................ 35
3.26. United Kingdom....................................................... 36
3.27. Restrictions on Intercompany Debt.................................... 36
3.28. Transfer of Assets................................................... 37
3.29. Transfer of Liabilities.............................................. 37
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3.30. Transfer of Edwards World Trade to Baxter............................ 37
3.31. Edwards Holdings Switzerland......................................... 37
ARTICLE IV - TRANSFERS TO EDWARDS U.S. OPERATING SUBSIDIARY.................. 37
4.1. Organization of Edwards U.S. Operating Subsidiary.................... 37
4.2. Transfer of Assets................................................... 38
4.3. Transfer of Third-Party Distribution Contracts....................... 38
4.4. Assumption of Liabilities............................................ 38
4.5. Transfer of Operating Subsidiaries................................... 38
ARTICLE V - ORGANIZATION OF EDWARDS LIFESCIENCES CORPORATION................. 38
5.1. Organization of Edwards.............................................. 38
5.2. Transfer of Certain Subsidiaries..................................... 39
5.3. Transfer of Assets................................................... 39
5.4. Transfer of Liabilities.............................................. 39
ARTICLE VI - EXCLUSIONS FROM TRANSFERS....................................... 39
6.1. Retained Assets...................................................... 39
6.2. Retained Liabilities................................................. 40
6.3. Termination of Existing Intercompany Agreements...................... 40
ARTICLE VII - ASSET SEPARATION CLOSING MATTERS............................... 41
7.1. Delivery of Instruments of Conveyance................................ 41
7.2. Delivery of Other Agreements......................................... 41
7.3. Non-Assignable Contracts............................................. 41
7.4. Further Assurances................................................... 42
7.5. Novation of Assumed Liabilities...................................... 43
7.6. Nominee Shares....................................................... 43
7.7. Provision of Corporate Records....................................... 43
ARTICLE VIII - REPRESENTATIONS AND WARRANTIES................................ 44
8.1. Organization, Good Standing and Authority of Baxter.................. 44
8.2. Organization, Good Standing and Authority of Edwards................. 44
8.3. No Other Representations and Warranties.............................. 44
ARTICLE IX - CERTAIN COVENANTS............................................... 45
9.1. Conduct of Edwards Business Pending the Distribution Date............ 45
9.2. Registration and Listing............................................. 45
9.3. Funds Distributed to Baxter.......................................... 46
9.4. Post-Distribution Tax-Related Restrictions........................... 46
9.5. Intercompany Receivables and Payables, Cash Management and True-Up... 47
9.6. Collection of Accounts Receivable.................................... 48
9.7. Agreements Relating to Baxter and Edwards............................ 48
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9.8. Certain Releases..................................................... 49
9.9. Litigation........................................................... 49
9.10. Liability for Previously Delivered Products.......................... 49
9.11. Edwards Bank Accounts................................................ 51
9.12. Informal, Nondocumented Real Estate Leases........................... 51
9.13. Third Party Consents................................................. 52
9.14. Material Governmental Approvals and Consents......................... 52
9.15. Late Payments........................................................ 52
9.16. Nextran Heart........................................................ 52
ARTICLE X - INTELLECTUAL PROPERTY LICENSES................................... 52
10.1. License to Baxter of Transferred Intellectual Property............... 52
10.2. License to Edwards of Retained Baxter Intellectual Property.......... 54
10.3. Use by Edwards of Baxter's Trademarks................................ 56
10.3. Use by Edwards of Baxter's Trademarks................................ 56
ARTICLE XI - CONDITIONS TO THE DISTRIBUTION.................................. 57
11.1. Approval by Baxter Board of Directors................................ 57
11.2. Receipt of IRS Private Letter Tax Ruling............................. 57
11.3. Compliance with State and Foreign Securities and..................... 57
11.4. SEC Filings and Approvals............................................ 58
11.5. Filing and Effectiveness of Registration Statement; No Stop Order.... 58
11.6. Approval of NYSE Listing Application................................. 58
11.7. Receipt of Fairness Opinions of Financial Advisors................... 58
11.8. Ancillary Agreements................................................. 58
11.9. Resignations......................................................... 58
11.10. Election of Edwards Board............................................ 58
11.11. Consents............................................................. 58
11.12. No Actions........................................................... 59
11.13. New Credit Facility.................................................. 59
11.14. Consummation of Pre-Distribution Transactions........................ 59
11.15. No Other Events...................................................... 59
11.16. Satisfaction of Conditions........................................... 59
ARTICLE XII - EMPLOYEES AND EMPLOYEE BENEFIT MATTERS......................... 59
12.1. Edwards Employees.................................................... 59
12.2. Employment of Edwards Employees...................................... 59
12.3. Terminations/Layoff/Severance........................................ 60
12.4. International Edwards Employees...................................... 60
12.5. Employment Solicitation.............................................. 60
12.6. WARN Act............................................................. 61
12.7. Leave of Absence Policies............................................ 61
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12.8. Withdrawal from Participation in Baxter Plans and
Establishment of Edwards Plans....................................... 62
12.9. Transfer of Account Balances and Accrued Benefits.................... 62
12.10. Entitlement to Distributions Under Pension Plan...................... 64
12.11. Welfare Benefits Provided Under Edwards Plans........................ 64
12.12. Stock Purchase Plans................................................. 65
12.13. Workers' Compensation................................................ 65
12.14. Vacation Pay Policy.................................................. 65
12.15. Non-Qualified Deferred Compensation Plans............................ 65
12.16. Split-Dollar Life Insurance.......................................... 65
12.17. Restricted Stock..................................................... 65
12.18. Information to be Provided to Baxter................................. 65
12.19. Corporate Action; Delegation of Authority............................ 66
12.20. Transfer of Employee Files........................................... 66
ARTICLE XIII - INSURANCE MATTERS............................................. 66
13.1. Insurance Prior to the Distribution Date............................. 66
13.2. Ownership of Existing Policies and Programs.......................... 66
13.3. Procurement of Insurance for Edwards................................. 66
13.4. Acquisition and Maintenance of Post-Distribution
Edwards Insurance Policies and Programs.............................. 67
13.5. Edwards Directors' and Officers' Insurance........................... 67
13.6. Pre-Distribution Insurance Claims Administration..................... 68
13.7 Post-Distribution Insurance Claims Administration.................... 68
13.8. Non-Waiver of Rights to Coverage..................................... 69
13.9. Scope of Affected Policies of Insurance.............................. 69
ARTICLE XIV - EXPENSE AND TAX MATTERS........................................ 69
14.1. Allocation of Expenses............................................... 69
14.2. Allocation of Taxes.................................................. 70
ARTICLE XV - RELEASE AND INDEMNIFICATION..................................... 70
15.1. Release of Pre-Distribution Claims................................... 70
15.2. Indemnification by Edwards........................................... 72
15.3. Indemnification by Baxter............................................ 73
15.4. Applicability of and Limitation on Indemnification................... 74
15.5. Adjustment of Indemnifiable Losses................................... 74
15.6. Procedures for Indemnification of Third Party Claims................. 76
15.7. Procedures for Indemnification of Direct Claims...................... 77
15.8. Contribution......................................................... 78
15.9. No Third-Party Beneficiaries......................................... 78
15.10. Remedies Cumulative.................................................. 78
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15.11. Survival............................................................. 78
ARTICLE XVI - DISPUTE RESOLUTION............................................. 78
16.1. General.............................................................. 78
16.2. Escalation........................................................... 79
16.3. Arbitration.......................................................... 79
16.4. Procedures........................................................... 79
16.5. Injunctive Relief.................................................... 80
ARTICLE XVII - ACCESS TO INFORMATION AND SERVICES............................ 80
17.1. Access to Financial Information...................................... 80
17.2. Ownership of Information............................................. 81
17.3. Compensation for Providing Information............................... 81
17.4. Retention of Records................................................. 81
17.5. Limitations.......................................................... 81
17.6. Production of Witnesses.............................................. 82
17.7. Confidentiality...................................................... 82
17.8. Privileged Matters................................................... 83
ARTICLE XVIII - MISCELLANEOUS................................................ 84
18.1. Entire Agreement..................................................... 84
18.2. Choice of Law and Forum.............................................. 84
18.3. Amendment............................................................ 84
18.4. Waiver............................................................... 84
18.5. Partial Invalidity................................................... 85
18.6. Execution in Counterparts............................................ 85
18.7. Successors and Assigns............................................... 85
18.8. Third Party Beneficiaries............................................ 85
18.9. Notices.............................................................. 85
18.10. Performance.......................................................... 86
18.11. Force Majeure........................................................ 86
18.12. No Public Announcement............................................... 86
18.13. Termination.......................................................... 86
</TABLE>
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<PAGE>
EXHIBITS
- --------
Exhibit A - Edwards Business
Exhibit B - Implementation Agreements
Exhibit C - Operating Agreements
Exhibit D - Tax Sharing Agreement
Exhibit E - Amended and Restated Certificate of Incorporation of Edwards
Exhibit F - Amended and Restated By-laws of Edwards
Exhibit G - Form of Edwards Stockholder Rights Plan
Exhibit H - Board of Directors of Edwards
SCHEDULES
- ---------
Schedule 1.1(b) - BHC Loans
Schedule 1.1(f) - CERCLA and OSHA Liabilities
Schedule 1.1(g) - Other Assumed Environmental Liabilities
Schedule 1.1(l) - Guarantees and Letters of Credit
Schedule 1.1(m) - Indemnification Agreements
Schedule 1.2(d) - Owned Real Property
Schedule 1.2(e) - Real Property Leases
Schedule 1.2(g)(ii) - Patents
Schedule 1.2(g)(iv) - Trademarks
Schedule 1.2(h)(i) - Contracts Related to Acquisitions or Divestitures
Schedule 1.2(h)(ii) - Customer Contracts
Schedule 1.2(h)(iv) - Government Contracts
Schedule 1.2(h)(v) - Supplier Contracts
Schedule 1.2(h)(vi) - Joint Development and Confidentiality Contracts
Schedule 1.2(h)(vii) - Consulting Contracts
Schedule 1.2(h)(viii) - Distribution Contracts
Schedule 1.2(h)(xi) - Personal Property Leases
Schedule 1.2(h)(xii) - Derivatives Contracts
Schedule 1.2(h)(xiii) - Other Contracts
Schedule 1.2(i) - Permits and Licenses
Schedule 1.2(j) - Claims and Indemnities
Schedule 1.2(k) - Subsidiaries, Joint Ventures and Minority Interests
Schedule 1.2(n) - Intellectual Property Licenses
Schedule 1.2(o) - Software and Software Contracts
Schedule 1.2(p) - Domain Names
Schedule 1.2(q) - Other Assets
Schedule 3.1 - Timing of Foreign Transfers
Schedule 4.3 - Foreign Subsidiaries' Third-Party Distribution Contracts
Schedule 6.1(h) - Baxter Distribution Countries
Schedule 6.2 - Retained Liabilities
Schedule 6.3 - Surviving Intercompany Agreements
Schedule 9.3 - Funds Distributed to Baxter
Schedule 9.7 - Shared Agreements
Schedule 9.9(a) - Assumed Actions
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<PAGE>
Schedule 9.9(b) - Transferred Actions
Schedule 9.11 - Transferred Bank Accounts
Schedule 10.2(a) - Licensed Baxter Intellectual Property
Schedule 12.1 - Edwards Employees
Schedule 12.4 - Calculation of Edwards Foreign Employees' Pension Benefits
-vii-
<PAGE>
REORGANIZATION AGREEMENT
------------------------
REORGANIZATION AGREEMENT, dated as of March 15, 2000, by and between
Baxter International Inc., a Delaware corporation ("Baxter"), and Edwards
------
Lifesciences Corporation, a Delaware corporation ("Edwards") which is, as of the
-------
date hereof, a wholly-owned Subsidiary (as hereinafter defined) of Baxter.
WHEREAS, Baxter, through its Subsidiaries, provides, inter alia, a
comprehensive line of therapies and services to treat late-stage cardiovascular
disease (as more fully described in Exhibit A hereto, the "Edwards Business");
--------- ----------------
WHEREAS, the Board of Directors of Baxter has determined that it would
be advisable and in the best interests of Baxter and its stockholders for Baxter
to transfer to Edwards and/or one or more of its Subsidiaries the business,
operations, assets and liabilities related to the Edwards Business;
WHEREAS, Baxter has agreed to transfer and assign, or cause to be
transferred and assigned, to Edwards or one or more of its Subsidiaries
substantially all of the assets and properties related to the Edwards Business
held by Baxter, Baxter Healthcare Corporation, a Delaware corporation ("BHC")
---
and a wholly-owned Subsidiary of Baxter, and, subject to certain exceptions,
certain other Subsidiaries of Baxter, and Edwards has agreed to assume, or cause
to be assumed by one or more of its Subsidiaries, certain liabilities and
obligations arising out of or relating to the Edwards Business;
WHEREAS, the Board of Directors of Baxter has determined that it would
be advisable and in the best interests of Baxter and its stockholders for Baxter
to distribute on a pro-rata basis to the holders of record of Baxter common
stock, par value $1.00 per share (the "Baxter Common Stock"), without any
-------------------
consideration being paid by such holders, all of the outstanding shares of
Edwards common stock, par value $1.00 per share (the "Edwards Common Stock")
--------------------
owned directly and indirectly by Baxter (the "Distribution");
------------
WHEREAS, for United States federal income tax purposes, the
Distribution is intended to qualify as a tax-free spin-off within the meaning of
Sections 355 and 368(a)(1)(D) of the United States Internal Revenue Code of
1986, as amended (the "Code"); and
----
WHEREAS, it is appropriate and desirable to set forth the principal
corporate transactions required to effect the Distribution and certain other
agreements that will govern the relationship of Baxter and Edwards following the
Distribution;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements hereinafter set forth, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, Baxter and Edwards
agree as follows:
<PAGE>
ARTICLE I
DEFINITIONS AND INTERPRETATION
------------------------------
1.1. Definitions. In this Agreement, the following terms have the
-----------
meanings specified or referred to in this Section 1.1:
-----------
"Act" has the meaning specified in Section 9.10(a).
--- ---------------
"Action" means any action, claim, suit, arbitration, inquiry,
------
subpoena, discovery request, proceeding or investigation by or before any court
or grand jury, any governmental or other regulatory or administrative entity,
agency or commission or any arbitration tribunal.
"Active Edwards Employees" means any regular full-time or part-time
------------------------
employee of Baxter or one of its Subsidiaries who commences employment with
Edwards or one of its Subsidiaries on the Distribution Date.
"Actually Using" has the meaning specified in Section 10.1(a).
-------------- ---------------
"Affiliate" means, with respect to any Person, any other Person that
---------
directly or indirectly controls, is controlled by or is under common control
with such Person. For the purpose of this definition, the term "control" means
the power to direct the management of an entity, directly or indirectly, whether
through the ownership of voting securities, by contract or otherwise; and the
term "controlled" has the meaning correlative to the foregoing. After the
Distribution Date, Edwards and Baxter shall not be deemed to be under common
control for purposes hereof due solely to the fact that Edwards and Baxter have
common stockholders.
"Anasco Division" has the meaning specified in Section 3.2.
--------------- -----------
"Assumed Actions" has the meaning specified in Section 9.9(a).
--------------- --------------
"Assumed Liabilities" means all contractual and other Liabilities of
-------------------
Baxter or any of its Subsidiaries (excluding the Retained Liabilities) arising
out of or relating to the Edwards Business, any Divested Business and/or any of
the past or present facilities of Baxter or any of its Subsidiaries used
primarily in connection with the Edwards Business or any Divested Business,
whether due or to become due, including:
(a) All Liabilities (excluding, except as provided in subparagraph (b)
below, Loans owed to Baxter or any of its Subsidiaries) that are reflected,
disclosed or reserved for on the Balance Sheet, as such Liabilities may be
increased or decreased in the operation of the Edwards Business from the
date of the Balance Sheet through the Distribution Date in the ordinary
course of business consistent with past practice;
(b) The Loans set forth on Schedule 1.1(b) hereto; [DETAILS OF DEBT
---------------
PUSHDOWN TO COME FROM ANDY GORE, BOB HOMBACH AND DOUG SHUMA]
-2-
<PAGE>
(c) All Liabilities under or related to the Real Estate Leases and the
Edwards Contracts, such assumption to occur as (i) assignee if such Real
Estate Leases and Edwards Contracts are assignable and are assigned or
otherwise transferred to Edwards or one of its Subsidiaries, or (ii)
subcontractor, sublessee or sublicensee as provided in Section 7.3 below if
-----------
assignment of such Real Estate Leases and Edwards Contracts and/or the
proceeds thereof is prohibited by law, by the terms thereof or not
permitted by the other contracting party;
(d) All warranty, performance and similar obligations entered into or
made prior to the Distribution Date with respect to the products or
services of the Edwards Business;
(e) All Liabilities related to any and all Actions asserting a
violation of any law, rule or regulation related to or arising out of the
operations of the Edwards Business, whether before or after the
Distribution Date and the Liabilities relating to any Assumed Actions (as
hereinafter defined);
(f) All Liabilities arising under (i) CERCLA and any other foreign,
federal, state or local laws regarding the management, control and clean-up
of hazardous materials (including off-site waste disposal liabilities) or
(ii) the Occupational Safety and Health Act or similar state laws or
regulations, in either case relating to or arising out of the operations of
the Edwards Business, whether before or after the Distribution Date,
including those set forth on Schedule 1.1(f) hereto;
---------------
(g) All environmental Liabilities relating to facilities transferred
to Edwards or one of its Subsidiaries in fee or by way of an assignment of
a lease or sublease from a third party, including those set forth on
Schedule 1.1(g) hereto;
---------------
(h) All Liabilities in connection with claims of past or current
employees of the Edwards Business, whether incurred prior to, on or after
the Distribution Date;
(i) All Liabilities under any mortgage interest subsidy program on
behalf of any Edwards Employee; [MARY BARKER AND ROB REINDL]
(j) All Liabilities associated with the transfer of assets from the
Baxter Savings Plan to the Edwards Savings Plan;
(k) All Liabilities related to the Transferred Intellectual Property
included as part of the Transferred Assets;
(l) All Liabilities under each of the guarantees and letters of credit
set forth on Schedule 1.1(l) hereto; [BOB HOMBACH]
---------------
(m) All liabilities under the indemnification agreements set forth on
Schedule 1.1(m);
---------------
(n) All Liabilities for property taxes with respect to any of the
Transferred Assets;
-3-
<PAGE>
(o) [All Liabilities for deferred taxes with respect to the Edwards
Business]; and
(p) All other Liabilities (other than the Retained Liabilities)
relating to the Edwards Business or any Divested Business, whether existing
on the date hereof or arising at any time or from time to time after the
date hereof, and whether based on circumstances, events or actions arising
heretofore or hereafter, whether or not such Liabilities shall have been
disclosed herein, and whether or not reflected on the books and records of
Baxter or Edwards or the Balance Sheet.
"Balance Sheet" has the meaning specified in paragraph (a) of the
-------------
definition of "Transferred Assets."
"Baxter" has the meaning specified in the first paragraph of this
------
Agreement.
"Baxter Alaska" has the meaning specified in Section 3.2.
------------- -----------
"Baxter Austria" has the meaning specified in Section 3.19.
-------------- ------------
"Baxter Asia" has the meaning specified in Section 3.10.
----------- ------------
"Baxter Belgium" has the meaning specified in Section 3.22.
-------------- ------------
"Baxter Cafeteria Plans" means the Baxter International Inc. Flexible
----------------------
Benefits Plan, the Baxter International Inc. Health Care Reimbursement Plan and
the Baxter International Inc. Dependent Care Reimbursement Plan.
"Baxter Canada" has the meaning specified in Section 3.7.
------------- -----------
"Baxter China" has the meaning specified in Section 3.8.
------------ -----------
"Baxter Common Stock" has the meaning specified in the fifth paragraph
-------------------
of this Agreement.
"Baxter Edwards" means Baxter Edwards AG, a company organized under
--------------
the laws of Switzerland.
"Baxter Export Corporation" means Baxter Export Corporation, a Nevada
-------------------------
corporation.
"Baxter France " has the meaning specified in Section 3.20.
------------- ------------
"Baxter Germany" means Baxter Deutschland GmbH, a German limited
--------------
company and a wholly-owned Subsidiary of Baxter Germany Holdings.
"Baxter Germany Holdings" means Baxter Deutschland Holding GmbH, a
-----------------------
German limited company and a wholly-owned Subsidiary of Baxter World Trade.
-4-
<PAGE>
"Baxter Group Member" means Baxter and (a) any corporation that is a
-------------------
member of the same controlled group of corporations (within the meaning of
Section 414(b) of the Code) as Baxter; (b) a trade or business (whether or not
incorporated) under common control (within the meaning of Section 414(c) of the
Code) with Baxter; (c) any organization (whether or not incorporated) that is a
member of an affiliated service group (within the meaning of Section 414(m) of
the Code) that includes Baxter, a corporation described in clause (a) of this
definition or a trade or business described in clause (b) of this definition or
(d) any other entity that is required to be aggregated with Baxter pursuant to
regulations promulgated under Section 414(o) of the Code.
"Baxter Hospitilar" means Baxter Hospitilar Ltda., a company organized
-----------------
under the laws of Brazil.
"Baxter Indemnified Parties" has the meaning specified in Section
-------------------------- -------
15.2.
- ----
"Baxter Italy" has the meaning specified in Section 3.21.
------------ ------------
"Baxter Japan" means Baxter Limited, a Japanese corporation.
------------
"Baxter Korea" has the meaning specified in Section 3.13.
------------ ------------
"Baxter Marks" has the meaning specified in Section 10.4.
------------ ------------
"Baxter Mexico" has the meaning specified in Section 3.5.
------------- -----------
"Baxter Netherlands" has the meaning specified in Section 3.23.
------------------ ------------
"Baxter Panama" has the meaning specified in Section 3.4.
------------- -----------
"Baxter Pension Plan" has the meaning specified in Section 12.10.
------------------- -------------
"Baxter Pharmacy Services" means Baxter Pharmacy Services Corporation,
------------------------
a Delaware corporation.
"Baxter Philippines" has the meaning specified in Section 3.10.
------------------ ------------
"Baxter Plans" has the meaning specified in Section 12.8(a).
------------ ---------------
"Baxter Policy" and "Baxter Policies" have the meanings specified in
------------- ---------------
Section 13.2.
- ------------
"Baxter PR Pension Plan" has the meaning specified in Section 12.9(c).
---------------------- ---------------
"Baxter PR Savings Plan" has the meaning specified in Section 12.9(b).
---------------------- ---------------
"Baxter Products" means those products manufactured by Baxter or its
---------------
Subsidiaries (as they would exist immediately following the Distribution Date)
(except for products manufactured for Edwards or its Subsidiaries by Baxter or
its Subsidiaries pursuant to
-5-
<PAGE>
the Manufacturing Contracts but including those products manufactured for Baxter
and its Subsidiaries by Edwards or its Subsidiaries pursuant to the
Manufacturing Contracts).
"Baxter Retiree Welfare Plan" means the Baxter Retiree Medical Plan
---------------------------
and the post-retirement life insurance portion of the Baxter Group Term Life
Insurance Plan.
"Baxter Sales and Distribution" shall have the meaning specified in
-----------------------------
Section 3.3.
- -----------
"Baxter Savings Plan" has the meaning specified in Section 12.9(a).
------------------- ---------------
"Baxter Severance Pay Plan" means the Baxter International Inc. and
-------------------------
Subsidiaries Severance Pay Plan.
"Baxter Share" means one share of Baxter Common Stock.
------------
"Baxter Spain" has the meaning specified in Section 3.25.
------------ ------------
"Baxter Stock Purchase Plan" means the Baxter International Inc.
--------------------------
Employee Stock Purchase Plan for United States Employees.
"Baxter Taiwan" has the meaning specified in Section 3.9.
------------- -----------
"Baxter Thailand" has the meaning specified in Section 3.12.
--------------- ------------
"Baxter U.K." has the meaning specified in Section 3.26.
----------- ------------
"Baxter Welfare Plans" means the Baxter Medical Plan, the Baxter Long-
--------------------
Term Disability Plan, the Baxter Personal Accident Insurance Plan, the Baxter
Business Travel Accident Insurance Plan, the Baxter Group Universal Life
Insurance Plan and the Baxter Cafeteria Plans.
"Baxter Woodlands" means Baxter Healthcare Pte. Ltd. (Singapore), a
----------------
company organized under the laws of Singapore.
"Baxter World Trade" has the meaning specified in Section 3.1.
------------------ -----------
"BCPL" means Baxter Cardiovascular Private Limited, a company
----
organized under the laws of India.
"BHC" has the meaning specified in the fourth paragraph of this
---
Agreement.
"BIPL" means Baxter (India) Private Limited, a company organized under
----
the laws of India.
"BPCL" means Baxter Participacoes e Commercial Ltda., a company
----
organized under the laws of Brazil.
"BRL" means Baxter Representacoes Ltda., a company organized under the
---
laws of Brazil.
-6-
<PAGE>
"Board of Directors" means the board of directors of the referenced
------------------
corporation or any duly authorized committee thereof.
"CERCLA" means the Comprehensive Environmental Response, Compensation
------
and Liability Act, as amended.
"Code" has the meaning specified in the sixth paragraph of this
----
Agreement.
"Contracts" has the meaning specified in paragraph (h) of the
--------- ---
definition of "Transferred Assets.
"Conveyancing Instruments" has the meaning specified in Section 7.1.
------------------------ -----------
"Copyrights" means United States and foreign copyrights, both
----------
registered and unregistered, along with the registrations and applications to
register any such copyrights.
"CPR" means the Center for Public Resources Institute for Dispute
---
Resolution.
"Distribution" has the meaning specified in the fifth paragraph of
------------
this Agreement.
"Distribution Date" means the date determined by the Board of
-----------------
Directors of Baxter as the date on which the Edwards Shares are distributable to
holders of record of Baxter Common Stock as of the Record Date.
"Divested Business" means any business primarily related to the
-----------------
Edwards Business that was divested by Baxter or any of its Subsidiaries at any
time prior to the Distribution Date, including any business divested pursuant to
any of the agreements listed on Schedule 1.2(h)(i) as "Divestitures."
------------------
"Edwards" has the meaning specified in the first paragraph of this
-------
Agreement.
"Edwards Austria" has the meaning specified in Section 3.19(a).
--------------- ---------------
"Edwards Belgium" has the meaning specified in Section 3.22(a).
--------------- ---------------
"Edwards Business" has the meaning specified in the second paragraph
----------------
of this Agreement.
"Edwards Canada" has the meaning specified in Section 3.7(a).
-------------- --------------
"Edwards Common Stock" has the meaning specified in the fifth
--------------------
paragraph of this Agreement.
"Edwards Contracts" has the meaning specified in paragraph (h) of the
----------------- ---
definition of "Transferred Assets".
"Edwards Credit Facility" has the meaning specified in Section 9.3.
----------------------- -----------
-7-
<PAGE>
"Edwards Deferred Compensation Plan" has the meaning specified in
----------------------------------
Section 12.8(b).
- ---------------
"Edwards Distributable Share" means for each holder of record of
---------------------------
Baxter Common Stock as of the Record Date one (1) Edwards Share for every five
(5) Baxter Shares outstanding and held of record by such holder as of the Record
Date.
"Edwards Dominican Republic" has the meaning specified in Section
-------------------------- -------
3.4(a).
- ------
"Edwards Employees" has the meaning specified in Section 12.1.
----------------- ------------
"Edwards EU Holdings" has the meaning specified in Section 3.17(a).
------------------- ---------------
"Edwards Foreign Employees" has the meaning specified in Section 12.4.
------------------------- ------------
"Edwards Foreign Entity" means any Subsidiary of Baxter that is
----------------------
located or incorporated in a jurisdiction outside the United States and will,
upon consummation of the transactions contemplated by this Agreement, become a
Subsidiary of Edwards.
"Edwards France" has the meaning specified in Section 3.20(a).
-------------- ---------------
"Edwards Germany" has the meaning specified in Section 3.18(b)(i).
--------------- ------------------
"Edwards Germany Holdings" has the meaning specified in Section
------------------------ -------
3.18(a)(i).
- ----------
"Edwards Holdings Switzerland" has the meaning specified in Section
---------------------------- -------
3.15.
- ----
"Edwards Indemnified Parties" has the meaning specified in Section
--------------------------- -------
15.3.
- ----
"Edwards Italy" has the meaning specified in Section 3.21(a).
------------- ---------------
"Edwards Korea" has the meaning specified in Section 3.13(a).
------------- ---------------
"Edwards Lifesciences AG" has the meaning specified in Section
----------------------- -------
3.16(a)(i).
- ----------
"Edwards LLC" has the meaning specified in Section 4.1(a).
----------- --------------
"Edwards Mexico" has the meaning specified in Section 3.5(a).
-------------- --------------
"Edwards Netherlands" has the meaning specified in Section 3.23(a).
------------------- ---------------
"Edwards PR Employees" has the meaning specified in Section 12.9(b).
-------------------- ---------------
"Edwards Products" means those products manufactured by Edwards or its
----------------
Subsidiaries (as they would exist immediately following the Distribution Date)
(excluding products manufactured for Baxter and its Subsidiaries by Edwards or
its Subsidiaries pursuant to the Manufacturing Contracts but including those
products manufactured for Edwards and its Subsidiaries by Baxter or its
Subsidiaries pursuant to the Manufacturing Contracts).
-8-
<PAGE>
"Edwards Puerto Rico (936)" has the meaning specified in Section
------------------------- -------
3.2(a).
- ------
"Edwards Puerto Rico (MS&P)" has the meaning specified in Section
-------------------------- -------
3.3(a).
- ------
"Edwards Savings Plan" has the meaning specified in Section 12.8(b).
-------------------- ---------------
"Edwards Severance Plan" has the meaning specified in Section 12.8(b).
---------------------- ---------------
"Edwards Share" means one share of Edwards Common Stock.
-------------
"Edwards Spain" has the meaning specified in Section 3.25(a).
------------- ---------------
"Edwards Stock Purchase Plan" means the Edwards Lifesciences
---------------------------
Corporation Employee Stock Purchase Plan for United States Employees.
"Edwards Swiss Commissionaire" has the meaning specified in Section
---------------------------- -------
3.16(b)(i).
- ----------
"Edwards Uden" has the meaning specified in Section 3.24(a).
------------ ---------------
"Edwards UK" has the meaning specified in Section 3.26(a).
---------- ---------------
"Edwards U.S." has the meaning specified in Section 4.1(b).
------------ --------------
"Edwards Welfare Plans" has the meaning specified in Section 12.8(b).
--------------------- ---------------
"Edwards World Trade" has the meaning specified in Section 3.1.
------------------- -----------
"Escalation Notice" has the meaning specified in Section 16.2(a).
----------------- ---------------
"Exchange Act" means the Securities Exchange Act of 1934, as amended
------------
(together with the rules and regulations promulgated thereunder).
"Exclusively" (and, with correlative meaning, "Exclusive") means, when
----------- ---------
used in connection with the Edwards Business, used only with or relating only to
the Edwards Business.
"Expenses" means any and all expenses incurred in connection with
--------
investigating, defending or asserting any claim, action, suit or proceeding
incident to any matter indemnified against hereunder (including court filing
fees, court costs, arbitration fees or costs, witness fees, and reasonable fees
and disbursements of legal counsel, investigators, expert witnesses,
consultants, accountants and other professionals).
"F.R.C.P." has the meaning specified in Section 16.4.
-------- ------------
"Foreign Exchange Rate" means, with respect to any currency other than
---------------------
United States dollars, as of any date of determination, the average of the
opening bid and asked rates on such date at which such currency may be exchanged
for United States dollars as quoted by Bank One, NA.
-9-
<PAGE>
"Foreign Subsidiaries" has the meaning specified in Section 4.4.
-------------------- -----------
"Governmental Authority" means any foreign, federal, state, local or
----------------------
other government, governmental, statutory or administrative authority,
regulatory body or commission or any court, tribunal or judicial or arbitral
body.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
-------
1976, as amended, and the regulations promulgated thereunder.
"Implementation Agreements" means the agreements set forth in Exhibit
------------------------- -------
B hereto implementing the transactions referred to in Articles III, IV and V.
- - ------------ -- -
"Inactive Employee" means any employee of Baxter or one of its
-----------------
Subsidiaries who immediately prior to the Distribution Date is on an approved
medical leave of absence or short-term disability leave or is absent from active
employment due to occupational illness or injury covered by workers'
compensation, but excluding any employee who is classified by Baxter or any of
its Subsidiaries as totally and permanently disabled on the Distribution Date
who is not on workers' compensation.
"Indemnified Party" has the meaning specified in Section 15.5(a).
----------------- ---------------
"Indemnifying Party" has the meaning specified in Section 15.5(a).
------------------ ---------------
"Indemnity Payment" has the meaning specified in Section 15.5(a).
----------------- ---------------
"Information" has the meaning specified in Section 17.1(a).
----------- ---------------
"Information Statement" has the meaning specified in Section 9.2(a).
--------------------- --------------
"Insurance Amount" has the meaning specified in Section 13.5.
---------------- ------------
"Insurance Charges" has the meaning specified in Section 13.7.
----------------- ------------
"Insurance Policies" means the insurance policies written by insurance
------------------
carriers unaffiliated with Baxter pursuant to which Edwards or one or more of
its Subsidiaries (or their respective officers or directors) will be insured
parties after the Distribution Date.
"Insurance Proceeds" means those monies (i) received by an insured
------------------
from an insurance carrier, (ii) paid by an insurance carrier on behalf of the
insured or (iii) received from any third Person in the nature of insurance,
contribution or indemnification in respect of any Liability, in each such case
net of any applicable premium adjustments (including reserves and
retrospectively rated premium adjustments) and net of any costs or expenses
(including allocated costs of in-house counsel and other personnel) incurred in
the collection thereof.
"Insured Claims" means those liabilities that, individually or in the
--------------
aggregate, are covered within the terms and conditions of any of the Baxter
Policies, whether or not subject to deductibles, co-insurance, uncollectability,
premium adjustments (including reserves),
-10-
<PAGE>
retrospectively-rated premium adjustments or retentions, but only to the extent
that such liabilities are within applicable Baxter Policy limits, including
aggregates and deductibles.
"Intellectual Property" means (a) Copyrights; (b) Patents; (c)
---------------------
Trademarks; (d) business and non-technical information; (e) non-patented or non-
patentable technical information, inventions, processes and formulations; and
(g) discoveries, trade secrets, know-how and technical data.
"Intercompany Agreements" means any Contract between Baxter and
-----------------------
Edwards entered into on or before the Distribution Date.
"Intercompany Receivables and Payables" means any intercompany
-------------------------------------
receivables and payables (other than Loans) arising in the ordinary course of
business.
"IRS" means the Internal Revenue Service.
---
"Kits" means an aggregation by Edwards or Baxter of Baxter, Edwards
----
and/or third-party products packaged together or repackaged for specific uses
and procedures.
"Liability" means any and all debts, liabilities and obligations,
---------
absolute or contingent, matured or unmatured, liquidated or unliquidated,
accrued or unaccrued, known or unknown, whenever arising (unless otherwise
specified in this Agreement), including all costs and expenses relating thereto,
and including those debts, liabilities and obligations arising under any law,
rule, regulation, Action, threatened Action, order or consent decree of any
Governmental Authority or any award of any arbitrator of any kind, and those
arising under any contract, commitment or undertaking.
"Licensed Baxter Intellectual Property" has the meaning specified in
-------------------------------------
Section 10.2(a).
- ---------------
"Licensed Edwards Intellectual Property" has the meaning specified in
--------------------------------------
Section 10.1(a).
- ---------------
"Loan" means any intercompany indebtedness for borrowed money.
----
"Losses" means any and all losses, costs, obligations, liabilities,
------
settlement payments, awards, judgments, fines, penalties, damages, fees,
expenses, deficiencies, claims or other charges, absolute or contingent, matured
or unmatured, liquidated or unliquidated, accrued or unaccrued, known or unknown
(including the costs and expenses of any and all Actions, threatened Actions,
demands, assessments, judgments, settlements and compromises relating thereto
and attorneys' fees and any and all expenses whatsoever reasonably incurred in
investigating, preparing or defending against any such Actions or threatened
Actions).
"Macchi" has the meaning specified in Section 3.6.
------ -----------
"Manufacturing Contracts" means the agreements set forth in Exhibit C
----------------------- ---------
hereto under the caption "Manufacturing Agreements."
-11-
<PAGE>
"Material Governmental Approvals and Consents" means any material
--------------------------------------------
notices, reports or other filings to be made with or to, or any consents,
registrations, approvals, permits, clearances or authorizations to be obtained
from, any Governmental Authority.
"New Product" means a product that is either (a) based upon the design
-----------
of a product that is manufactured and distributed prior to the Distribution
Date, but the design of which is modified from such pre-existing product by
changing the size or other dimensions, the materials or the manufacturing
process; or (b) a replacement for a product that is manufactured and distributed
prior to the Distribution Date but has an improved feature or property while
retaining the overall functionality of such pre-existing product.
"NYSE" means the New York Stock Exchange, Inc. or any successor
----
thereto.
"Operating Agreements" means the agreements set forth in Exhibit C
-------------------- ---------
hereto regarding the ongoing business and service relationships between Baxter
and Edwards and their respective Affiliates following the Distribution.
"Party" means Baxter or Edwards.
-----
"Pas Palzer KG" has the meaning specified in Section 3.18.
------------- ------------
"Pas Palzer Verwaltungs" has the meaning specified in Section 3.18.
---------------------- ------------
"Patents" means United States and foreign patents and applications for
-------
patents, including any continuations, continuations-in-part, re-examinations,
patents by addition, Supplemental Protection Certificates, patent term
extensions, divisions, renewals, reissues and extensions thereof.
"Person" means any individual, corporation, partnership, joint
------
venture, limited liability company, association, joint-stock company, trust,
unincorporated organization or Governmental Authority.
"Personal Property Leases" has the meaning specified in paragraph
------------------------
(h)(xii) of the definition of "Transferred Assets."
"PR Transferred Accounts" has the meaning specified in Section
----------------------- -------
12.9(b).
- -------
"PR Transferred Accrued Benefits" has the meaning specified in Section
------------------------------- -------
12.9(c).
- -------
"Pre-Distribution Claims Administration" has the meaning specified in
--------------------------------------
Section 13.6.
- ------------
"Prime Rate" means the rate that Bank One, NA (or any successor
----------
thereto or other major money center commercial bank agreed to by the Parties)
announces from time to time as its prime lending rate, as in effect from time to
time.
"Privilege" or "Privileges" has the meaning specified in Section
--------- ---------- -------
17.8(a).
- -------
-12-
<PAGE>
"Privileged Information" has the meaning specified in Section 17.8(a).
---------------------- ---------------
"Products" has the meaning specified in Section 9.10.
-------- ------------
"Real Estate Leases" has the meaning specified in paragraph (e) of the
------------------
definition of "Transferred Assets."
"Receivables" has the meaning specified in paragraph (b)(i) of the
-----------
definition of "Transferred Assets."
"Record Date" means the date determined by the Board of Directors of
-----------
Baxter as the record date for determining stockholders of Baxter entitled to
receive shares of Edwards Common Stock in the Distribution.
"Registration Statement" has the meaning specified in Section 9.2(a).
---------------------- --------------
"Repair or Replacement Period" has the meaning specified in Section
---------------------------- -------
9.10(a).
- -------
"Retained Assets" has the meaning specified in Section 6.1.
--------------- -----------
"Retained Baxter Intellectual Property" means all of the Intellectual
-------------------------------------
Property owned by Baxter or its Subsidiaries as of the Distribution Date other
than the Transferred Intellectual Property.
"Retained Business" means those portions of the business of Baxter and
-----------------
its current Subsidiaries that are not part of the Edwards Business.
"Retained Liabilities" has the meaning specified in Section 6.2.
-------------------- -----------
"Rights Plan" means the rights plan referred to in Section 5.1.
----------- -----------
"SEC" means the United States Securities and Exchange Commission.
---
"Securities Act" means the Securities Act of 1933, as amended
--------------
(together with the rules and regulations promulgated thereunder).
"Security Interest" means any mortgage, security interest, pledge,
-----------------
lien, charge, claim, option, right to acquire, voting or other restriction,
right-of-way, covenant, condition, easement, encroachment, restriction on
transfer or other encumbrance of any nature whatsoever.
"Shared Agreements" has the meaning specified in Section 9.7(a).
----------------- --------------
"Software" means computer software programs, in source code and object
--------
code form, including all related source diagrams, flow charts, specifications,
documentation and all other materials necessary to allow a reasonably skilled
third-party programmer or technician to maintain, support and enhance the
Software.
-13-
<PAGE>
"Subsidiary" means, when used with reference to any Person, any
----------
corporation or other organization whether incorporated or unincorporated of
which at least a majority of the securities or interests having by the terms
thereof ordinary voting power to elect at least a majority of the board of
directors or others performing similar functions with respect to such
corporation or other organization is directly or indirectly owned or controlled
by such Person or by any one or more of its Subsidiaries, or by such Person and
one or more of its Subsidiaries; provided, however, that no Person that is not
-------- -------
directly or indirectly wholly-owned by any other Person shall be a Subsidiary of
such other Person unless such other Person controls, or has the right, power or
ability to control, that Person.
"Swiss Sales Branch" has the meaning, specified in Section 3.16.
------------------ ------------
"Tax" (and, with correlative meaning, "Taxes" and "Taxable") means:
--- ----- -------
(i) any federal, state, local or foreign net income, gross income,
gross receipts, windfall profit, severance, property, production, sales,
use, license, excise, franchise, employment, payroll, withholding,
alternative or add-on minimum, ad valorem, value-added, transfer, stamp, or
environmental tax, or any other tax, custom, duty, governmental fee or
other like assessment or charge of any kind whatsoever, together with any
interest or penalty, addition to tax or additional amount imposed by any
Governmental Authority; and
(ii) any liability of either Party for the payment of amounts with
respect to payments of a type described in clause (i) as a result of being
a member of an affiliated, consolidated, combined or unitary group, or as a
result of any obligation of either Party under any Tax sharing arrangement
or Tax indemnity arrangement.
"Tax Sharing Agreement" means the tax sharing agreement in
---------------------
substantially the form of Exhibit D hereto.
---------
"Third Party Claim" has the meaning specified in Section 15.6(a).
----------------- ---------------
"Third Party Consents" has the meaning specified in Section 9.13.
-------------------- ------------
"Trademarks" means all United States, state and foreign trademarks,
----------
service marks, trade names and service names (including all assumed or
fictitious names under which Baxter is conducting the Edwards Business), whether
registered or unregistered, including all common law rights in and all goodwill
associated with the foregoing, and all registrations and pending applications to
register the foregoing.
"Transaction Taxes" has the meaning specified in Section 14.2.
----------------- ------------
"Transfer Agent" means First Chicago Trust Company of New York, a
--------------
division of EquiServe, the distribution agent appointed by Baxter to distribute
shares of Edwards Common Stock pursuant to the Distribution.
"Transferred Accounts" has the meaning specified in Section 12.9(a).
-------------------- ---------------
-14-
<PAGE>
"Transferred Actions" has the meaning specified in Section 9.9(b).
------------------- --------------
"Transferred Assets" means the tangible and intangible assets,
------------------
properties, rights and interests relating Exclusively to the Edwards Business
(excluding the Retained Assets), including the following:
(a) Balance Sheet Assets. All assets reflected or disclosed on the
---------------------
audited balance sheet of the Edwards Business as of December 31, 1999
contained in the Registration Statement (the "Balance Sheet"), including
-------------
all machinery, equipment, furniture and other tangible personal property,
whether owned or leased, used Exclusively in the operation of the Edwards
Business, subject to acquisitions, dispositions and adjustments in the
ordinary course of the Edwards Business, consistent with past practice,
after such date;
(b) Receivables.
-----------
(i) All accounts receivable, notes receivable, lease receivables,
prepayments (other than prepaid insurance), advances and other
receivables arising out of or produced by the Edwards Business and
owing by any Persons (the "Receivables");
-----------
(ii) all payments received after the Distribution Date on account
of the Receivables;
(iii) all manufacturers' warranties or guarantees related to the
Transferred Assets or related to any of the Assumed Liabilities; and
(iv) any and all manufacturers' or third-party service or
replacement programs relating to the Transferred Assets;
(c) Inventories.
-----------
(i) All work-in-process, finished goods and spare parts inventory
of Edwards Products, other than (x) Edwards Products transferred to
Baxter World Trade or one of its Subsidiaries for distribution outside
the United States pursuant to an arrangement under which title to such
Edwards Products passes to Baxter World Trade or any of its Subsidiaries
(in order to take account of Edwards Products transferred to the books
of Baxter World Trade or its Subsidiaries where such companies are to be
distributing the Edwards Products on behalf of Edwards), and (y) Edwards
Products manufactured by Baxter or one of its Subsidiaries pursuant to
the Manufacturing Contracts and with respect to which title has not yet
passed to Edwards or one of its Subsidiaries pursuant to the terms of
the Manufacturing Contracts;
(ii) all raw materials inventory related to Edwards Products other
than Edwards Products manufactured by Baxter or one of its
Subsidiaries pursuant to the Manufacturing Contracts;
-15-
<PAGE>
(iii) all supplies, packaging and other inventories related to the
Edwards Business but excluding any such items in the possession of
Baxter or one of its Subsidiaries that relate to Edwards Products
manufactured by Baxter or one of its Subsidiaries pursuant to the
Manufacturing Contracts; and
(iv) rights with respect to consignment inventory of Edwards
Products held by others;
(d) Owned Real Property. Those certain parcels of land set forth on
-------------------
Schedule 1.2(d) hereto, together with any and all buildings and other
---------------
structures and improvements thereon, any and all rights and privileges
pertaining thereto or to any of such buildings or other structures or
improvements, including all ownership interests, oil and mineral interests,
water rights, easements, permits, licenses, rights of way, leases, and
purchase and option agreements with respect to real property, and, to the
extent constituting real property, any and all fixtures, machinery,
equipment and other property attached thereto or located thereon (other
than equipment and furniture located in property to be retained by Baxter
or its Subsidiaries hereunder) and all other rights and interests of any
nature in and to any such real estate or other real estate of the Edwards
Business;
(e) Real Property Leases. Those certain real estate leases set forth
--------------------
on Schedule 1.2(e) hereto including any amendments thereto (collectively
---------------
the "Real Estate Leases") and all rights to use the leased premises
------------------
including any and all improvements, fixtures, machinery, equipment and
other property located on the premises demised under such Real Estate
Leases (other than equipment and furniture located in property to be
retained by Baxter or its Subsidiaries hereunder);
(f) Vehicles. All vehicles used Exclusively in connection with the
--------
Edwards Business, whether owned or leased;
(g) Intellectual Property. All of the following Intellectual Property
---------------------
(collectively, the "Transferred Intellectual Property") along with (1) the
---------------------------------
right to sue, recover and retain such recoveries for infringement of the
Transferred Intellectual Property occurring prior to the Distribution Date,
and (2) the right to continue in the name of Baxter any actions for
infringement of the Transferred Intellectual Property pending as of the
Distribution Date and to recover and retain such recoveries therefrom.
(i) All business and non-technical information; non-patented or
non-patentable technical information, inventions, processes and
formulations; and discoveries, trade secrets, know-how and technical
data (A) used Exclusively as of the Distribution Date and made or
conceived by employees, consultants or contractors of Baxter or its
Subsidiaries or any third-party; or (B) to be used Exclusively and to be
made or conceived by third parties pursuant to Contracts with said third
parties;
(ii) All Patents used Exclusively as of the Distribution Date
(including all such Patents set forth on Schedule 1.2(g)(ii) hereto),
-------------------
all other Patents set forth
-16-
<PAGE>
on Schedule 1.2(g)(ii) hereto that are not used Exclusively (if any),
-------------------
and all invention records set forth on Schedule 1.2(g)(ii) hereto;
-------------------
(iii) All Copyrights used Exclusively as of the Distribution Date;
and
(iv) All Trademarks used Exclusively as of the Distribution Date
(including all such Trademarks set forth on Schedule 1.2(g)(iv)), all
-------------------
other Trademarks set forth on Schedule 1.2(g)(iv) that are not used
-------------------
Exclusively (if any), and all common law rights in the EDWARDS, EDWARDS
LABORATORIES, EDLABS, EDWARDS CARDIOVASCULAR SYSTEM, EDWARDS CVS,
EDWARDS CRITICAL CARE, and EDWARDS LIS marks (whether used Exclusively
or not);
(h) Contracts. All contracts, agreements, arrangements, leases (other
---------
than Real Estate Leases), manufacturers' warranties, memoranda,
understandings and offers open for acceptance of any nature, whether
written or oral (the "Contracts") (such Contracts being referred to as the
---------
"Edwards Contracts"):
-----------------
(i) all Contracts related Exclusively to the Edwards Business
related to acquisitions or divestitures of assets or stock, including
Contracts related to the transactions set forth on Schedule 1.2(h)(i)
------------------
hereto, except to the extent any such Contracts relate to the Retained
Business;
(ii) all Contracts with customers Exclusive to the Edwards
Business, including those set forth on Schedule 1.2(h)(ii) hereto;
-------------------
(iii) all customer leases under which the underlying equipment is
the Exclusive marketing responsibility of Edwards;
(iv) all government Contracts Exclusive to the Edwards Business,
including those set forth on Schedule 1.2(h)(iv) hereto;
-------------------
(v) all supplier Contracts Exclusive to the Edwards Business
relating either to raw materials or distributed products, including
those set forth on Schedule 1.2(h)(v) hereto;
------------------
(vi) all joint development and confidentiality Contracts
Exclusive to the Edwards Business, including those set forth on Schedule
--------
1.2(h)(vi) hereto;
----------
(vii) all consulting Contracts Exclusive to the Edwards Business,
including those set forth on Schedule 1.2(h)(vii) hereto;
--------------------
(viii) all third-party distribution Contracts Exclusive to the
Edwards Business, including those set forth on Schedule 1.2(h)(viii)
---------------------
hereto;
(ix) all manufacturing Contracts Exclusive to the Edwards
Business;
-17-
<PAGE>
(x) the Shared Agreements set forth on Schedule 9.7 hereto that
------------
are designated as being assigned to Edwards;
(xi) those certain machinery, equipment or other tangible
personal property leases (the "Personal Property Leases") set forth on
------------------------
Schedule 1.2(h)(xi) hereto;
-------------------
(xii) the Contracts related to derivatives set forth on Schedule
--------
1.2(h)(xii); and
-----------
(xiii) all other Contracts Exclusive to the Edwards Business,
including those set forth on Schedule 1.2(h)(xiii) hereto.
---------------------
(i) Permits and Licenses. All permits, approvals, licenses, franchises,
--------------------
authorizations or other rights granted by any Governmental Authority held
or applied for and that are used Exclusively in the Edwards Business or
that relate Exclusively to the Transferred Assets or any of the Transferred
Subsidiaries, and all other consents, grants and other rights that are used
Exclusively for the lawful ownership of the Transferred Assets or the
operation of the Edwards Business and that are legally transferable
including, in each case, those set forth on Schedule 1.2(i) hereto.
---------------
(j) Claims and Indemnities. All rights, claims, demands, causes of
----------------------
action, judgments, decrees and rights to indemnity or contribution, whether
contractual or otherwise, in favor of Baxter or any of its Subsidiaries
relating Exclusively to the Edwards Business or the Transferred Assets,
including those set forth on Schedule 1.2(j) hereto, including the right to
---------------
sue, recover and retain such recoveries and the right to continue in the
name of Baxter and its Subsidiaries any pending actions relating to the
foregoing, and to recover and retain any damages therefrom, but not
including any such rights, claims, demands, causes of action, judgments,
decrees and rights to indemnity or contribution relating to the Retained
Assets, including in particular any retained third-party distribution
agreements;
(k) Subsidiaries, Joint Ventures and Minority Interests. All shares of
---------------------------------------------------
capital stock or equity or debt or other interests owned by Baxter or its
Subsidiaries in the Subsidiaries, joint ventures and minority investments
set forth on Schedule 1.2(k) hereto;
---------------
(l) Books And Records. All books and records (including all records
-----------------
pertaining to customers, suppliers and personnel), wherever located, that
relate Exclusively to the Edwards Business;
(m) Supplies. All office supplies, production supplies, spare parts,
--------
purchase orders, forms, labels, shipping material, art work, catalogues,
sales brochures, operating manuals and advertising and promotional material
and all other printed or written material that relate Exclusively to the
Edwards Business;
-18-
<PAGE>
(n) Intellectual Property Licenses. All permits, grants, contracts,
------------------------------
agreements and licenses running to or from Baxter or its Subsidiaries
relating to the Transferred Intellectual Property, including those set
forth on Schedule 1.2(n) hereto;
---------------
(o) Software. All (i) Software set forth on Schedule 1.2(o) hereto,
-------- ---------------
(ii) shrink-wrapped Software located on hardware included in the
Transferred Assets and (iii) any Contracts related to the aforementioned
Software including those set forth on Schedule 1.2(o) hereto;
---------------
(p) Domain Names. All domain names set forth on Schedule 1.2(p)
------------ ---------------
hereto; and
(q) Other Assets. All other assets, tangible or intangible, including
------------
all goodwill, that are Exclusive to the operations of, or otherwise relate
Exclusively to, the Edwards Business, including those set forth on Schedule
--------
1.2(q) hereto.
------
"Transferred Intellectual Property" means the Intellectual Property
---------------------------------
described in paragraph (g) of the definition of "Transferred Assets."
"Uden Manufacturing Facility" has the meaning specified in Section 3.24.
--------------------------- ------------
"Under Development" has the meaning specified in Section 10.1(a).
----------------- ---------------
"Voting Stock" means all of the capital stock of Edwards entitled to
------------
vote generally in the election of directors but excluding any class or series of
capital stock entitled to vote for directors only in the event of dividend
arrearages thereon, whether or not at the time of determination there are any
such dividend arrearages.
"WARN Act" has the meaning specified in Section 12.6.
-------- ------------
"Xenomedica" has the meaning specified in Section 3.16.
---------- ------------
1.2. Interpretation. (a) In this Agreement, unless the context clearly
--------------
indicates otherwise:
(i) words used in the singular include the plural and words in
the plural include the singular;
(ii) reference to any Person includes such Person's successors and
assigns, but only if such successors and assigns are permitted by this
Agreement;
(iii) reference to any gender includes the other gender;
(iv) the word "including" (and with correlative meaning "include")
means "including but not limited to";
(v) reference to any Article, Section, Exhibit or Schedule means
such Article or Section of, or such Exhibit or Schedule to, this
Agreement, as the case
-19-
<PAGE>
may be, and references in any Section or definition to any clause
means such clause of such Section or definition;
(vi) the words "herein," "hereunder," "hereof," "hereto" and
words of similar import shall be deemed references to this Agreement
as a whole and not to any particular Section or other provision
hereof;
(vii) reference to any agreement, instrument or other document
means such agreement, instrument or other document as amended,
supplemented and modified from time to time to the extent permitted by
the provisions thereof and by this Agreement;
(viii) reference to any law (including statutes and ordinances)
means such law (including all rules and regulations promulgated
thereunder) as amended, modified, codified or reenacted, in whole or
in part, and in effect at the time of determining compliance or
applicability;
(ix) relative to the determination of any period of time, "from"
means "from and including," "to" means "to but excluding" and
"through" means "through and including";
(x) accounting terms used herein shall have the meanings
historically ascribed to them by Baxter and its Subsidiaries based
upon Baxter's internal financial policies and procedures in effect
prior to the date of this Agreement;
(xi) in the event of any conflict between the provisions of the
body of this Agreement and the Exhibits or Schedules hereto, the
provisions of the body of this Agreement shall control; and
(xii) the titles to Articles and headings of Sections contained in
this Agreement have been inserted for convenience of reference only
and shall not be deemed to be a part of or to affect the meaning or
interpretation of this Agreement.
(b) This Agreement was negotiated by the Parties with the benefit of
legal representation, and no rule of construction or interpretation otherwise
requiring this Agreement to be construed or interpreted against either Party
shall apply to any construction or interpretation hereof. Subject to Section
-------
18.5, this Agreement shall be interpreted and construed to the maximum extent
- ----
possible so as to uphold the enforceability of each of the terms and provisions
hereof, it being understood and acknowledged that this Agreement was entered
into by the Parties after substantial negotiations and with full awareness by
the Parties of the terms and provisions hereof and the consequences thereof.
ARTICLE II
THE DISTRIBUTION
----------------
-20-
<PAGE>
2.1. Issuance and Delivery of Edwards Shares. Edwards shall issue to
---------------------------------------
Baxter the number of Edwards Shares required so that the total number of Edwards
Shares held by Baxter on the Distribution Date is equal to the total number of
Edwards Shares distributable pursuant to Section 2.2. Baxter shall deliver to
-----------
the Transfer Agent one or more stock certificates representing all the Edwards
Shares then issued and outstanding, together with one or more stock power(s)
duly endorsed in blank. The Transfer Agent will then transfer and distribute
such shares in the manner described in Section 2.2 below.
-----------
2.2. Distribution of Edwards Shares. Edwards shall provide to the
------------------------------
Transfer Agent sufficient certificates in such denominations as the Transfer
Agent may request in order to effect the Distribution. Baxter shall instruct
the Transfer Agent to distribute to all holders of record of Baxter Common Stock
as of the Record Date the Edwards Distributable Share. All the distributed
Edwards Shares shall be validly issued, fully paid and nonassessable and shall
be free of any preemptive rights.
2.3. Treatment of Fractional Shares. No certificates or scrip
------------------------------
representing fractional Edwards Shares shall be issued in the Distribution. In
lieu of receiving fractional shares, each holder of Baxter Common Stock who
otherwise would be entitled to receive a fractional Edwards Share pursuant to
the Distribution will receive cash (rounded to the nearest cent) for such
fractional share. Baxter and Edwards shall instruct the Transfer Agent to
determine the number of whole Edwards Shares and fractional Edwards Shares
(rounded to the eighth decimal place) allocable to each holder of record of
Baxter Common Stock as of the Record Date, to aggregate all such fractional
shares into whole shares and to sell the whole shares obtained thereby in the
open market at the then prevailing prices on behalf of holders who otherwise
would be entitled to receive fractional share interests, and the Transfer Agent
shall distribute to each such holder such holder's ratable share of the total
proceeds of such sale after making appropriate deductions of any amounts
required for federal tax withholding purposes and after deducting any taxes
attributable to the sale of such fractional share interests. Baxter shall bear
the costs of commissions incurred in connection with such sales.
2.4. Baxter Board Action. The Board of Directors of Baxter, or a duly
-------------------
authorized committee of the Board of Directors, shall, in its sole discretion,
determine the Record Date and the Distribution Date and all appropriate
procedures in connection with the Distribution. The Board of Directors of
Baxter or such committee also shall have the right to adjust at any time prior
to the Distribution Date the Edwards Distributable Share. The consummation of
the transactions provided for in this Article II shall be effected only after
----------
the Distribution has been declared by the Board of Directors of Baxter or such
committee and after all of the conditions set forth in Article XI hereof shall
----------
have been satisfied or waived by Baxter.
2.5. Additional Approvals. Baxter shall cooperate with Edwards in
--------------------
effecting, and if so requested by Edwards, Baxter shall, as the sole stockholder
of Edwards prior to the Distribution, ratify all actions that are reasonably
necessary or desirable to be taken by Edwards to effectuate, the transactions
referenced in or contemplated by this Agreement in a manner consistent with the
terms of this Agreement.
-21-
<PAGE>
ARTICLE III
FOREIGN TRANSFERS
-----------------
3.1. Edwards Lifesciences World Trade. Prior to or promptly following
--------------------------------
the execution of this Agreement, Baxter shall cause to be incorporated, under
the General Corporation Law of Delaware, Edwards Lifesciences World Trade
Corporation ("Edwards World Trade") as a wholly-owned Subsidiary of Baxter World
-------------------
Trade Corporation, a Delaware corporation and a wholly-owned Subsidiary of
Baxter ("Baxter World Trade"). Edwards World Trade shall be qualified as a
------------------
foreign corporation under the General Corporation Law of California. Subject to
the terms and conditions of this Agreement, Baxter and Edwards hereby agree to
take, or cause to be taken, any and all actions necessary to effect the
transactions described in this Article III, with each transaction occurring at
-----------
the approximate times and in the order described in Schedule 3.1 hereto.
------------
3.2. Puerto Rico (936). Baxter and Edwards hereby agree to take any
-----------------
and all actions necessary to effect the transfer to Edwards World Trade of all
of the right, title and interest of Baxter Healthcare Corporation of Puerto
Rico, an Alaska corporation and a wholly-owned Subsidiary of Baxter Pharmacy
Services ("Baxter Alaska"), in and to the Anasco division of Baxter Alaska which
-------------
is engaged in the Edwards Business, and all of the Transferred Assets and the
Assumed Liabilities related thereto (the "Anasco Division"), as follows:
---------------
(a) Edwards Lifesciences Corporation of Puerto Rico ("Edwards Puerto
--------------
Rico (936)") shall be incorporated as a Delaware corporation;
----------
(b) Edwards Puerto Rico (936) shall be qualified as a foreign
corporation under the laws of Puerto Rico;
(c) Baxter Alaska shall transfer to Edwards Puerto Rico (936) all of
its right, title and interest in and to the Anasco Division in return for
100 shares of capital stock of Edwards Puerto Rico (936);
(d) Baxter Alaska shall transfer to Baxter Pharmacy Services as a
dividend, all of its right, title and interest in and to the capital stock
Edwards Puerto Rico (936);
(e) Baxter Pharmacy Services shall transfer to Edwards Puerto Rico
(MS&P) as a contribution to capital, all of its right, title and interest
in and to the capital stock of Edwards Puerto Rico (936) as described in
Section 3.3(e)(ii) below;
------------------
(f) Baxter Pharmacy Services shall transfer to Baxter World Trade as
a dividend, all of its right, title and interest in and to the capital
stock of Edwards Puerto Rico (MS&P);
(g) Baxter World Trade shall transfer to Edwards World Trade as a
contribution to capital all of its right, title and interest in and to the
capital stock of Edwards Puerto Rico (MS&P); and
-22-
REORGANIZATION AGREEMENT
<PAGE>
(h) After the Distribution Date, Edwards Puerto Rico (936) shall
transfer to Edwards Lifesciences AG all of its right, title and interest in
and to certain Transferred Assets and the Assumed Liabilities transferred
to Edwards Puerto Rico (936) by Baxter Alaska as part of the Anasco
Division, which assets and liabilities relate to the Edwards Business
conducted in the Dominican Republic prior to the Distribution Date, in
exchange for cash or other consideration equal to the net book value of the
Transferred Assets.
3.3 Puerto Rico (MS&P). Baxter and Edwards hereby agree to take any
-----------------
and all actions necessary to effect the transfer to Edwards World Trade of all
of the right, title and interest in and to the Transferred Assets and the
Assumed Liabilities held by Baxter Pharmacy Services and Baxter Sales and
Distribution Corporation, a Delaware corporation and a wholly-owned Subsidiary
of Baxter Pharmacy Services ("Baxter Sales and Distribution"), as follows:
-----------------------------
(a) Edwards Lifesciences Sales Corporation ("Edwards Puerto Rico
-------------------
(MS&P)") shall be incorporated as a Delaware corporation;
------
(b) Edwards Puerto Rico (MS&P) shall be qualified as a foreign
corporation under the laws of Puerto Rico;
(c) Baxter Sales and Distribution shall transfer to Edwards Puerto
Rico (MS&P) all of its right, title and interest in and to the Transferred
Assets and the Assumed Liabilities, including those assets and liabilities
relating to the marketing and sales business conducted in Puerto Rico, in
return for 100 shares of capital stock of Edwards Puerto Rico (MS&P);
(d) Baxter Sales and Distribution shall transfer to Baxter Pharmacy
Services as a dividend, all of its right, title and interest in and to the
capital stock of Edwards Puerto Rico (MS&P);
(e) Baxter Pharmacy Services shall transfer to Edwards Puerto Rico
(MS&P) as a contribution to capital, all of its right, title and interest
in and to (i) the Transferred Assets and the Assumed Liabilities, including
those assets, liabilities and employees relating to the perfusion business
conducted in Puerto Rico and (ii) the capital stock of Edwards Puerto Rico
(936) as described in Section 3.2(e) above;
--------------
(f) Baxter Pharmacy Services shall transfer to Baxter World Trade as
a dividend, all of its right, title and interest in and to the capital
stock of Edwards Puerto Rico (MS&P); and
(g) Baxter World Trade shall transfer to Edwards World Trade as a
contribution to capital all of its right, title and interest in and to the
capital stock of Edwards Puerto Rico (MS&P).
3.4 Dominican Republic. Baxter and Edwards hereby agree to take any
------------------
and all actions necessary to effect the transfer to Edwards World Trade of all
of the right, title and interest of Baxter Healthcare S.A., a company organized
under the laws of Panama ("Baxter
------
-23-
<PAGE>
Panama"), in and to the Transferred Assets and the Assumed Liabilities,
- ------
consisting of contracts for the construction and leasing of a manufacturing
facility located in the Dominican Republic, as follows:
(a) A branch office of Edwards Lifesciences AG ("Edwards Dominican
-----------------
Republic") shall be established in the Dominican Republic;
--------
(b) Edwards Dominican Republic shall be qualified as a foreign entity
under the laws of the Dominican Republic;
(c) Baxter Panama shall transfer to Edwards Lifesciences AG all of
its right, title and interest in and to the Transferred Assets and the
Assumed Liabilities, consisting of contracts for the construction and
leasing of a manufacturing facility located in the Dominican Republic, in
return for_________________; and
(d) After the Distribution Date, Edwards Puerto Rico (936) shall
transfer to Edwards Lifesciences AG all of its right, title and interest in
and to certain Transferred Assets and the Assumed Liabilities transferred
to Edwards Puerto Rico (936) by Baxter Alaska as described in Section
-------
3.2(h) above in exchange for cash or other consideration equal to the net
------
book value of the Transferred Assets.
3.5. Mexico. Baxter and Edwards hereby agree to take any and all
------
actions necessary to effect the transfer to Edwards World Trade of all of the
right, title and interest of Baxter S.A. de C.V., a company organized under
the laws of Mexico ("Baxter Mexico"), in and to the Transferred Assets and the
-------------
Assumed Liabilities, which constitutes the Edwards Business conducted in Mexico,
as follows:
(a) Edwards Lifesciences Mexico, S.A. de C.V. ("Edwards Mexico")
--------------
shall be incorporated as a Mexican corporation and a wholly-owned
Subsidiary of Edwards World Trade;
(b) Baxter Mexico shall transfer to Edwards Mexico all of its right,
title and interest in and to the Transferred Assets and the Assumed
Liabilities (except for third-party distribution agreements) in return
for _______________;
(c) Baxter Mexico shall transfer [all][certain] third-party
distribution agreements in its name but relating Exclusively to the Edwards
Business conducted in Mexico to Edwards LLC [in return for
_______________]; and
(d) [Baxter Mexico shall enter into an agreement with Edwards Mexico
whereby Baxter Mexico will act as the manufacturing plant of record to hold
the product registrations applicable to the Edwards Business conducted in
Mexico.]
3.6. Brazil. Baxter and Edwards hereby agree to take any and all
------
actions necessary to effect the transfer to Edwards World Trade of all the
right, title and interest in Macchi Engenharia Biomedica Ltda., a Brazilian
corporation ("Macchi"), held by BPCL and BRL, as follows:
------
-24-
<PAGE>
(a) BRL shall transfer to BPCL all of its right, title and interest
in and to _____ shares of capital stock of Macchi for U.S. $_____;
(b) BRL shall transfer to _________ [JAY WERTHEIM AND ED TARLE TO
IDENTIFY CORPORATE NOMINEE] all of its right, title and interest in and to
____ shares of capital stock of Macchi for U.S. $_____;
(c) BPCL shall transfer to BRL all of its right, title and interest
in and to _____ shares of capital stock of Baxter Hospitilar for U.S.
$_________;
(d) BPCL shall transfer to ____________ [JOE SCHOHL TO IDENTIFY
CORPORATE NOMINEE] all of its right, title and interest in and to _________
shares of capital stock of Baxter Hospitilar for U.S. $_________;
(e) Baxter World Trade shall transfer to Edwards World Trade as a
contribution of capital all of its right, title and interest in and to
_______ shares of capital stock of BPCL; and
(f) Baxter Export Corporation shall transfer to _________ [JAY
WERTHEIM AND ED TARLE TO IDENTIFY CORPORATE NOMINEE] all of its right,
title and interest in and to ________ shares of capital stock of BPCL in
return for U.S. $____.
3.7. Canada. Baxter and Edwards hereby agree to take any and all
------
actions necessary to effect the transfer to Edwards World Trade of all of the
right, title and interest of Baxter Corporation, a company organized under the
laws of Canada ("Baxter Canada"), and to the Transferred Assets and the Assumed
-------------
Liabilities, which constitutes the Edwards Business conducted in Canada, as
follows:
(a) Edwards Lifesciences [Canada] Inc. ("Edwards Canada") shall be
--------------
incorporated as a Canadian corporation and a wholly-owned Subsidiary of
Edwards World Trade; and
(b) Baxter Canada shall transfer to Edwards Canada all of its right,
title and interest in and to the Transferred Assets and the Assumed
Liabilities for U.S. $_______________.
3.8. China. Baxter and Edwards hereby agree to take any and all
-----
actions necessary to effect the transfer to Edwards World Trade of all of the
right, title and interest of Baxter Healthcare Limited (Hong Kong), a company
organized under the laws of China ("Baxter China"), in and to the Transferred
------------
Assets and the Assumed Liabilities, which constitutes the Edwards Business
conducted in China, as follows:
(a) A representative office of Edwards World Trade shall be
established in Shanghai, China;
-25-
<PAGE>
(b) Baxter China shall transfer to Edwards World Trade all of its
right, title and interest in and to the Transferred Assets and the Assumed
Liabilities (except for third-party distribution agreements) in return for
________;
(c) Baxter China shall transfer all of its right, title and interest
in and to certain third-party distribution agreements involving U.S. $
sales in its name but relating Exclusively to the Edwards Business
conducted in China to Edwards LLC [in return for ________________________];
and
(d) Baxter China shall terminate the Labor Supply Contract dated as
of ________________ by and between Baxter China and FESCO, relating to the
contracting of Baxter China employees from FESCO and Edwards World Trade
shall enter into an agreement with FESCO providing for the same. [NOTE:
CECILIA LIM TO PROVIDE DATE OF CONTRACT AND DEFINITION OF FESCO]
3.9. Taiwan. Baxter and Edwards hereby agree to take any and all
------
actions necessary to effect the transfer to Edwards World Trade of all of the
right, title and interest of Baxter Healthcare Limited (Taiwan), a company
organized under the laws of Taiwan ("Baxter Taiwan"), in and to the Transferred
-------------
Assets and the Assumed Liabilities, which constitutes the Edwards Business
conducted in Taiwan, as follows:
(a) A branch office of Edwards World Trade shall be established in
Taipei, Taiwan;
(b) Baxter Taiwan shall transfer to Edwards World Trade all of its
right, title and interest in and to the Transferred Assets and the Assumed
Liabilities (except for third-party distribution agreements) in return for
_______________;
(c) Baxter Taiwan shall transfer all third-party distribution
agreements in its name but relating Exclusively to the Edwards Business
conducted in Taiwan to Edwards LLC [in return for ________________]; and
(d) Edwards World Trade shall enter into an agreement with Edwards
LLC whereby the Taiwan branch of Edwards World Trade shall provide, for a
fee, certain sales and promotion activities on behalf of Edwards LLC in
connection with the distribution of Edwards Products by third-party
distributors in Taiwan.
3.10 Singapore and the Philippines. Baxter and Edwards hereby agree to
-----------------------------
take any and all actions necessary to effect the transfer to Edwards World Trade
of all of the right, title and interest of Baxter Healthcare (Asia) Pte. Ltd., a
company organized under the laws of Singapore ("Baxter Asia"), in and to the
-----------
Transferred Assets and the Baxter Healthcare Philippines Inc., a company
organized under the laws of the Philippines ("Baxter Philippines"), in and to
------------------
the Transferred Assets and the Assumed Liabilities, which constitutes the
Edwards Business conducted in the Philippines, as follows:
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<PAGE>
(a) A representative office of Edwards World Trade shall be
established in Singapore;
(b) Baxter Asia shall transfer to Edwards World Trade all of its
right, title and interest in and to the Transferred Assets and the Assumed
Liabilities relating Exclusively to the Edwards Business conducted in
Singapore (except for certain public hospital contracts) in return
for_____________;
(c) Baxter Asia shall transfer all of its right, title and interest
in and to certain public hospital contracts relating Exclusively to the
Edwards Business [conducted in Singapore] to a third-party distributor [in
return for _____];
(d) Baxter Asia shall transfer all of its right, title and interest
in and to certain supplier contracts in its name relating Exclusively to
the Edwards Business [conducted in Singapore] to Edwards LLC [in return
for _____];
(e) Baxter Philippines shall transfer to Edwards World Trade all of
its right, title and interest in and to the Transferred Assets and Assumed
Liabilities relating Exclusively to the Edwards Business conducted in the
Philippines (except for product registrations) in return for _____; and
(f) Baxter Philippines shall transfer all of its right, title and
interest in and to the product registrations in its name but relating
Exclusively to the Edwards Business conducted in the Philippines to _____
[in return for _____].
3.11 Malaysia. Baxter and Edwards hereby agree to take any and all
--------
actions necessary to effect the transfer to Edwards World Trade of all of the
right, title and interest of Baxter Asia in and to the Transferred Assets and
the Assumed Liabilities, which constitutes the Edwards Business conducted in
Malaysia, as follows:
(a) A representative office of Edwards World Trade shall be
established in Malaysia;
(b) Baxter Asia shall transfer to Edwards World Trade all of its
right, title and interest in and to the Transferred Assets and the Assumed
Liabilities relating Exclusively to the Edwards Business conducted in
Malaysia (except for third-party distribution agreements) in return for
__________; and
(c) Baxter Asia shall transfer all of its right, title and interest
in and to all third-party distribution agreements in its name but relating
Exclusively to the Edwards Business conducted in Malaysia to Edwards LLC
[in return for __________].
3.12 Thailand. Baxter and Edwards hereby agree to take any and all
--------
actions necessary to effect the transfer to Edwards World Trade of all of the
right, title and interest of Baxter Healthcare (Thailand) Co., Ltd., a company
formed under the laws of Thailand ("Baxter Thailand"), in and to the Transferred
---------------
Assets and the Assumed Liabilities, which constitutes the Edwards Business
conducted in Thailand, as follows:
-27-
<PAGE>
(a) A representative office of Edwards World Trade shall be
established in Bangkok, Thailand;
(b) Baxter Thailand shall transfer to Edwards World Trade all of
its right, title and interest in and to the Transferred Assets and the
Assumed Liabilities (except for third-party distribution agreements and
product registrations) in return for ___________________;
(c) Baxter Thailand shall transfer all of its right, title and
interest in and to all third-party distribution agreements in its name but
relating Exclusively to the Edwards Business conducted in Thailand to
Edwards LLC [in return for _____________]; and
(d) Baxter Thailand shall transfer to Osotspa Co., Ltd., a third-
party distributor of Edwards Products in Thailand, all of its right, title
and interest in and to all product registrations in its name but relating
Exclusively to the Edwards Business conducted in Thailand in return for
_____________.
3.13. Korea. Baxter and Edwards hereby agree to take any and all
-----
actions necessary to effect the transfer to Edwards World Trade of all of the
right, title and interest of Baxter Korea Co. Ltd., a company organized under
the laws of Korea ("Baxter Korea"), in and to the Transferred Assets and the
------------
Assumed Liabilities, which constitutes the Edwards Business conducted in Korea,
as follows:
(a) Edwards Lifesciences Korea Co., Ltd. ("Edwards Korea") shall be
-------------
organized as a Korean private limited company (chusik hwesa) and a wholly-
owned Subsidiary of Edwards World Trade; and
(b) Baxter Korea shall transfer to Edwards Korea all of its right,
title and interest in and to the Transferred Assets and the Assumed
Liabilities in return for __________________.
3.14. India. Baxter and Edwards hereby agree to take any and all
-----
actions necessary to effect the transfer to Edwards World Trade of (i) all the
right, title and interest in BCPL held by BIPL and Sanjiv Verma and (ii) all the
remaining right, title and interest of BIPL in and to the Edwards Business
conducted in India, as follows:
(a) BIPL shall transfer to Edwards World Trade all of its right,
title and interest in and to 2,999,980 shares of capital stock of BCPL for
29,999,800 Indian Rupees;
(b) Sanjiv Verma shall transfer to Edwards all of his right, title
and interest in and to 20 shares of capital stock of BCPL for 200 Indian
Rupees;
(c) Edwards World Trade shall subscribe for 15,216,020 additional
shares of capital stock for BCPL for 152,160,200 Indian Rupees;
(d) Edwards shall subscribe for 183,980 additional shares of
capital stock of BCPL for 1,839,000 Indian Rupees; and
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<PAGE>
(e) BIPL shall transfer to BCPL all of its right, title and interest
in and to the Transferred Assets and the Assumed Liabilities, which
constitutes the Edwards Business conducted by BIPL in return for _________.
3.15. Intentionally Blank.
-------------------
3.16. Switzerland. Baxter and Edwards hereby agree to take any and all
-----------
actions necessary to effect the transfer to Edwards World Trade of (i) all the
right, title and interest of Baxter Edwards in and to the Transferred Assets and
the Assumed Liabilities, which constitutes the Edwards Business conducted in
Switzerland; (ii) all the right, title and interest in Xenomedica AG, a company
organized under the laws of Switzerland and a wholly-owned Subsidiary of Baxter
World Trade ("Xenomedica"), held by Baxter World Trade; and (iii) all the right,
----------
title and interest of Baxter Woodlands in and to the Transferred Assets and the
Assumed Liabilities, which constitutes the Swiss sales branch ("Swiss Sales
-----------
Branch") of Baxter Woodlands, all as follows:
- ------
(a) Edwards Lifesciences AG (Swiss Principal).
----------------------------------------
(i) Edwards Lifesciences AG ("Edwards Lifesciences AG") shall
-----------------------
be formed as a Swiss corporation;
(ii) Baxter Edwards shall transfer to Edwards Lifesciences AG
all of its right, title and interest in and to the Transferred Assets
and the Assumed Liabilities, which constitutes the Edwards Business
conducted by Baxter Edwards (except for the sales employees and
related assets and liabilities) in return for ___ shares of capital
stock of Edwards Lifesciences AG;
(iii) Baxter Woodlands shall transfer the Swiss Sales Branch to
Edwards Lifesciences AG in return for 25,000 Swiss francs and
assumption by Edwards Lifesciences AG of the liabilities of the Swiss
Sales Branch;
(iv) Edwards shall cause its Subsidiaries to apply for VAT
registrations in the European countries in which Edwards' Subsidiaries
will have a legal presence as described in this Article III;
-----------
(v) The third-party distribution agreements applicable
Exclusively to the Edwards Business in the following countries shall
be transferred from the applicable Baxter Subsidiaries to Edwards
Lifesciences AG: Africa, Balkans, Estonia, Lithuania, Latvia, Czech
Republic, Poland, Slovakia, Slovenia, Hungary, Iceland, Malta,
Abudabi, Bahrain, Dubai, Egypt, Israel, Jordan, Kuwait, Lebanon, Oman,
Saudi Arabia, Turkey, Portugal and Russia [in return for ___________];
(vi) Baxter France and Baxter Italy shall transfer certain
employees and all of their respective rights, title and interest in
and to certain related assets and liabilities to Edwards Lifesciences
AG;
(vii) Baxter Edwards shall transfer to Baxter World Trade as a
dividend, all of its right, title and interest in and to the stock of
Edwards Lifesciences AG;
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<PAGE>
(viii) [Baxter World Trade shall transfer to Edwards
Lifesciences AG as a contribution to capital all of its right, title
and interest in and to the capital stock of Xenomedica;] and
(ix) Baxter World Trade shall transfer to Edwards World Trade
as a contribution to capital all of its right, title and interest in
and to the capital stock of Edwards Lifesciences AG.
(b) Third-Party Distributor. Baxter AG, Volketswil, a third-party
-----------------------
distributor, will transfer all of its right, title and interest in certain
assets to Edwards Lifesciences AG in return for ___________.
(c) Edwards Swiss Commissionaire.
----------------------------
(i) Edwards Lifesciences GmbH ("Edwards Swiss
-------------
Commissionaire") shall be organized as a Swiss limited company (GmbH)
--------------
and a wholly-owned Subsidiary of Edwards Lifesciences Holding A/S;
(ii) Baxter Edwards shall transfer to Edwards Swiss
Commissionaire all of the sales employees relating to the Edwards
Business conducted by Baxter Edwards together with all of its right,
title and interest in certain related assets and liabilities in return
for ________; and
(iii) Edwards Lifesciences AG shall transfer to Edwards Swiss
Commissionaire the assets transferred to Edwards Lifesciences AG by
Baxter AG, Volketswil, as described above in Section 3.6(b) in return
--------------
for __________.
3.17. EU Holdings (Denmark). Baxter and Edwards hereby agree to take
---------------------
any and all actions necessary to establish a holding company in Europe to hold
the stock of all of the European entities described in Sections 3.18 through
-------------
3.23, 3.25 and 3.26 below, as follows:
- ---- ---- ----
(a) Edwards Lifesciences Holding A/S ("Edwards EU Holdings") shall
-------------------
be formed as a Danish corporation;
(b) Baxter shall purchase all issued and outstanding capital stock
(___ shares) of Edwards EU Holdings from the organizer of Edwards EU
Holdings for __________;
(c) Baxter shall transfer to Baxter World Trade [as a contribution
to capital] all of its right, title and interest in and to the capital
stock of Edwards EU Holdings; and
(d) Baxter World Trade shall transfer to Edwards World Trade [as a
contribution to capital] all of its right, title and interest in and to the
capital stock of Edwards EU Holdings.
3.18. Germany. Baxter and Edwards hereby agree to take any and all
-------
actions necessary to effect the transfer to Edwards World Trade of (i) all the
right, title and interest of Baxter Germany in and to the Transferred Assets and
the Assumed Liabilities, which constitutes the Edwards Business conducted in
Germany; (ii) all the right, title and interest in Pas Palzer
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<PAGE>
GmbH & Co. KG, a German limited company ("Pas Palzer KG"), held by Baxter
-------------
Germany; and (iii) all the right, title and interest in Pas Palzer Verwaltungs-
GmbH, a German limited company ("Pas Palzer Verwaltungs"), held by Baxter
----------------------
Germany Holdings, all as follows:
(a) Edwards Germany Holdings.
------------------------
(i) Edwards Lifesciences Holding GmbH ("Edwards Germany
---------------
Holdings") shall be formed as a German limited company (GmbH);
--------
(ii) Baxter World Trade shall purchase all issued and outstanding
capital stock (___ shares) of Edwards Germany Holdings from the
organizer of Edwards Germany Holdings for _________________;
(iii) After the steps outlined in Section 3.18 (b) below, Baxter
----------------
World Trade shall transfer to Edwards World Trade as a contribution to
capital all of its right, title and interest in and to the capital
stock of Edwards Germany Holdings; and
(iv) Edwards World Trade shall transfer to Edwards EU Holdings as
a contribution to capital all of its right, title and interest in and
to the capital stock of Edwards Germany Holdings.
(b) Edwards Germany.
---------------
(i) Edwards Lifesciences GmbH ("Edwards Germany") shall be
---------------
formed as a German limited company (GmbH);
(ii) Baxter Germany Holdings shall purchase all issued and
outstanding capital stock (___ shares) of Edwards Germany from the
organizer of Edwards Germany for _______________;
(iii) Baxter Germany shall transfer to Edwards Germany all of its
right, title and interest in and to the Transferred Assets and the
Assumed Liabilities (except for inventory) as well as its partnership
interest in Pas Palzer KG;
(iv) Baxter Germany shall transfer to Baxter Belgium all of its
right, title and interest in and to the inventory relating Exclusively
to the Edwards Business in Germany in return for
_____________________;
(v) Baxter Germany Holdings shall transfer to Baxter World Trade
as a dividend all of its right, title and interest in and to the
capital stock of Edwards Germany as well as its membership interest in
Pas Palzer Verwaltungs;
(vi) Baxter World Trade shall transfer to Edwards Germany
Holdings as a contribution to capital all of its right, title and
interest in and to the capital stock of Edwards Germany as well as its
membership interest in Pas Palzer Verwaltungs;
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<PAGE>
(vii) After the Distribution Date, Edwards Germany shall
transfer to Edwards Lifesciences AG all of its right, title and
interest in and to the accounts receivable held by Edwards Germany in
return for _________; and
(viii) After the Distribution Date, Edwards Germany shall
transfer to Edwards Lifesciences AG the third-party distribution
agreements originally transferred to Edwards Germany by Baxter Germany
[in return for ________].
3.19. Austria. Baxter and Edwards hereby agree to take any and all
-------
actions necessary to effect the transfer to Edwards World Trade of all of the
right, title and interest of Baxter Immuno Vertriebsgesellschaft GmbH, a company
organized under the laws of Austria ("Baxter Austria"), in and to the
--------------
Transferred Assets and the Assumed Liabilities, which constitutes the Edwards
Business conducted in Austria, as follows:
(a) Edwards Lifesciences Austria GmbH ("Edwards Austria") shall be
---------------
organized as an Austrian limited company (GmbH) and a wholly-owned
Subsidiary of Edwards EU Holdings;
(b) Baxter Austria shall transfer to Edwards Austria all of its
right, title and interest in and to the Transferred Assets and the Assumed
Liabilities (except for inventory) in return for _________;
(c) Baxter Austria shall transfer to Baxter Belgium all of its
right, title and interest in and to the inventory relating Exclusively to
the Edwards Business in Austria in return for __________;
(d) After the Distribution Date, Edwards Austria shall transfer to
Edwards Lifesciences AG all of its right, title and interest in and to the
accounts receivable held by Edwards Austria in return for ________________.
3.20. France. Baxter and Edwards hereby agree to take any and all
------
actions necessary to effect the transfer to Edwards World Trade of all of the
right, title and interest of Baxter S.A. (France), a company organized under the
laws of France ("Baxter France"), in and to the Transferred Assets and the
-------------
Assumed Liabilities, which constitutes the Edwards Business conducted in France,
as follows:
(a) Edwards Lifesciences SAS ("Edwards France") shall be organized
--------------
as a French SAS;
(b) Baxter France shall transfer to Edwards France all of its right,
title and interest in and to the Transferred Assets and the Assumed
Liabilities (except for inventory and third-party distribution agreements)
in return for ________shares of capital stock of Edwards France;
(c) Baxter France shall transfer to Baxter Belgium all of its right,
title and interest in and to the inventory relating Exclusively to the
Edwards Business in France in return for _________________;
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<PAGE>
(d) Baxter France shall transfer to Edwards Lifesciences AG all of
its right, title and interest in and to [all] [certain] third-party
distribution agreements in its name but relating Exclusively to the Edwards
Business conducted in France [in return for _____________________________];
(e) Baxter France shall transfer to Edwards EU Holdings all of its
right, title and interest in and to the capital stock of Edwards France for
___________________; and
(f) After the Distribution Date, Edwards France shall transfer to
Edwards Lifesciences AG all of its right, title and interest in and to the
accounts receivable held by Edwards France in return for _________________.
3.21. Italy. Baxter and Edwards hereby agree to take any and all
-----
actions necessary to effect the transfer to Edwards World Trade of all of the
right, title and interest of Baxter S.p.A., a company organized under the laws
of Italy ("Baxter Italy"), in and to the Transferred Assets and the Assumed
------------
Liabilities, which constitutes the Edwards Business conducted in Italy, as
follows:
(a) Baxter World Trade and Baxter Export Corporation, as
shareholders of Baxter Italy, shall spin off the Transferred Assets and the
Assumed Liabilities (except for accounts receivable, inventory and third-
party distribution agreements), which constitutes the Edwards Business
conducted in Italy, thus creating a new company, under the name Edwards
Lifesciences Italia S.r.l. ("Edwards Italy");
(b) As a result, Baxter World Trade and Baxter Export Corporation
shall jointly own the entire share capital of Edwards Italy;
(c) Baxter Italy shall transfer to Edwards Lifesciences AG all of
its right, title and interest in and to [all] [certain] third-party
distribution agreements in its name but relating Exclusively to the Edwards
Business conducted in Italy [in return for ______________________________];
(d) Baxter Italy shall transfer to Edwards Lifesciences AG all of
its right, title and interest in and to the inventory relating Exclusively
to the Edwards Business conducted in Italy [in return for ______________];
(e) Baxter World Trade and Baxter Export Corporation shall transfer
to Edwards World Trade all of their respective rights, titles and interests
in and to the capital stock of Edwards Italy in return for
_________________; and
(f) Edwards World Trade shall transfer to Edwards EU Holdings as a
contribution to capital all of its right, title and interest in and to the
capital stock of Edwards Italy.
3.22. Belgium/Luxembourg. Baxter and Edwards hereby agree to take any
------------------
and all actions necessary to effect the transfer to Edwards World Trade of all
of the right, title and interest of Baxter S.A. (Belgium), a company organized
under the laws of Belgium ("Baxter
------
-33-
<PAGE>
Belgium"), in and to the Transferred Assets and the Assumed Liabilities, which
- -------
constitutes the Edwards Business conducted in Belgium and Luxembourg, as
follows:
(a) Edwards Lifesciences S.P.R.L. ("Edwards Belgium") shall be
---------------
organized as a Belgian SRL with Raymond Lauret as a 0.08% holder and
Edwards EU Holdings as a 99.92% holder;
(b) Baxter Belgium shall transfer to Edwards Belgium all of its
right, title and interest in and to the Transferred Assets and the Assumed
Liabilities (except for inventory and third-party distribution agreements),
in return for ___________________;
(c) Baxter Belgium shall transfer to Edwards Lifesciences AG all of
its right, title and interest in and to the inventory relating Exclusively
to the Edwards Business in Germany, France, Belgium, Luxembourg, the
Netherlands, Austria and the U.K. in return for ________________;
(d) Baxter Belgium shall transfer to Edwards Lifesciences AG all of
its right, title and interest in and to [all] [certain] third-party
distribution agreements in its name but relating Exclusively to the Edwards
Business conducted in Belgium and Luxembourg [in return for ____________];
and
(e) After the Distribution Date, Edwards Belgium shall transfer to
Edwards Lifesciences AG all of its right, title and interest in and to the
accounts receivable held by Edwards Belgium in return for _____________.
3.23. Netherlands. Baxter and Edwards hereby agree to take any and
-----------
all actions necessary to effect the transfer to Edwards World Trade of all of
the right, title and interest of Baxter B.V., a company organized under the laws
of the Netherlands ( "Baxter Netherlands"), in and to the Transferred Assets and
------------------
the Assumed Liabilities, which constitutes Edwards Business conducted in the
Netherlands, except for the Uden Manufacturing Facility, as follows:
(a) Edwards Lifesciences BV ("Edwards Netherlands") shall be
-------------------
organized as a Netherlands corporation and a wholly-owned Subsidiary of
Edwards EU Holdings;
(b) Baxter Netherlands shall transfer to Edwards Netherlands all of
its right, title and interest in and to the Transferred Assets and the
Assumed Liabilities (except for inventory, third-party distribution
agreements and the Uden Manufacturing Facility) in return for ___________;
(c) Baxter Netherlands shall transfer to Baxter Belgium all of its
right, title and interest in and to the inventory relating Exclusively to
the Edwards Business in the Netherlands in return for ;
(d) Baxter Netherlands shall transfer to Edwards Lifesciences AG all
of its right, title and interest in and to [all] [certain] third-party
distribution agreements in its name but relating Exclusively to the Edwards
Business conducted in the Netherlands [in return for ________________]; and
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<PAGE>
(e) After the Distribution Date, Edwards Netherlands shall transfer
to Edwards Lifesciences AG all of its right, title and interest in and to
the accounts receivable held by Edwards Netherlands in return for
________________.
3.24. Uden. Baxter and Edwards hereby agree to take any and all
----
actions necessary to effect the transfer to Edwards World Trade of all of the
right, title and interest of Baxter Netherlands in the manufacturing facility in
Uden that produces Edwards Products and all of the Transferred Assets and
Assumed Liabilities related thereto (the "Uden Manufacturing Facility), as
---------------------------
follows:
(a) Edwards Lifesciences Uden BV ("Edwards Uden") shall be organized
------------
as a Dutch corporation and a wholly-owned Subsidiary of Edwards World
Trade; and
(b) Baxter Netherlands shall transfer to Edwards Uden all of its
right, title and interest in and to the Uden Manufacturing Facility in
return for _______________.
3.25. Spain. Baxter and Edwards hereby agree to take any and all
-----
actions necessary to effect the transfer to Edwards World Trade of all of the
right, title and interest of Baxter S.L. (Spain), a company organized under the
laws of Spain ("Baxter Spain"), in and to the Transferred Assets and the Assumed
------------
Liabilities, which constitutes the Edwards Business conducted in Spain, as
follows:
(a) Edwards Lifesciences SL ("Edwards Spain") shall be organized as
-------------
a Spanish Sociedad Limitada and a wholly-owned Subsidiary of Edwards EU
Holdings
(b) Baxter Spain shall transfer to Edwards Spain all of its right,
title and interest in and to the Transferred Assets and the Assumed
Liabilities (except for inventory and third-party distribution agreements)
in return for ___________;
(c) Baxter Spain shall transfer to Edwards Lifesciences AG all of
its right, title and interest in and to the inventory relating Exclusively
to the Edwards Business in Spain in return for ______________;
(d) Baxter Spain shall transfer to Edwards Lifesciences AG all of
its right, title and interest in and to the inventory and accounts
receivable held by Edwards Spain in return for _______________; and
(e) Baxter Spain shall transfer to Edwards Lifesciences AG all of
its right, title and interest in and to [all] [certain] third-party
distribution agreements in its name but relating Exclusively to the Edwards
Business conducted in Spain [in return for ______________________________].
3.26. United Kingdom. Baxter and Edwards hereby agree to take any and
--------------
all actions necessary to effect the transfer to Edwards World Trade of all of
the right, title and interest of Baxter Healthcare Ltd., a company organized
under the laws of England ("Baxter U.K."), in and to the Transferred Assets and
-----------
the Assumed Liabilities, which constitutes the Edwards Business conducted in the
United Kingdom, as follows:
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<PAGE>
(a) Edwards Lifesciences Limited ("Edwards U.K.") shall be organized
------------
as an English limited liability company and a wholly-owned Subsidiary of
Edwards EU Holdings;
(b) Baxter U.K. shall transfer to Edwards U.K. all of its right,
title and interest in and to the Transferred Assets and the Assumed
Liabilities (except for inventory and third-party distribution agreements),
in return for _______________;
(c) Baxter U.K. shall transfer to Baxter Belgium all of its right,
title and interest in and to the inventory relating Exclusively to the
Edwards Business in the United Kingdom in return for _____________________;
(d) Baxter U.K. shall transfer to Edwards Lifesciences AG all of its
right, title and interest in and to [all] [certain] third-party
distribution agreements in its name but relating Exclusively to the Edwards
Business conducted in the United Kingdom [in return for ]; and
(e) After the Distribution Date, Edwards U.K. shall transfer to
Edwards Lifesciences AG all of its right, title and interest in and to the
accounts receivable held by Edwards U.K. in return for ______________.
3.27. Restrictions on Intercompany Debt. Neither Baxter nor any
---------------------------------
Affiliate of Baxter shall make any Loan, other than in the ordinary course of
business, to any Edwards Foreign Entity from February __, 2000 through the
Distribution Date, except as specifically contemplated by this Agreement. [BOB
HOMBACH: WILL THIS BE NECESSARY IN CONNECTION WITH THE DEBT PUSHDOWN?]
3.28. Transfer of Assets. Subject to the terms and conditions of this
------------------
Agreement, Baxter hereby agrees to convey, assign, transfer, contribute and set
over, or cause to be conveyed, assigned, transferred, contributed and set over,
to Edwards World Trade on or prior to the Distribution Date all of Baxter World
Trade's right, title and interest in and to the Transferred Assets, if any.
3.29. Transfer of Liabilities. Subject to the terms and conditions of
-----------------------
this Agreement, Edwards shall cause Edwards World Trade to assume, effective as
of the Distribution Date, and pay, comply with and discharge all Assumed
Liabilities of Baxter World Trade.
3.30. Transfer of Edwards World Trade to Baxter. Baxter and Edwards
-----------------------------------------
hereby agree to take, or cause to be taken, any and all actions necessary to
effect the declaration of a dividend by Baxter World Trade to Baxter of all of
Baxter World Trade's right, title and interest in and to the common stock of
Edwards World Trade.
3.31. Edwards Holdings Switzerland. After the Distribution Date,
----------------------------
Edwards Lifesciences Holding AG ("Edwards Holdings Switzerland") shall be formed
----------------------------
as a Swiss corporation, and Edwards World Trade shall transfer to Edwards
Holdings Switzerland all of its right, title and interest in and to the capital
stock of Edwards Lifesciences AG, Edwards
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<PAGE>
Lifesciences Holding A/S and Edwards Lifesciences Uden BV in exchange for ____
shares of capital stock of Edwards Holdings Switzerland.
ARTICLE IV
TRANSFERS TO EDWARDS U.S. OPERATING SUBSIDIARY
----------------------------------------------
4.1. Organization of Edwards U.S. Operating Subsidiary. (a) Prior to
-------------------------------------------------
or promptly following the execution of this Agreement, Baxter shall cause to be
formed, under the Limited Liability Company Act of Delaware, Edwards
Lifesciences LLC ("Edwards LLC"), as a wholly-owned Subsidiary of BHC. Edwards
-----------
LLC shall be qualified as a foreign limited liability company under the relevant
laws of each state within the United States and in each jurisdiction outside the
United States where the ownership of its assets or conduct of its business makes
such qualification necessary.
(b) Prior to or promptly following the execution of this Agreement, Baxter
shall cause to be formed, under the General Corporation Law of Delaware, Edwards
Lifesciences (U.S.) Inc. ("Edwards U.S."), as a wholly-owned Subsidiary of BHC.
------------
Edwards U.S. shall be qualified as a foreign corporation under the relevant laws
of each state within the United States and in each jurisdiction outside the
United States where the ownership of its assets or conduct of its business makes
such qualification necessary.
4.2. Transfer of Assets. Subject to the terms and conditions of this
------------------
Agreement, on or prior to the Distribution Date, Baxter shall convey, assign,
transfer, contribute and set over, or cause to be conveyed, assigned,
transferred, contributed and set over, to Edwards LLC, and Edwards shall cause
Edwards LLC to accept and receive, on or prior to the Distribution Date, all
right, title and interest of BHC in and to the Transferred Assets.
4.3. Transfer of Third-Party Distribution Contracts. Subject to the
----------------------------------------------
terms and conditions of this Agreement, Baxter shall cause the foreign
Subsidiaries of Baxter World Trade listed on Schedule 4.3 hereto (the "Foreign
------------ -------
Subsidiaries") to convey, assign, transfer, contribute and set over to Edwards
- ------------
LLC, and Edwards shall cause Edwards LLC to accept and receive, on or prior to
the Distribution Date, all right, title and interest of the Foreign Subsidiaries
in and to the third-party distribution contracts relating Exclusively to the
Edwards Business, except as indicated on Schedule 4.3.
------------
4.4. Assumption of Liabilities. Except as expressly limited in this
-------------------------
Article IV, Edwards shall cause an appropriate Subsidiary to assume, effective
- ----------
on or before the Distribution Date, and pay, comply with and discharge the
Assumed Liabilities.
4.5. Transfer of Operating Subsidiaries. Baxter and Edwards hereby
----------------------------------
agree to take, or cause to be taken, any and all actions necessary to effect the
following transactions on or prior to the Distribution Date, with each
transaction occurring at the approximate times and in the order described in
Schedule 3.1 hereto:
- ------------
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<PAGE>
(a) BHC shall contribute to Edwards U.S., in exchange for all of the
capital stock of Edwards U.S. together with [certain intercompany
liabilities BHC owes Baxter], all of BHC's right, title and interest in and
to the membership interests of Edwards LLC and all of BHC's right, title
and interest in and to the capital stock of Perfusion Services of Baxter
Healthcare Corporation, a Pennsylvania corporation; and
(b) [ANDY GORE TO PROVIDE INFORMATION RE: ASSIGNMENT OF DEBT.]
ARTICLE V
ORGANIZATION OF EDWARDS LIFESCIENCES CORPORATION
------------------------------------------------
5.1. Organization of Edwards. Baxter and Edwards shall take any and
-----------------------
all action necessary so that, on the Distribution Date, the Certificate of
Incorporation and By-laws of Edwards shall be in the forms attached hereto as
Exhibits E and F, respectively. Prior to the Distribution Date, the Board of
- ---------- -
Directors of Edwards shall consider the adoption of a stockholder rights plan in
substantially the form attached hereto as Exhibit G. On the Distribution Date,
---------
the Edwards Board of Directors shall consist of, and Baxter and Edwards shall
take all actions that may be required to elect or otherwise appoint as directors
of Edwards on or prior to the Distribution Date, the persons named on Exhibit H.
---------
Following the transfers of Subsidiaries contemplated by Section 5.2, Edwards
-----------
shall take appropriate action to be qualified as a foreign corporation under the
General Corporation Law of California.
5.2. Transfer of Certain Subsidiaries. Baxter and Edwards hereby
--------------------------------
agree to take, or cause to be taken, any and all actions necessary to effect the
following transactions, on or prior to the Distribution Date and at the
approximate times described in Schedule 3.1:
------------
(a) BHC shall distribute as a dividend to Baxter all of BHC's right,
title and interest in and to the capital stock of Edwards U.S.;
(b) Baxter shall contribute to Edwards, in exchange for ___________,
all of Baxter's right, title and interest in and to the capital stock of
(i) Edwards U.S., (ii) Edwards World Trade, (iii) Research Medical Inc., a
Utah corporation; and (iv) Baxter CVG Sub, a Delaware corporation; and
(c) [ANDY GORE TO PROVIDE INFORMATION RE: ASSIGNMENT OF DEBT.]
5.3. Transfer of Assets. Subject to the terms and conditions of this
------------------
Agreement, Baxter hereby agrees to convey, assign, transfer, contribute and set
over, or cause to be conveyed, assigned, transferred, contributed and set over,
to Edwards on or prior to the Distribution Date, all of Baxter's right, title
and interest in and to the Transferred Assets.
5.4. Transfer of Liabilities. Subject to the terms and conditions of
-----------------------
this Agreement, Edwards shall assume, or cause to be assumed, effective as of
the Distribution Date,
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and pay, comply with and discharge, or cause to be paid, complied with or
discharged, all Assumed Liabilities of Baxter.
ARTICLE VI
EXCLUSIONS FROM TRANSFERS
-------------------------
6.1. Retained Assets. Notwithstanding anything to the contrary
---------------
herein, the following assets (the "Retained Assets") are not, and shall not be
---------------
deemed to be, Transferred Assets:
(a) Cash and cash equivalents, any cash on hand or in bank accounts,
certificates of deposit, commercial paper and similar securities, except
for (i) cash and cash equivalents of the Transferred Subsidiaries, (ii)
deposits securing bonds, letters of credit, leases and all other
obligations related to the Edwards Business and (iii) petty cash and
impressed funds related to the Edwards Business;
(b) Except as otherwise provided in the Tax Sharing Agreement, any
right, title or interest of Baxter or its Subsidiaries in any foreign,
federal, state or local tax refund, credit or benefit (including any income
with respect thereto) relating to the operations of the Edwards Business
prior to the Distribution Date;
(c) Any amounts accrued on the books and records of Baxter or its
Subsidiaries or the Edwards Business with respect to any Retained
Liabilities;
(d) All assets relating to all employee benefit plans of Baxter other
than the assets transferred in accordance with Section 12.9;
------------
(e) Any corporate allocations of non-Edwards Business-related assets
heretofore made by Baxter or its Subsidiaries to the Edwards Business for
internal management responsibility reporting purposes, other than
allocations of accounts receivable and accounts payable as contemplated by
Section 9.6(d);
--------------
(f) Any proprietary rights in and to the BAXTER name and the related
emblem design, and any variants thereof, and the Trademarks used by Baxter
or its Subsidiaries in relation to the Retained Business, except as
provided in Article X;
---------
(g) All assets held by Baxter Japan;
(h) Contracts with customers or third-party distributors in or with
respect to the countries or regions listed on Schedule 6.1(h) hereto (which
---------------
are the countries and regions where Baxter, as principal, is serving as the
distributor for Edwards Products) together with the accounts receivable and
all other rights, claims, demands, causes of action and rights to
indemnification or contribution under such Contracts;
(i) All assets used in connection with Baxter's Tisseal product; and
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<PAGE>
(j) All other assets, properties and rights of Baxter and its
Subsidiaries not used Exclusively in the conduct of the Edwards Business
and not specifically included as Transferred Assets.
6.2. Retained Liabilities. Notwithstanding anything to the contrary
--------------------
in this Agreement, neither Edwards nor any of its Subsidiaries shall assume any
of the following Liabilities of Baxter and its Subsidiaries (the "Retained
--------
Liabilities"):
- -----------
(a) Liabilities of Baxter Japan; and
(b) The environmental liabilities set forth on Schedule 6.2 hereto.
------------
Nothing contained in this Section 6.2 shall be construed as in any way limiting
-----------
the Liabilities of Edwards or any of its Subsidiaries under any of the Operating
Agreements.
6.3. Termination of Existing Intercompany Agreements. Except as
-----------------------------------------------
otherwise expressly provided in this Agreement, the Conveyancing Instruments,
the Implementation Agreements, the Operating Agreements or the agreements set
forth on Schedule 6.3, all Intercompany Agreements and all other intercompany
------------
arrangements and course of dealings, whether or not in writing and whether or
not binding, in effect immediately prior to the Distribution Date, shall be
terminated and be of no further force and effect from and after the Distribution
Date. [ARE THERE INTERNATIONAL AGREEMENTS THAT SHOULD SURVIVE?]
ARTICLE VII
ASSET SEPARATION CLOSING MATTERS
--------------------------------
7.1. Delivery of Instruments of Conveyance. In order to effectuate
-------------------------------------
the transactions contemplated by Articles III, IV and V, the Parties shall
------------ -- -
execute and deliver, or cause to be executed and delivered, prior to or as of
the Distribution Date such deeds, bills of sale, instruments of assumption,
instruments of assignment, stock powers, certificates of title and other
documents of assignment, transfer, assumption and conveyance (collectively, the
"Conveyancing Instruments") as the Parties shall reasonably deem necessary or
------------------------
appropriate to effect such transactions.
7.2. Delivery of Other Agreements. Prior to or as of the Distribution
----------------------------
Date, the Parties shall execute and deliver, or shall cause to be executed and
delivered, each of the Implementation Agreements, the Operating Agreements and
the Tax Sharing Agreement.
7.3. Non-Assignable Contracts. In the event and to the extent that
------------------------
Baxter and its Subsidiaries are unable to obtain any consent, approval or
amendment to any Contract, lease, license or other rights relating to the
Edwards Business that otherwise would be transferred or assigned to Edwards or
one of its Subsidiaries as contemplated by this Agreement or any other agreement
or document contemplated hereby, (i) Baxter and its Subsidiaries shall continue
to be bound thereby and the purported transfer or assignment to Edwards or one
of its Subsidiaries
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<PAGE>
shall automatically be deemed deferred until such time as all legal impediments
are removed and/or all necessary consents have been obtained, and (ii) unless
not permitted by the terms thereof or by law, Edwards or one of its Subsidiaries
shall pay, perform and discharge fully all the obligations of Baxter or its
Subsidiaries thereunder from and after the Distribution Date, or such earlier
date as such transfer or assignment otherwise would have taken place. Edwards
shall indemnify Baxter and its Subsidiaries for all indemnifiable Losses arising
out of the performance by Edwards or its Subsidiaries referred to in the
preceding sentence or any actions of Baxter or any of its Subsidiaries taken in
accordance with this Section 7.3 or at the direction or request of Edwards as
provided in this Section 7.3. Baxter and its Subsidiaries shall, without further
consideration therefor, pay and remit to Edwards or its Subsidiaries promptly
all monies, rights and other considerations received in respect of such
performance. Baxter and its Subsidiaries shall exercise or exploit its rights
and options under all such Contracts, leases, licenses and other rights and
commitments referred to in this Section 7.3, including instituting or joining
-----------
as a party legal proceedings, as reasonably directed by Edwards and at Edwards'
expense. If and when any such consent shall be obtained or such Contract, lease,
license or other right shall otherwise become assignable or be able to be
novated, Baxter or its Subsidiaries shall promptly assign and novate (to the
extent permissible) all of its rights and obligations thereunder to Edwards or
its Subsidiaries without payment of further consideration, and Edwards or its
Subsidiaries shall, without the payment of any further consideration therefor,
assume such rights and obligations. To the extent that the assignment of any
Contract, lease, license or other right (or the proceeds thereof) pursuant to
this Section 7.3 is prohibited by law, the assignment provisions of this
-----------
Section 7.3 shall operate to create a subcontract with Edwards or its
- -----------
Subsidiaries to perform each relevant unassignable Contract of Baxter at a
subcontract price equal to the monies, rights and other considerations received
by Baxter or its Subsidiaries with respect to the performance by Edwards or its
Subsidiaries under such subcontract.
7.4. Further Assurances. (a) In addition to the actions specifically
------------------
provided for elsewhere in this Agreement, each of the Parties shall use
commercially reasonable efforts to take, or cause to be taken, all actions and
to do, or cause to be done, all things reasonably necessary, proper or advisable
under applicable laws, regulations and agreements to consummate and make
effective, in the most expeditious manner practicable, the transactions
contemplated by this Agreement and the other agreements and documents
contemplated hereby. Without limiting the generality of the foregoing, each
Party shall cooperate with the other Party to execute and deliver, or use
commercially reasonable efforts to cause to be executed and delivered, all
instruments, including instruments of conveyance, assignment and transfer, and
to make all filings with, and to obtain all consents, approvals or
authorizations of, any Governmental Authority or any other Person under any
permit, license, Contract or other instrument, and to take all such other
actions as such Party may reasonably be requested to take by the other Party
from time to time, consistent with the terms of this Agreement, in order to
confirm the title of Edwards and its Subsidiaries to all of the Edwards
Business, to put Edwards or its Subsidiaries in actual possession and operating
control of the Transferred Assets and to permit Edwards or its Subsidiaries to
exercise all rights with respect thereto and to effectuate the provisions and
purposes of this Agreement, the Conveyancing Instruments, the Implementation
Agreements, the Operating Agreements, the Tax Sharing Agreement and the other
agreements and documents contemplated hereby or thereby; provided, however, that
-------- -------
neither Party shall be obligated to pay any consideration to any third-party in
connection with the foregoing.
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<PAGE>
(b) If, as a result of mistake, oversight or otherwise, any asset
reasonably necessary to the conduct of the Edwards Business is not transferred
to Edwards or one of its Subsidiaries, or any asset reasonably necessary to the
conduct of the Retained Business is transferred to Edwards or one of its
Subsidiaries, Baxter and Edwards shall negotiate in good faith after the
Distribution Date to determine whether such asset should be transferred to
Edwards or one of its Subsidiaries or to Baxter or one of its Subsidiaries, as
the case may be, and/or the terms and conditions upon which such asset shall be
made available to Edwards or one of its Subsidiaries or to Baxter or one of its
Subsidiaries, as the case may be. Unless expressly provided to the contrary in
this Agreement, the Conveyancing Instruments, the Implementation Agreements, the
Operating Agreements or the Tax Sharing Agreement, if as a result of mistake,
oversight or otherwise, any Liability arising out of or relating to the Edwards
Business is retained by Baxter or its Subsidiaries, or any Liability arising out
of or relating to the Retained Business is assumed by Edwards or its
Subsidiaries, Baxter and Edwards shall negotiate in good faith after the
Distribution Date to determine whether such Liability should be transferred to
Edwards or one of its Subsidiaries or Baxter or one of its Subsidiaries, as the
case may be, and/or the terms and conditions upon which any such Liability shall
be transferred. The Parties agree that the terms and conditions upon which any
assets or Liabilities are made available or assumed as provided in this Section
7.4(b) shall be consistent with the terms of this Agreement, the Implementation
Agreements, the Operating Agreements and the Tax Sharing Agreement.
(c) If, after the Distribution Date, either Party identifies any
commercial or other service, product or component that can be provided by the
other Party, that is needed to assure a smooth and orderly transition of the
businesses in connection with the consummation of the transactions contemplated
hereby, and that is not otherwise governed by the provisions of this Agreement,
the Operating Agreements or the Tax Sharing Agreement, the Parties will
cooperate in determining whether there is a mutually acceptable arm's-length
basis, consistent with the terms of the this Agreement, the Implementation
Agreements, the Operating Agreements and the Tax Sharing Agreement, on which one
Party will provide such service to the other Party.
7.5. Novation of Assumed Liabilities. (a) Edwards or its
-------------------------------
Subsidiaries, at the request of Baxter or its Subsidiaries, shall use
commercially reasonable efforts to obtain, or cause to be obtained, any consent,
approval, release, substitution or amendment required to novate (including with
respect to any federal government contract) or assign all obligations under the
Assumed Liabilities, or to obtain in writing the unconditional release of all
parties to such arrangements other than Edwards or its Subsidiaries; provided,
--------
however, that Edwards and its Subsidiaries shall not be obligated to pay any
- -------
consideration therefor to any third-party from whom such consents, approvals,
releases, substitutions or amendments are requested.
(b) Edwards agrees to provide Baxter, upon written request, with a
list of Contracts included in the Transferred Assets under which Baxter or one
of its Subsidiaries remains liable and which has a base term that is subject to
automatic renewal or renewal in the absence of notice at the option of Edwards
or one of its Subsidiaries. Edwards agrees that if so requested by Baxter with
respect to any individual Contract or Contracts included on such list, it will
not exercise any option to renew such Contract and, to the extent such Contract
provides for automatic renewal, Edwards agrees that it will not permit such
Contract to enter an auto-renewal period.
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<PAGE>
7.6. Nominee Shares. Baxter agrees to use commercially reasonable
--------------
efforts to cause to be transferred to, or as directed by, Edwards all director's
qualifying or other shares of capital stock of any of the Transferred
Subsidiaries held as of the Distribution Date by persons who are not Edwards
Employees. Edwards agrees to use commercially reasonable efforts to cause to be
transferred to, or as directed by, Baxter all director's qualifying or other
shares of capital stock of any Baxter Subsidiary other than Edwards and the
Transferred Subsidiaries held as of the Distribution Date by Edwards Employees.
7.7. Provision of Corporate Records. Prior to or as promptly as
------------------------------
practicable after the Distribution Date, Baxter shall deliver to Edwards all
corporate books and records of Edwards and copies of all corporate books and
records of Baxter relating to the Edwards Business, including in each case all
active agreements, litigation files and government filings. From and after the
Distribution Date, all books, records and copies so delivered shall be the
property of Edwards.
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES
------------------------------
8.1. Organization, Good Standing and Authority of Baxter. Baxter
---------------------------------------------------
hereby represents and warrants to Edwards as follows: Baxter is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware. Baxter has full power and authority to execute, deliver and
perform this Agreement. The execution, delivery and performance of this
Agreement by Baxter have been duly authorized and approved by Baxter's board of
directors and do not require any further authorization or consent of Baxter or
its stockholders. This Agreement has been duly authorized, executed and
delivered by Baxter.
8.2. Organization, Good Standing and Authority of Edwards. Edwards
----------------------------------------------------
represents and warrants to Baxter as follows: Edwards is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Edwards has full power and authority to execute, deliver and perform
this Agreement. The execution, delivery and performance of this Agreement by
Edwards has been duly authorized and approved by Edwards' board of directors and
do not require any further authorization or consent of Edwards or its
stockholder. This Agreement has been duly authorized, executed and delivered by
Edwards.
8.3. No Other Representations and Warranties. Except as expressly set
---------------------------------------
forth herein or in any Operating Agreement, and notwithstanding anything
contained in any Implementation Agreement, neither Baxter nor any of its
Subsidiaries represents or warrants in any way (i) as to the value or freedom
from encumbrance of, or any other matter concerning, any of the Transferred
Assets or Transferred Subsidiaries or (ii) as to the legal sufficiency to convey
title to any of the Transferred Assets or Transferred Subsidiaries on the
execution, delivery and filing of the Conveyancing Instruments. SUBJECT TO
SECTION 9.10 AND THE OPERATING AGREEMENTS, ALL SUCH ASSETS AND SUBSIDIARIES ARE
- ------------
BEING TRANSFERRED ON AN "AS IS, WHERE IS" BASIS WITHOUT ANY REPRESENTATION OR
WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE,
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<PAGE>
MARKETABILITY, TITLE, VALUE, FREEDOM FROM ENCUMBRANCE OR ANY OTHER
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, and Edwards and its Subsidiaries
shall bear the economic and legal risks that any conveyances of such assets and
Subsidiaries shall prove to be insufficient or that Edwards' and its
Subsidiaries' title to any such assets and Subsidiaries shall be other than good
and marketable and free of encumbrances. Except as expressly set forth in this
Agreement or in any Operating Agreement, and notwithstanding anything contained
in any Implementation Agreement, neither Baxter nor any of its Subsidiaries
represents or warrants that the obtaining of the consents or approvals, the
execution and delivery of any amendatory agreements and the making of the
filings and applications contemplated by this Agreement shall satisfy the
provisions of all applicable agreements or the requirements of all applicable
laws or judgments, and, subject to Section 7.3, Edwards and its Subsidiaries
-----------
shall bear the economic and legal risk that any necessary consents or approvals
are not obtained or that any requirements of law or judgments are not complied
with.
ARTICLE IX
CERTAIN COVENANTS
-----------------
9.1. Conduct of Edwards Business Pending the Distribution Date. Each
---------------------------------------------------------
of the Parties agrees that, from the date hereof until the Distribution Date,
except as otherwise expressly contemplated by this Agreement, it will take, or
cause to be taken, all reasonable efforts to carry on the Edwards Business
diligently in the ordinary course and substantially in the same manner as
heretofore conducted and to preserve intact the business organization and
goodwill of the Edwards Business.
9.2. Registration and Listing. Prior to the Distribution Date:
------------------------
(a) Baxter and Edwards shall prepare a registration statement on Form
10, including such amendments or supplements thereto as may be necessary
(together, the "Registration Statement") to effect the registration of the
----------------------
Edwards Common Stock under the Exchange Act, which Registration Statement shall
include an information statement to be sent by Baxter to its stockholders in
connection with the Distribution (the "Information Statement"). Edwards shall
---------------------
file the Registration Statement with the SEC and shall use commercially
reasonable efforts to cause the Registration Statement to become and remain
effective under the Exchange Act as soon as reasonably practicable. After the
Registration Statement becomes effective, Baxter shall mail the Information
Statement to the holders of Baxter Common Stock as of the Record Date.
(b) The Parties shall use commercially reasonable efforts to take all
such action as may be necessary or appropriate under state and foreign
securities and "Blue Sky" laws in connection with the transactions contemplated
by this Agreement.
(c) Baxter and Edwards shall prepare, and Edwards shall file and seek
to make effective, an application for the listing of the Edwards Common Stock on
the NYSE, subject to official notice of issuance.
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<PAGE>
(d) The Parties shall cooperate in preparing, filing with the SEC and
causing to become effective any registration statements or amendments thereto
that are necessary or appropriate in order to effect the transactions
contemplated hereby or to reflect the establishment of, or amendments to, any
employee benefit plans contemplated hereby.
9.3. [Funds Distributed to Baxter. On or prior to the Distribution
----------------------------
Date, Edwards shall enter into a new credit facility or facilities with
commercial lenders (the "Edwards Credit Facility") and use the proceeds of the
-----------------------
indebtedness incurred under the Edwards Credit Facility to ___________. The
calculation of the amounts set forth in this Section 9.3 is set forth on
-----------
Schedule 9.3.][BOB HOMBACH]
- ------------
9.4. Post-Distribution Tax-Related Restrictions. (a) In order to
------------------------------------------
avoid potentially adverse tax consequences relating to the Distribution, for a
period of two years after the Distribution Date Edwards shall not:
(i) cease to engage in the active conduct of a trade or
business within the meaning of Section 355 of the Code;
(ii) issue or redeem any share of stock of Edwards, except for
issuances and redemptions
(A) for the benefit of Edwards' employees, or
(B) to effect acquisitions by Edwards in the ordinary
course of business, or
(C) in connection with the issuance of any convertible debt
by Edwards, or
(D) in accordance with the requirements for permitted
purchases of Edwards stock as set forth in Section 4.05(1)(b) of
Revenue Procedure 96-30 issued by the IRS; or
(iii) liquidate or merge with any other corporation;
unless, with respect to (i), (ii) or (iii) above, either (x) an opinion is
obtained from counsel to Baxter reasonably acceptable to Edwards, or (y) a
ruling is obtained from the IRS, in either case to the effect that such act or
event will not adversely affect the federal income tax consequences of the
Distribution to Baxter, its stockholders who receive Edwards Shares or Edwards.
(b) If, as a result of any transaction occurring after the
Distribution Date involving either the stock or assets of either Edwards or any
of its Subsidiaries, or any combination thereof, the Distribution fails to
qualify as tax-free under the provisions of Section 355 of the Code, Edwards
shall indemnify Baxter for all Taxes, Liabilities and associated expenses,
including penalties and interest, incurred as a result of such failure of the
Distribution to qualify under Section 355 of the Code. If the Distribution fails
to qualify as tax-free under the provisions of Section 355 of the Code other
than as a result of a transaction occurring after the
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<PAGE>
Distribution Date involving either the stock or assets of Edwards or any of its
Subsidiaries, or any combination thereof, then Edwards shall not be liable for
such Taxes, Liabilities or expenses.
(c) Notwithstanding Paragraph 9.4(a) above, Baxter and Edwards agree as
follows. As of the Distribution Date, neither Baxter nor Edwards has entered
into, and within the first six months following the Distribution Date, neither
Baxter nor Edwards will enter into any agreements, understandings, arrangements
or substantial negotiations that would result, individually or collectively, in
a change of ownership of 50% or more of either within the meaning of Section
355(e) of the Code. Further, should Edwards enter into or continue any
negotiations during the first six months following the Distribution Date that
could result in the acquisition of its stock by a third-party, it will notify
the Baxter tax department immediately.
9.5. Intercompany Receivables and Payables, Cash Management and True-Up
------------------------------------------------------------------
[ANDY GORE, DOUG SHUMA AND BOB HOMBACH]. (a) All Intercompany Receivables and
Payables between any Subsidiary of Baxter, on the one hand, and any Subsidiary
of Edwards, on the other hand, shall be settled (i) as of 3:00 p.m., Chicago
time, on [Date] if such Intercompany Receivables and Payables are subject to
----
Baxter's netting process and (ii) as of [Date] if such Intercompany Receivables
----
and Payables are not subject to Baxter's netting process, in each case, in cash
with such cash settlement occurring on [Date]. Commencing from the opening of
----
business on [Date], in the case of transactions subject to the netting process,
----
and [Date], in the case of transactions not subject to the netting process,
----
Intercompany Receivables and Payables between any Subsidiary of Baxter, on the
one hand, and any Subsidiary of Edwards, on the other hand, shall be recorded
for accounting purposes as third-party trade account receivables and payables.
(b) As provided in Section 6.1(a), Baxter shall be entitled to all cash
--------------
bank balances [(other than cash and cash equivalents of the Transferred
Subsidiaries)][IS THIS CORRECT?] existing immediately prior to the Distribution
Date relating to the Edwards Business, or otherwise utilized or maintained in
connection with the Edwards Business, including cash balances representing
deposited checks or drafts for which only a provisional credit has been allowed
in depository accounts, which are to be transferred to Edwards or any of its
Subsidiaries on or prior to the Distribution Date. Any such cash balances as of
the Distribution Date which have not been transferred to Baxter shall be paid to
Baxter.
(c) All Loans owing by Edwards or any of its Subsidiaries to Baxter or
any of its Subsidiaries after giving effect to the transactions contemplated by
Articles III, IV and V shall be repaid no later than the Distribution Date.
- ------------ -- -
(d) Edwards or an appropriate Subsidiary thereof shall be responsible for
payment of all checks or drafts issued up to the Distribution Date against
disbursement accounts transferred to Edwards or such Subsidiary, which checks or
drafts have not been charged against such disbursement accounts on or prior to
the Distribution Date (other than with respect to payroll accounts, which will
be assumed by Baxter or its Subsidiaries).
(e) Baxter shall assist Edwards and each of its Subsidiaries in
establishing a separate cash management system effective as of and immediately
after the Distribution Date.
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<PAGE>
9.6. Collection of Accounts Receivable. (a) Baxter and its Subsidiaries
---------------------------------
shall be entitled to control all collection actions related to the Retained
Assets, including the determination of what actions are necessary or appropriate
and when and how to take any such action.
(b) Subject to Section 9.6(d), Edwards and its Subsidiaries shall be
entitled to control all collection actions related to the Transferred Assets,
including the determination of what actions are necessary or appropriate and
when and how to take any such action.
(c) If, after the Distribution Date, Edwards or any of its Subsidiaries
shall receive any remittance from any account debtors with respect to the
accounts receivable arising out of the Retained Assets or other amounts due
Baxter or its Subsidiaries in respect of services rendered or products sold by
Baxter or its Subsidiaries after the Distribution Date, or Baxter or any of its
Subsidiaries shall receive any remittance from any account debtors with respect
to the accounts receivable arising out of the Transferred Assets or other
amounts due Edwards or its Subsidiaries in respect of services rendered or
products sold by Edwards or its Subsidiaries after the Distribution Date, such
Party shall receive and deposit such remittance and deliver cash in an amount
equal thereto to the other Party as soon as practicable. In the absence of any
designation of the specific invoice being paid by a customer thereby, payments
from account debtors shall be applied to the earliest invoice outstanding with
respect to indebtedness of such account debtor owing to either Baxter or
Edwards.
(d) The Parties acknowledge that certain accounts receivable and accounts
payable are not capable of being specifically separated between Baxter and its
Subsidiaries, on the one hand, and Edwards and its Subsidiaries, on the other
hand. Accordingly, the Parties agree that, notwithstanding the foregoing,
Baxter shall cause one or more of its Subsidiaries to administer the collection
of such accounts receivable and the payment of such accounts payable. Baxter
shall pay or cause to be paid to Edwards or its appropriate Subsidiary an
allocable portion of the amounts collected with respect to such accounts
receivable determined by Baxter in accordance with Baxter's past practices.
Edwards shall pay or cause to be paid to Baxter or its appropriate Subsidiary an
allocable portion of the amounts paid with respect to such accounts payable
determined by Baxter in accordance with Baxter's past practices.
(e) Each Party shall deliver to the other such schedules and other
information with respect to the accounts receivable included in the Transferred
Assets and those not included therein as each shall reasonably request from time
to time in order to permit such Parties to reconcile their respective records
and to monitor the collection of all accounts receivable (whether or not
Transferred Assets). Each Party shall afford the other reasonable access to its
books and records relating to any accounts receivable.
9.7. Agreements Relating to Baxter and Edwards. (a) Each of Baxter
-----------------------------------------
and Edwards shall use commercially reasonable efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, all things, reasonably
necessary, proper or advisable under applicable laws, regulations and agreements
to consummate, make effective and perform its or its Subsidiaries' allocable
portion of all purchase, distribution and other obligations under all Contracts
with customers, suppliers, vendors or other third parties relating to both the
Edwards Business and the Retained Business (the "Shared Agreements"), including
-----------------
those Shared
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Agreements set forth on Schedule 9.7 hereto. Each of Baxter and its Subsidiaries
------------
and Edwards and its Subsidiaries shall be entitled to the rights and privileges
of its allocable portion of the Shared Agreements.
(b) Each of Baxter and Edwards shall use commercially reasonable efforts
to take, or cause to be taken, all actions, and to do, or cause to be done, all
things reasonably necessary, proper or advisable under applicable laws,
regulations and agreements to afford the rights and privileges of the allocable
portion of the Shared Agreements to the other.
(c) Liabilities pursuant to, arising under or relating to a Shared
Agreement shall be allocated between Baxter and its Subsidiaries, on the one
hand, and Edwards and its Subsidiaries, on the other hand, as follows:
(i) First, if a Liability is incurred exclusively in respect of a
benefit received by one Party, the Party receiving such benefit shall be
responsible for such Liability;
(ii) Second, if a Liability cannot be so allocated under clause (i),
such Liability shall be allocated between the Parties based on the relative
proportions of total benefit received (based upon the performance under
such Shared Agreement during the twelve-month period immediately prior to
the Distribution Date) under the relevant Shared Agreement. Notwithstanding
the foregoing, each Party shall be responsible for any and all Liabilities
arising out of or resulting from its breach of the relevant Shared
Agreement.
(d) If either Baxter or its Subsidiaries, on the one hand, or Edwards or
its Subsidiaries, on the other hand, improperly receives any benefit or payment
under any Shared Agreement that was intended for the other, the Party receiving
such benefit or payment will use commercially reasonable efforts to deliver,
transfer or otherwise afford such benefit or payment to the other Party.
9.8. Certain Releases. Baxter or one or more of its Subsidiaries is a
----------------
guarantor of certain obligations of the Edwards Business, including those
obligations set forth on Schedule 1.1(l). Edwards shall use commercially
---------------
reasonable efforts to release Baxter and its Subsidiaries from such guarantees
prior to the Distribution Date and shall indemnify and hold harmless Baxter and
its Subsidiaries from and against any Liabilities relating to such guarantees.
[BOB HOMBACH: ARE THERE ANY?]
9.9. Litigation. (a) On or as of the Distribution Date, Edwards or its
----------
Subsidiaries, as appropriate, shall assume and pay all Liabilities that may
result from the Assumed Actions (as hereinafter defined) and all fees and costs
relating to the defense of the Assumed Actions, including attorneys' fees and
costs incurred after the Distribution Date. "Assumed Actions" shall mean those
---------------
cases, claims and investigations (on which Baxter or its Subsidiaries, other
than Edwards and its Subsidiaries, is a defendant or the party against whom the
claim or investigation is directed) relating [primarily] to the Edwards
Business, including those listed on Schedule 9.9(a).
---------------
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<PAGE>
(b) Baxter and its Subsidiaries shall transfer the Transferred Actions
(as hereinafter defined) to Edwards, and Edwards shall receive and have the
benefit of all of the proceeds of such Transferred Actions. "Transferred
-----------
Actions" shall mean those cases and claims (on which Baxter or its Subsidiaries
- -------
is a plaintiff or claimant) relating [primarily] to the Edwards Business,
including those listed on Schedule 9.9(b).
---------------
9.10. Liability for Previously Delivered Products. The following
-------------------------------------------
provisions shall apply to all Baxter Products sold or transferred prior to the
Distribution Date to the Edwards Business for distribution and to all Edwards
Products sold or transferred prior to the Distribution Date to the Retained
Business for distribution (in each case, the "Products"):
--------
(a) Each Party that supplied Products either directly or through its
Subsidiaries warrants to the other Party that, at the time of delivery to the
other Party (or such other Party's designee): (i) the Products were not (A)
adulterated or misbranded within the meaning of the Federal Food, Drug and
Cosmetic Act (as amended) (the "Act") or the regulations issued thereunder,
(B) products that may not, under the provisions of Sections 404, 505, 514 or
515 of the Act, be introduced into interstate commerce, or (C) banned devices
under Section 516 of said Act; (ii) the Products shall not violate any other
medical or health law, statute, regulation or directive applicable to the
Products or their distribution; and (iii) the Products shall not violate any
applicable customs, trade or environmental law, statute, regulation or
directive. THE FOREGOING WARRANTY IS EXCLUSIVE AND IN LIEU OF ALL OTHER
WARRANTIES OF ANY KIND WITH RESPECT TO THE PRODUCTS, WHETHER STATUTORY,
WRITTEN, ORAL, EXPRESS OR IMPLIED, INCLUDING ANY WARRANTIES OF FITNESS FOR A
PARTICULAR PURPOSE AND MERCHANTABILITY. ANY LIABILITY OF A PARTY AND ITS
SUBSIDIARIES TO THE OTHER PARTY AND ITS SUBSIDIARIES UNDER THE FOREGOING
WARRANTY SHALL BE LIMITED TO THE TOTAL PRICE PAID BY SUCH PARTY AND ITS
SUBSIDIARIES FOR THE PRODUCTS THAT ARE THE SUBJECT OF SUCH LIABILITY PLUS ALL
COSTS FOR TRANSPORTATION AND OTHER DIRECT EXPENSES INCURRED BY EDWARDS AND ITS
SUBSIDIARIES WITH RESPECT TO SUCH PRODUCTS. A receiving Party's and its
Subsidiaries' exclusive remedy against the supplying Party and its
Subsidiaries for any breach of the foregoing warranty shall be the right to
require the other Party or its Subsidiaries to repair or replace (at the other
Party's option and expense) any Product that proves not to be in conformity
with applicable labeling or specifications. The receiving Party or its
Subsidiaries shall pay the transportation and other costs incurred by a Party
or its Subsidiaries with respect to any Products returned to the supplying
Party or its Subsidiaries for repair or replacement under this Section, or, at
the receiving Party's option, reimburse the supplying Party or its
Subsidiaries for any such costs. The foregoing right to require repair or
replacement shall commence on the date of receipt by a Party or its
Subsidiaries of each Product from the supplying Party or its Subsidiaries and
expire six months after receipt by the end-user customer (the "Repair or
---------
Replacement Period"), except that the Repair or Replacement Period for each
------------------
Product the use of which is subject to an expiration date shall expire on the
applicable expiration date, if sooner.
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<PAGE>
(b) Each Party that supplied Products either directly or through its
Subsidiaries warrants to the receiving Party and its Subsidiaries that, at the
time of delivery to the receiving Party or its designee, the receiving Party
or its Subsidiaries shall have good and marketable title to all such Products
free and clear of all liens or encumbrances (other than any created by the
receiving Party or its Subsidiaries).
(c) Each Party that supplied Products either directly or through its
Subsidiaries shall indemnify and hold harmless the receiving Party and its
Subsidiaries, from and against, and in respect of, any and all Expenses and
Losses, that result from a third-party claim and that arise out of or relate
to: (i) any actual or alleged Patent, Copyright or Trademark infringement, or
violation of any other proprietary right, arising out of the purchase, sale or
use of the Products; (ii) defects in the Products; (iii) any actual or alleged
breach of warranty or obligation, if any, accompanying the Product or
Products, subject to the limitations in Section 9.10(a) to the extent provided
---------------
therein; and (iv) any claim for personal injury, wrongful death or property
damage arising out of the use of a Product; provided, however, that this
-------- -------
Section 9.10(c) shall not apply to any Expense or Loss: (A) to the extent that
---------------
the Parties agree; (B) to any tort claim, including claims for personal
injury, wrongful death or property damage, to the extent such claims are based
upon any wrongful or negligent act or omission by the receiving Party or its
Subsidiaries or business units (but excluding Subsidiaries or business units
that become Subsidiaries or business units of the Party claiming
indemnification as a result of the Distribution), or their employees or other
agents, including any Expenses or Losses caused by any such wrongful or
negligent act or omission constituting a representation concerning the
characteristics or method of usage of Products, or relating to the storage,
handling or delivery of Products or selection of Products for use in Kits; or
(C) to any actual or alleged Patent, Copyright or Trademark infringement, or
violation of any other proprietary right, arising out of any act or omission
of the receiving Party, its Subsidiaries or any of their Affiliates or
business units (but excluding Subsidiaries of business units that become
Subsidiaries or business units of the Party claiming indemnification as a
result of the Distribution), in connection with the sale of Kits or relating
to any intellectual property owned by a Party, its Subsidiaries or any of
their Affiliates and used in connection with the sale of Kits.
9.11. Edwards Bank Accounts. On or prior to the Distribution Date, Baxter
---------------------
and its Subsidiaries shall transfer the bank accounts set forth on Schedule 9.11
-------------
hereto to Edwards or one of its Subsidiaries. Edwards shall cause any amounts
received, by mistake or otherwise, in such accounts after the Distribution Date
on account of the Retained Business to be transferred promptly to Baxter and its
Subsidiaries, as appropriate. Baxter shall cause any amounts received, by
mistake or otherwise, after the Distribution Date on account of the Edwards
Business to be transferred promptly to Edwards and its Subsidiaries, as
appropriate.
9.12. Informal, Nondocumented Real Estate Leases. Each Party and its
------------------------------------------
Subsidiaries may continue to occupy, from and after the Distribution Date, such
space in the facilities of the other Party and its Subsidiaries as is occupied
immediately prior to the Distribution Date, or such other space therein as may
be mutually agreed to from time to time by Baxter and Edwards, and which
occupancy is otherwise not documented by written leasing agreements, on the
following terms and conditions:
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(a) The occupying Party shall pay to the other Party rent with
respect to such occupied space for the period from and after the
Distribution Date during which such space is so occupied, which rent shall
be determined by the other Party on the same basis on which the other Party
allocates rent with respect to the occupancy of space by business units of
the other Party or as the occupying Party presently is paying, whichever is
lower. Such rent shall be payable from time to time by the occupying Party
(but not more frequently than monthly) promptly following delivery by the
other Party to the occupying Party of a statement therefor.
(b) The occupying Party may, at any time, upon not less than 15
days' prior written notice to Baxter's Director of Corporate Real Estate,
with a copy to Edwards, terminate its occupancy of any or all of such
space.
(c) The other Party may, at any time, upon not less than 30 days'
prior written notice to the occupying Party, require the occupying Party to
cease occupancy of any or all of such space as designated in such notice.
9.13. Third Party Consents. To the extent that the transactions
--------------------
contemplated by this Agreement require any material consents, approvals or
waivers from third parties (the "Third Party Consents"), the Parties will use
--------------------
commercially reasonable efforts to obtain any such material Third Party
Consents.
9.14. Material Governmental Approvals and Consents. To the extent
--------------------------------------------
that the transactions contemplated by this Agreement require any approvals or
consents of any Governmental Authority, the Parties will use commercially
reasonable efforts to obtain any Material Governmental Approvals and Consents.
9.15. Late Payments. Any amount not paid when due pursuant to this
-------------
Agreement or any Implementation Agreement (and any amounts billed or otherwise
invoiced or demanded and properly payable that are not paid within thirty (30)
days of such bill, invoice or other demand) shall accrue interest at a rate per
annum equal to the Prime Rate plus 2%.
9.16. Nextran Heart. It is the intent of Baxter and Edwards that in
-------------
the event that [Nextran] shall develop a xenotransplant heart product suitable
for commercialization, Edwards or a Subsidiary of Edwards shall be entitled to
distribute such product on terms to be agreed between _______ and Edwards in
good faith.
ARTICLE X
INTELLECTUAL PROPERTY LICENSES
------------------------------
10.1. License to Baxter of Transferred Intellectual Property.
------------------------------------------------------
(a) Grant of License. Edwards and its Subsidiaries hereby grant,
----------------
and Baxter and its Subsidiaries hereby accept, a perpetual, nonexclusive, fully
paid-up, worldwide right and
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<PAGE>
license to use and otherwise practice under the Transferred Intellectual
Property (except for the business and non-technical information that is part of
the Transferred Intellectual Property) in order to make, have made, import,
offer for sale, sell and distribute (i) any Baxter products Actually Using the
Transferred Intellectual Property as of the Distribution Date, and (ii) any New
Products developed and manufactured by Baxter or its Subsidiaries during the
three-year period commencing on the Distribution Date. A Party will be deemed to
be "Actually Using" certain Intellectual Property if: (I) such Party or its
--------------
Subsidiaries is manufacturing (or has a third party manufacturing for it) a
product incorporating such Intellectual Property; or (II) a New Product
incorporating such Intellectual Property was Under Development by such Party or
its Subsidiaries prior to the Distribution Date; provided, however, that a Party
-------- -------
will not be deemed to be Actually Using any Intellectual Property the sole use
of which is to manufacture a product for the other Party. "Under Development" by
-----------------
a Party shall mean, with respect to a New Product, that it (1) is the subject of
a funded research and development project by such Party or its Subsidiaries as
of the Distribution Date; (2) is described by such Party or its Subsidiaries in
a pending patent application filed by such Party or its Subsidiaries prior to
the Distribution Date; (3) is described by such Party or its Subsidiaries in an
invention record that satisfies the enablement requirement of 35 U.S.C. ?112 and
which is submitted no less than three months prior to the Distribution Date; or
(4) is (A) described by such Party or its Subsidiaries in an invention record
that satisfies the enablement requirement of 35 U.S.C. ?112 and which is
submitted no less than three months after the Distribution Date, and (B)
subsequently commercialized by such Party or its Subsidiaries. The license
granted pursuant to this Section 10.1(a) shall not include any rights to the
---------------
Transferred Intellectual Property related to (w) the Duraflo treatment and other
biocompatible coatings developed by the Edwards Business; (x) Edwards' laser
technology including the laser technology utilized in Edwards' Transmyocardial
Laser Revascularization program; (y) the continuous renal replacement therapy
business; and (z) Edwards' angiogenesis technology including VEGF-B protein and
zinc finger DNA binding proteins and genes. Any Transferred Intellectual
Property actually licensed pursuant to this Section 10.1(a) shall be deemed to
---------------
be "Licensed Edwards Intellectual Property."
--------------------------------------
(b) Ownership of the Licensed Edwards Intellectual Property. Baxter and
-------------------------------------------------------
its Subsidiaries acknowledge that, subject to the foregoing license, Edwards and
its Subsidiaries, as the case may be, are the sole and exclusive owners of all
right, title and interest in and to the Transferred Intellectual Property.
Baxter and its Subsidiaries agree that they will do nothing inconsistent with
Edwards' or its Subsidiaries' ownership of, or rights in, the Transferred
Intellectual Property. Notwithstanding the foregoing or Section 17.2, Baxter
------------
and its Subsidiaries shall have the right to disclose the Licensed Edwards
Intellectual Property to a third-party contract manufacturer in connection with
Baxter or its Subsidiaries exercising their right pursuant to Section 10.1(a) to
--------------
have products made, provided that such third-party contract manufacturer agrees
to be bound by obligations of confidentiality consistent with Section 17.2, and
------------
Baxter and its Subsidiaries remain liable for any breach of such obligations by
such third-party contract manufacturer. Edwards and its Subsidiaries shall not
allow any registration or other protection for any Licensed Edwards Intellectual
Property to lapse without notifying Baxter thereof at least one month prior
thereto. Upon Baxter's receipt of such notice, (i) Baxter and its Subsidiaries
shall have the right, but not the obligation, to take steps (at Baxter's expense
and in Edwards' and its Subsidiaries' names, if necessary) to prevent such a
lapse, and (ii) Edwards and its Subsidiaries shall cooperate with Baxter and its
Subsidiaries (at Baxter's or its Subsidiaries'
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<PAGE>
reasonable request and at Baxter's expense) to assign to Baxter or its
Subsidiaries such Licensed Edwards Intellectual Property.
(c) Marking and Notices. Baxter and its Subsidiaries shall ensure that
-------------------
any products that are made (by them or by third-party manufacturers), imported,
offered for sale, sold or distributed by them pursuant to the license granted by
Edwards and its Subsidiaries in this Section 10.1 shall bear a legal or
------------
proprietary rights notice in such form as may be reasonably requested by, and to
the extent directed by, Edwards from time to time.
(d) Termination of Licenses. The license granted pursuant to this Section
----------------------- -------
10.1 may be terminated by Edwards only under the following conditions:
- ----
(i) Breach. If Baxter or its Subsidiaries are in breach or default
------
of a material term of this Section 10.1 which breach or default continues
------------
for sixty (60) days after written notice thereof from Edwards to Baxter,
Edwards may terminate the license granted pursuant to this Section 10.1,
------------
provided that such termination shall be solely with respect to the Licensed
Edwards Intellectual Property that is the subject of such uncured breach.
(ii) Divestiture. If Baxter or its Subsidiaries sell, assign,
-----------
transfer or otherwise divest themselves of ownership of any business unit
that uses, or product line that uses or is manufactured under, the Licensed
Edwards Intellectual Property, the license granted in this Section 10.1 may
------------
be assigned, but only with respect to such business unit or product line
and with the written consent of Edwards, which consent shall not be
unreasonably withheld.
10.2. License to Edwards of Retained Baxter Intellectual Property.
-----------------------------------------------------------
(a) Grant of License. Baxter and its Subsidiaries hereby grant, and
----------------
Edwards and its Subsidiaries hereby accept, a perpetual, nonexclusive, fully
paid-up, worldwide right and license to use and otherwise practice under the
Retained Baxter Intellectual Property (except for the business and non-technical
information and the Trademarks that are part of the Retained Baxter Intellectual
Property) in order to make, have made, import, offer for sale, sell and
distribute (i) any Edwards Products Actually Using the Retained Baxter
Intellectual Property as of the Distribution Date, and (ii) any New Products
developed and manufactured by Edwards or its Subsidiaries during the three-year
period commencing on the Distribution Date. Any Baxter Retained Intellectual
Property actually licensed pursuant to this Section 10.2(a) shall be deemed to
---------------
be "Licensed Baxter Intellectual Property." Schedule 10.2(a) contains a listing
------------------------------------- ----------------
of (I) the Patents licensed by Baxter and its Subsidiaries to Edwards hereunder;
and (II) certain Edwards Products Under Development as of the Distribution Date
which may incorporate Licensed Baxter Intellectual Property. The parties
acknowledge that Schedule 10.2(a) may be incomplete, and, accordingly, shall be
----------------
amended, as necessary, to include any additional Retained Baxter Intellectual
Property that Edwards is deemed to be Actually Using as of the Distribution
Date. Without limiting the terms of Section 7.4, the parties shall cooperate
-----------
and act reasonably in amending Schedule 10.2(a). The license granted pursuant
----------------
to this Section 10.2(a) shall not include any rights to the Retained Baxter
---------------
Intellectual Property related to the following:
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<PAGE>
i) Fibrin sealant biopharmaceuticals and the associated delivery devices
which shall be the subject of a separate supply agreement;
ii) The spinning membrane separation technology acquired by Baxter
through the HemaScience acquisition which shall be the subject of a
separate supply agreement;
iii) Continuous renal replacement therapy which shall be the subject of
separate distribution agreements;
iv) Hemoglobin Therapeutics technology, including human, bovine and
recombinant hemoglobin based biopharmaceuticals and perfluorocarbon-
based pharmaceuticals; and
v) Non-polyvinylchloride based film, tubing, containers and compositions
developed as an alternative/replacement for PVC (whether acquired
from Bieffe and/or developed under the IV Systems Marc project) which
shall be the subject of a separate supply agreement.
(b) Ownership of the Licensed Baxter Intellectual Property. Edwards
------------------------------------------------------
and its Subsidiaries acknowledge that, subject to the foregoing license, Baxter
and its Subsidiaries, as the case may be, are the sole and exclusive owner of
all right, title and interest in and to the Retained Baxter Intellectual
Property. Edwards and its Subsidiaries agree that they will do nothing
inconsistent with Baxter's or its Subsidiaries' ownership of, or rights in, the
Retained Baxter Intellectual Property. Notwithstanding the foregoing or
Section 17.2, Edwards and its Subsidiaries shall have the right to disclose the
- ------------
Licensed Baxter Intellectual Property to a third-party contract manufacturer in
connection with Edwards or its Subsidiaries exercising their right pursuant to
Section 10.2(a) to have products made, provided that such third-party contract
- ---------------
manufacturer agrees to be bound by obligations of confidentiality consistent
with Section 17.2, and Edwards and its Subsidiaries remain liable for any breach
------------
of such obligations by such third-party contract manufacturer. Baxter and its
Subsidiaries shall not allow any registration or other protection for any
Licensed Baxter Intellectual Property to lapse without notifying Edwards thereof
at least one month prior thereto. Upon Edwards' receipt of such notice, (i)
Edwards and its Subsidiaries shall have the right, but not the obligation, to
take steps (at Edwards' expense and in Baxter's and its Subsidiaries' names, if
necessary) to prevent such a lapse, and (ii) Baxter and its Subsidiaries shall
cooperate with Edwards and its Subsidiaries (at Edwards' or its Subsidiaries'
reasonable request and at Edwards' expense) to assign to Edwards or its
Subsidiaries such Licensed Baxter Intellectual Property.
(c) Marking and Notices. Edwards and its Subsidiaries shall ensure
-------------------
that any products that are made (by them or by a third-party manufacturer),
imported, offered for sale, sold or distributed by them pursuant to the license
granted by Baxter and its Subsidiaries in this Section 10.2 shall bear a legal
------------
or proprietary rights notice in such form as may be reasonably requested by and
to the extent directed by Baxter from time to time.
(d) Termination of Licenses. The Licenses granted pursuant to this
-----------------------
Section 10.2 may be terminated by Baxter only under the following conditions:
- ------------
(i) Breach. If Edwards or its Subsidiaries are in breach or
------
default of a material term of this Section 10.2 which breach or
------------
default continues for sixty (60) days after written notice from
Baxter to Edwards, Baxter may terminate the
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<PAGE>
license granted pursuant to this Section 10.2, provided that such
------------
termination shall be solely with respect to the Licensed Baxter
Intellectual Property that is the subject of such uncured breach.
(ii) Divestiture. If Edwards or its Subsidiaries sell, assign,
-----------
transfer or otherwise divest themselves of ownership of any business
unit that uses or product line that uses or is manufactured under the
Licensed Baxter Intellectual Property, the licenses granted in this
Section 10.2 may be assigned, but only with respect to such business
------------
unit or product line and the written consent of Baxter, which consent
shall not be unreasonably withheld.
(iii) Limitations on Requirements to Supply. Nothing in this
-------------------------------------
Agreement shall require either Party to supply any composition,
formulation or product that was not commercially available or was not
being manufactured as of the Distribution Date or that is not
commercially available or is not being manufactured at the time the
above-referenced supply agreements are executed.
10.3. Licenses Related to Interlink?. Notwithstanding Section 10.1 or
------------------------------ ------------
10.2, the following shall apply with respect to the Intellectual Property in the
- ----
needleless access technology known as Interlink?:
(a) The license granted by Edwards in Section 10.1 shall apply to
------------
any Baxter products incorporating such technology to the extent claimed in
any United States or foreign patent filed by Edwards as a continuation or
divisional of a patent application filed prior to the Distribution Date,
and any such licensed Transferred Intellectual Property shall be deemed
Licensed Edwards Intellectual Property.
(b) The license granted by Baxter in Section 10.1 shall apply to any
------------
Edwards products incorporating such technology to the extent claimed in any
United States or foreign patent filed by Baxter as a continuation or
divisional of a patent application filed prior to the Distribution Date,
and any such licensed Retained Baxter Intellectual Property shall be deemed
Licensed Baxter Intellectual Property.
10.4. Use by Edwards of Baxter's Trademarks. Edwards and its
-------------------------------------
Subsidiaries shall discontinue use of the names BAXTER, BAXTER HEALTHCARE,
BAXTER INTERNATIONAL INC. and all other trademarks, service marks and trade
names owned by or licensed to Baxter (the "Baxter Marks") as follows:
------------
(a) Baxter hereby grants to Edwards and its Subsidiaries a
nonexclusive, royalty-free, fully paid-up right and license to use the
Baxter Marks on Edwards Products in all appropriate jurisdictions for only
so long as is reasonably necessary to transfer product registrations,
deplete existing inventory and complete labeling and reimbursement
qualifications. Edwards and its Subsidiaries shall use their commercially
reasonable efforts to cease using the Baxter Marks as soon as possible
after the Distribution Date, but in no event shall Edwards or its
Subsidiaries use the Baxter Marks on Edwards Products after December 31,
2001.
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<PAGE>
(b) Edwards and its Subsidiaries will use their commercially
reasonable efforts to cease the use of the Baxter Marks on or in connection
with materials other than labels of Edwards Products including signs,
stationery, trucks and customer brochures, as soon as reasonably practical,
but in no event later than December 31, 2001.
(c) If delays in obtaining regulatory approval require Edwards or
its Subsidiaries to use the Baxter Marks beyond the time limits set forth
above, Baxter shall be reasonable in granting extensions of the time limits
as necessary.
(d) Any use of the Baxter Marks by Edwards or its Subsidiaries
pursuant to the above terms and conditions shall inure to the benefit of
Baxter and shall be in the same form as existed prior to the Distribution
Date. Any products or processes offered by Edwards or its Subsidiaries for
sale under the Baxter Marks shall meet the same product specifications and
quality assurance standards as existed prior to the Distribution Date.
Baxter shall have the right to inspect any and all materials and products
offered in connection with the Baxter Marks including label copy and
marketing and sales materials.
(e) Any use of the Baxter Marks by Edwards or its Subsidiaries shall
indicate that Baxter is the owner of the Baxter Marks and that such use is
pursuant to a license from Baxter.
(f) Edwards and its Subsidiaries shall do nothing to impair Baxter's
rights in the Baxter Marks. Edwards and its Subsidiaries shall inform
Baxter promptly of any infringement of the Baxter Marks.
ARTICLE XI
CONDITIONS TO THE DISTRIBUTION
------------------------------
The obligation of Baxter to effect the Distribution is subject to the
satisfaction or the waiver by Baxter, at or prior to the Distribution Date, of
each of the following conditions:
11.1. Approval by Baxter Board of Directors. This Agreement and the
-------------------------------------
transactions contemplated hereby, including the declaration of the Distribution,
shall have been duly approved by the Board of Directors of Baxter in accordance
with applicable law and the Amended and Restated Certificate of Incorporation
and Amended and Restated By-laws of Baxter.
11.2. Receipt of IRS Private Letter Tax Ruling. Baxter shall have
----------------------------------------
received a ruling from the IRS or, at Baxter's sole discretion, an opinion of
its tax counsel Skadden, Arps, Slate, Meagher & Flom, substantially to the
effect that the Distribution will qualify as a tax-free distribution for federal
income tax purposes under Section 355 of the Code and that no income, gain or
loss will be recognized by Baxter, Edwards or their respective stockholders
(other than
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<PAGE>
with respect to cash received in lieu of fractional shares) upon the
distribution to Baxter's stockholders of Edwards Shares.
11.3. Compliance with State and Foreign Securities and "Blue Sky" Laws.
----------------------------------------------------------------
The Parties shall have taken all such action as may be necessary or appropriate
under state and foreign securities and "Blue Sky" laws in connection with the
Distribution.
11.4. SEC Filings and Approvals. The Parties shall have prepared and
-------------------------
Edwards shall, to the extent required under applicable law, have filed with the
SEC any such documentation and any requisite no action letters that Baxter
determines are necessary or desirable to effectuate the Distribution, and each
Party shall use commercially reasonable efforts to obtain all necessary
approvals from the SEC with respect thereto as soon as practicable.
11.5. Filing and Effectiveness of Registration Statement; No Stop Order.
-----------------------------------------------------------------
The Registration Statement shall have been filed and declared effective by the
SEC, and no stop order suspending the effectiveness of the Registration
Statement shall have been initiated or, to the knowledge of either of the
Parties, threatened by the SEC.
11.6. Approval of NYSE Listing Application. The Edwards Common Stock and
------------------------------------
the accompanying rights granted pursuant to the Rights Plan shall have been
approved for listing on the NYSE, subject to official notice of distribution.
11.7. Receipt of Fairness Opinions of Financial Advisors. The Baxter
--------------------------------------------------
Board of Directors shall have received written opinions of Credit Suisse First
Boston and J.P. Morgan & Co. Incorporated, in form acceptable to Baxter, to the
effect that the Distribution is fair to Baxter's stockholders from a financial
point of view, which opinions shall not have been withdrawn or modified.
11.8. Ancillary Agreements. The Tax Sharing Agreement and each of the
--------------------
Conveyancing Instruments, Implementation Agreements and Operating Agreements
intended to be executed prior to the Distribution shall have been executed and
delivered, and each of such agreements shall be in full force and effect.
11.9. Resignations. On or prior to the Distribution Date, Baxter shall
------------
cause all of its designees to resign or to be removed as officers and from all
Boards of Directors or similar governing bodies of Edwards and its Affiliates
and any Transferred Subsidiary on which they serve.
11.10. Election of Edwards Board. The Board of Directors of Edwards as set
-------------------------
forth on Exhibit H shall have been duly elected.
---------
11.11. Consents. (a) All Material Governmental Approvals and Consents
--------
required to permit the valid consummation of the Distribution shall have been
obtained without any conditions being imposed that would have a material adverse
effect on Baxter or Edwards.
(b) Baxter shall have obtained all Third Party Consents required in
connection with the Distribution, except those for which the failure to obtain
such Third Party Consents
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<PAGE>
would not, in the reasonable opinion of Baxter, individually or in the aggregate
have a material adverse effect on Baxter, Edwards or the consummation of the
Distribution.
11.12. No Actions. No action, suit or proceeding shall have been
----------
instituted or threatened by or before any court or quasi-judicial or
administrative agency of any federal, state, local or foreign jurisdiction or
before any arbitrator to restrain, enjoin or otherwise prevent the Distribution
or the other transactions contemplated by this Agreement (including, a stop
order with respect to the effectiveness of the Registration Statement), and no
order, injunction, judgment, ruling or decree issued by any court of competent
jurisdiction shall be in effect restraining the Distribution or such other
transactions.
11.13. New Credit Facility. The definitive agreements governing the
-------------------
Edwards Credit Facility shall have been executed.
11.14. Consummation of Pre-Distribution Transactions. The pre-
---------------------------------------------
Distribution transactions contemplated by Articles III, IV and V of this
------------ -- -
Agreement shall have been consummated in all material respects.
11.15. No Other Events. No other events or developments shall have
---------------
occurred that, in the judgment of the Baxter Board of Directors, would result in
the Distribution having a material adverse effect on Baxter or its stockholders.
11.16. Satisfaction of Conditions. The satisfaction of the foregoing
--------------------------
conditions are for the sole benefit of Baxter and shall not give rise to or
create any duty on the part of Baxter or the Baxter Board of Directors to waive
or not waive any such condition, to effect the Distribution or in any way limit
Baxter's power of termination set forth in Section 18.13.
-------------
ARTICLE XII
EMPLOYEES AND EMPLOYEE BENEFIT MATTERS
--------------------------------------
12.1. Edwards Employees. Schedule 12.1 describes or otherwise
----------------- -------------
identifies all employees of the Edwards Business (the "Edwards Employees").
-----------------
12.2. Employment of Edwards Employees. On the Distribution Date,
-------------------------------
Edwards shall, or shall cause its Subsidiaries to, employ or continue to employ
each Edwards Employee. Edwards and Baxter (and their respective Subsidiaries)
shall use commercially reasonable efforts to accomplish any transfers of
employment required by this Section 12.2 in a timely manner. Active Edwards
------------
Employees shall be paid by Edwards or one of its Subsidiaries at the same salary
and wage rate levels (including bonus programs) paid by Baxter or its
Subsidiaries as in effect on the Distribution Date; provided, however, that
-------- -------
Edwards (or the applicable Edwards Subsidiary) retains the right to determine
the compensation of Edwards Employees after the Distribution Date.
12.3. Terminations/Layoff/Severance. (a) Edwards Employees shall not
-----------------------------
be eligible for any severance benefits from Baxter or its Subsidiaries or
Affiliates as a result of
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<PAGE>
either their employment by Edwards or its Subsidiaries or Affiliates or their
subsequent termination of employment with Edwards or its Subsidiaries or
Affiliates.
(b) Any Edwards Employee who receives a written notice prior to the
Distribution Date regarding such employee's termination of employment on a fixed
date between the Distribution Date and one year after the Distribution Date from
Edwards or any of its Subsidiaries shall be eligible to receive from Edwards (or
the applicable Edwards Subsidiary) severance pay that is calculated pursuant to
the formula used under the Baxter Severance Pay Plan as in effect on the
Distribution Date. The manner in which this Section 12.3(b) is implemented
---------------
shall be governed by the terms of the Edwards Severance Pay Plan.
(c) Effective as of the Distribution Date, Edwards (or the applicable
Edwards Subsidiary) shall have the obligation to reimburse Baxter for the
severance benefits paid by Baxter under the Baxter Severance Pay Plan on or
after the Distribution Date to any employee who was terminated by Baxter prior
to the Distribution Date while employed in any Edwards Business unit. Edwards
(or the applicable Edwards Subsidiary) shall have the obligation to pay
severance benefits to any employee terminated by Edwards after the Distribution
Date who is eligible to receive severance benefits under the Edwards Severance
Pay Plan.
12.4. International Edwards Employees. All issues, other than those
-------------------------------
addressed in Sections 12.1, 12.2 and 12.3, relating to any person who,
------------- ---- ----
immediately prior to the Distribution Date, is employed by an Edwards Subsidiary
in a foreign jurisdiction (the "Edwards Foreign Employees") shall be addressed
-------------------------
in connection with the Implementation Agreement applicable to such Edwards
Subsidiary and are outside the scope of this Agreement. Notwithstanding the
foregoing, the amount of pension benefits earned by any Edwards Foreign Employee
under any pension plan maintained by Baxter, or its Subsidiaries or Affiliates,
in a foreign jurisdiction that are transferred to a pension plan maintained by
Edwards shall be determined by the actuaries for the respective plans by the
Distribution Date in accordance with the methodology described in Schedule 12.4
-------------
and shall be the amount which is equal to the benefits of such Edwards Foreign
Employee as of the date of the transfer determined on a plan termination basis.
12.5. Employment Solicitation. During the period beginning on the
-----------------------
Distribution Date and ending one year after the Distribution Date, neither
Baxter nor Edwards shall, nor shall they permit any of their respective
Subsidiaries, Affiliates or agents to, directly or indirectly, except as
provided in the following sentence, actively solicit or recruit for employment
any then current employee of the other or of any of the other's Subsidiaries.
Nothing contained in this Article XII shall (i) prohibit the hiring of any
-----------
employee who in good faith is believed to be actively seeking employment on his
or her own initiative without prior contact initiated by any employee or agent
of the company where employment is sought, or any of such company's Affiliates;
provided, however, that such employee has obtained authorization from the Senior
- -------- -------
Vice President of Human Resources or the Corporate Vice President of Human
Resources, as the case may be, of his or her current employer; or (ii) prohibit
Baxter or Edwards or any of their respective Subsidiaries from hiring any person
who has terminated employment with the other company. The foregoing restriction
shall cease to apply one year after the Distribution Date.
-59-
<PAGE>
12.6. WARN Act. Edwards and its Subsidiaries agree that they shall not,
--------
at any time during the 90-day period following the Distribution Date, (i)
effectuate a "plant closing" as defined in the Worker Adjustment and Retraining
Notification Act of 1988 (the "WARN Act") affecting any site of employment or
--------
operating units within any site of employment of the Edwards Business, or (ii)
take any action to precipitate a "mass layoff" as defined in the WARN Act
affecting any site of employment of the Edwards Business, except, in either
case, after complying fully with the notice and other requirements of the WARN
Act. Edwards agrees to indemnify Baxter and its Subsidiaries and to defend and
hold harmless Baxter and its Subsidiaries from and against any and all claims,
losses, damages, expenses, obligations and liabilities (including attorney's
fees and other costs of defense) that Baxter and its Subsidiaries may incur in
connection with any suit or claim of violation brought against Baxter under the
WARN Act, which relates in whole or in part to actions taken by Edwards or its
Subsidiaries with regard to any site of employment of Edwards or operating units
within any site of employment of the Edwards Business.
12.7. Leave of Absence Policies. (a) Through the Distribution Date,
-------------------------
Baxter and its Subsidiaries shall be responsible for administering compliance
with the Baxter leave of absence policies with respect to Edwards Employees.
(b) No later than the Distribution Date: (i) Edwards shall adopt, and
shall cause each of its Subsidiaries to adopt, its own leave of absence
policies; (ii) Edwards shall honor, and shall cause each of its Subsidiaries to
honor, all the terms and conditions of leaves of absence that have been granted
to any Edwards Employee under a Baxter leave of absence policy before the
Distribution Date by Baxter or any of its Subsidiaries, including such leaves
that are to commence after the Distribution Date where Baxter or any of its
Subsidiaries has approved such leave or where an employee has submitted
appropriate paperwork to Baxter or any of its Subsidiaries for such leave prior
to the Distribution Date; (iii) Edwards and its Subsidiaries shall be solely
responsible for administering leaves of absence policies and compliance with all
applicable laws with respect to the Edwards Employees; and (iv) Edwards and its
Subsidiaries shall recognize all periods of service of Edwards Employees with
Baxter or any of its Subsidiaries, as applicable, to the extent such service is
recognized by Baxter or its Subsidiaries for the purpose of eligibility for
leave entitlement under the Baxter leave of absence policies; provided, however,
-------- -------
that no duplication of benefits shall be required by the foregoing.
(c) As soon as administratively possible after the Distribution Date and
upon request to Baxter's Senior Vice President of Human Resources, Baxter shall
provide to Edwards copies of all records pertaining to the Baxter leave of
absence policies with respect to all Edwards Employees to the extent such
records have not been provided previously to Edwards or one of its Subsidiaries.
12.8. Withdrawal from Participation in Baxter Plans and Establishment
---------------------------------------------------------------
of Edwards Plans. (a) Except as otherwise specifically provided in this
- ----------------
Article XI, no later than the Distribution Date, Edwards Employees shall cease
- ----------
to participate in the Baxter employee benefit plans and programs (the "Baxter
------
Plans").
- -----
(b) No later than the Distribution Date, Edwards or any Edwards
Subsidiary shall establish its own employee benefit plans and programs for the
benefit of eligible employees
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<PAGE>
of Edwards and its Subsidiaries, including, a 401(k) savings plan (the "Edwards
-------
Savings Plan"), a nonqualified executive deferred compensation plan (the
- ------------
"Edwards Deferred Compensation Plan"), a medical and dental plan, a group vision
----------------------------------
care plan, a cafeteria plan, a group term life and accidental death and
dismemberment plan, a long-term disability plan and a group legal expense plan
(collectively, the "Edwards Welfare Plans"), a severance plan (the "Edwards
--------------------- -------
Severance Plan") and the Edwards 2000 Incentive Compensation Program, all as
- --------------
described in the Registration Statement. Notwithstanding the foregoing, Edwards
shall not establish a plan similar to the Baxter Pension Plan (as hereinafter
defined).
12.9. Transfer of Account Balances and Accrued Benefits.
-------------------------------------------------
(a) Baxter Savings Plan. Subject to applicable law and the provisions
-------------------
of the Baxter International Inc. and Subsidiaries Incentive Investment Plan (the
"Baxter Savings Plan"), as soon as administratively practicable following the
-------------------
establishment of the Edwards Savings Plan, or effective as of any other date as
agreed to in writing by the plan administrator for the Baxter Savings Plan and
the plan administrator for the Edwards Savings Plan, the account balances
(including outstanding loans) of all Baxter Savings Plan participants who are
Edwards Employees shall be transferred from the Baxter Savings Plan to the
Edwards Savings Plan (the "Transferred Accounts"). Each Edwards Employee shall
--------------------
receive credit for all purposes under the Edwards Savings Plan for periods of
service with Baxter or any of its Subsidiaries or Affiliates. The plan
administrator for the Edwards Savings Plan shall distribute any amounts from
such Transferred Accounts that may be necessary in order for the Baxter Savings
Plan to satisfy any requirements of applicable law (including, nondiscrimination
rules) as instructed by the plan administrator for the Baxter Savings Plan. The
plan administrator for the Edwards Savings Plan shall take any other action
reasonably requested by the plan administrator for the Baxter Savings Plan that
is necessary or advisable, in the opinion of the plan administrator for the
Baxter Savings Plan, to maintain the tax-qualified status of the Baxter Savings
Plan or to avoid the imposition of any penalties with respect to such plan.
(b) Puerto Rico Savings Plan. Subject to applicable law and the
------------------------
provisions of the Baxter Healthcare Corporation of Puerto Rico Savings and
Investment Plan (the "Baxter PR Savings Plan"), as soon as administratively
----------------------
practicable following the establishment of the Edwards Puerto Rico Savings Plan,
or effective as of any other date as agreed to in writing by the plan
administrator for the Baxter PR Savings Plan and the plan administrator for the
Edwards Puerto Rico Savings Plan, the account balances (including outstanding
loans) of all Baxter PR Savings Plan participants who are employees of [Edwards
Puerto Rico] ("Edwards PR Employees") shall be transferred from the Baxter PR
--------------------
Savings Plan to the Edwards Puerto Rico Savings Plan (the "PR Transferred
--------------
Accounts"). Each Edwards PR Employee shall receive credit for all purposes under
- --------
the Edwards Puerto Rico Savings Plan for the periods of service with Baxter
Healthcare Corporation of Puerto Rico or any of its Subsidiaries or Affiliates.
The plan administrator for the Edwards Puerto Rico Savings Plan shall distribute
any amounts from such Transferred Accounts that may be necessary in order for
the Baxter PR Savings Plan to satisfy any requirements of applicable law
(including, nondiscrimination rules) as instructed by the plan administrator for
the Baxter PR Savings Plan. The plan administrator for the Edwards Puerto Rico
Savings Plan shall take any other action reasonably requested by the plan
administrator for the Baxter PR Savings Plan that is necessary or advisable, in
the opinion of the plan
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<PAGE>
administrator for the Baxter PR Savings Plan, to maintain the tax-qualified
status of the Baxter PR Savings Plan or to avoid the imposition of any penalties
with respect to such plan.
(c) Puerto Rico Pension Plan. Subject to applicable law and the
------------------------
provisions of the Baxter Healthcare Corporation of Puerto Rico Pension Plan
(the "Baxter PR Pension Plan"), as soon as administratively practicable
----------------------
following the establishment of the Edwards Puerto Rico Pension Plan, or
effective as of any other date as agreed to in writing by the plan administrator
for the Baxter PR Pension Plan and the plan administrator for the Edwards Puerto
Rico Pension Plan, the accrued benefits of all Baxter PR Pension Plan
participants who are Edwards PR Employees shall be transferred from the Baxter
PR Pension Plan to the Edwards Puerto Rico Pension Plan (the "PR Transferred
--------------
Accrued Benefits"). The amount of Transferred Accrued Benefits shall be
- ----------------
determined by the actuaries for the respective plans by the Distribution Date in
accordance with the methodology described in Schedule 12.9 and shall be the
-------------
amount which is equal to the benefits of the Edwards PR Employees as of the date
of the transfer determined on a plan termination basis. Each Edwards PR Employee
shall receive credit for all purposes under the Edwards Puerto Rico Pension Plan
for the periods of service with Baxter Healthcare Corporation of Puerto Rico or
any of its Subsidiaries or Affiliates. The plan administrator for the Edwards PR
Pension Plan shall take any other action reasonably requested by the plan
administrator for the Baxter PR Pension Plan that is necessary or advisable, in
the opinion of the plan administrator for the Baxter PR Pension Plan, to
maintain the tax-qualified status of the Baxter PR Pension Plan or to avoid the
imposition of any penalties with respect to such plan.
12.10. Entitlement to Distributions Under Pension Plan. Each Edwards
-----------------------------------------------
Employee shall be treated as having terminated employment with an "Employer" as
defined in the Baxter International Inc. and Subsidiaries Pension Plan (the
"Baxter Pension Plan") effective as of the Distribution Date and shall be fully
-------------------
vested in his or her accrued benefit under the Baxter Pension Plan as of such
date.
12.11. Welfare Benefits Provided Under Edwards Plans. (a) Each Edwards
---------------------------------------------
Employee who becomes eligible to participate in the Edwards Welfare Plans shall
be credited under such plan with periods of service with any Baxter Group Member
for all purposes under such plan.
(b) Baxter (or the applicable Baxter Subsidiary) shall pay all costs
associated with the provision of disability benefits to any employee or former
employee of the Edwards Business who as of the Distribution Date is totally and
permanently disabled. Edwards (or the applicable Edwards Subsidiary) shall pay
all costs associated with the provision of disability benefits to any employee
or former employee of the Edwards Business other than the persons described in
the first sentence of this Section 12.11(b) in an amount equal to the benefits
----------------
such persons would have received if they had remained covered under the Baxter
Plans during the period of such disability leave. Notwithstanding the
foregoing, any Edwards Employee receiving benefits under the Baxter Long-Term
Disability Plan on the Distribution Date shall continue to receive benefits
under the terms of such plan and the insurance contract used to fund such plan,
and neither Edwards nor any Edwards Subsidiary shall be charged for the payment
of such benefits. As of the Distribution Date, Edwards (or the applicable
Edwards Subsidiary) shall assume all Liabilities determined under FAS 112
relating to all Edwards Employees.
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<PAGE>
(c) Baxter (or the applicable Baxter Subsidiary) shall pay all claims
under the Baxter Medical Plan (including dental benefits) relating to Edwards
Employees that as of the Distribution Date have been incurred but not paid, but
only if claims for such costs are submitted in written form to the authorized
agents of Baxter (or the applicable Baxter Subsidiary) during the six-month
period beginning on the Distribution Date.
(d) Baxter (or the applicable Baxter Subsidiary) shall pay all costs
associated with the provision of benefits under the terms of the Baxter Retiree
Welfare Plan for all persons who as of the Distribution Date have satisfied the
age and service eligibility requirements for receiving benefits under such plan.
Edwards (or the applicable Edwards Subsidiary) shall assume and pay all costs,
if any, associated with the provision of retiree welfare benefits for all
Edwards Employees who after the Distribution Date satisfy the age and service
eligibility requirements under the corresponding Edwards plan, if any, for
receiving such benefits.
12.12. Stock Purchase Plans. Except as otherwise provided in the plan,
--------------------
on the Distribution Date, Edwards Employees shall cease to be eligible to
purchase Baxter Common Stock under the terms of the Baxter Stock Purchase Plan,
and as of the record date of the Distribution, Edwards Employees shall become
eligible to participate in the Edwards Stock Purchase Plan.
12.13. Workers' Compensation. As soon as administratively practicable
---------------------
following the Distribution Date but in no event later than June 30, 2000, a Risk
Management Representative for each of the Parties shall agree upon the
allocation between the Parties of responsibility and liability for workers'
compensation claims and expenses relating to current and former employees of the
Parties and their respective Subsidiaries.
12.14. Vacation Pay Policy. After the Distribution Date, it is expected
-------------------
that Edwards shall maintain for its employees and employees of its Subsidiaries
a vacation pay policy, and Edwards (or the applicable Edwards Subsidiary) shall
be responsible for costs incurred to provide vacation pay to Edwards Employees
following such date. Edwards (or the applicable Edwards Subsidiary) shall
assume any and all Baxter Liabilities to provide to Edwards Employees vacation
that such persons accrued under the Baxter vacation pay policy as of the
Distribution Date, and no payment of such accrued vacation pay shall be made by
Baxter (or the applicable subsidiary) on the Distribution Date.
12.15. Non-Qualified Deferred Compensation Plans. Baxter (or the
-----------------------------------------
applicable Baxter Subsidiary) shall assume the Liability to provide benefits
accrued as of the Distribution Date under the Baxter International Inc. and
Subsidiaries Supplemental Pension Plan with respect to all Edwards Employees.
Edwards (or the applicable Edwards Subsidiary) shall assume the Liability to
provide benefits accrued under the Baxter International Inc. and Subsidiaries
Deferred Compensation Plan with respect to Edwards Employees. No assets shall
be transferred between the Parties with respect to the plans listed in this
Section 12.15.
- -------------
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<PAGE>
12.16. Split-Dollar Life Insurance. As of the Distribution Date, Baxter
---------------------------
(or the applicable Baxter Subsidiary) shall retain all Liabilities associated
with the provision of all split-dollar life insurance policies relating to any
Edwards Employee.
12.17. Restricted Stock. All shares of Baxter Common Stock issued in the
----------------
form of restricted stock that were earned for 1999 performance and are held by
an Edwards Employee as of the Distribution Date will vest on December 31, 2000
as long as such Edwards Employee continues employment with either Edwards or
Baxter (or any of their respective Subsidiaries or Affiliates) through such
date.
12.18. Information to be Provided to Baxter. Edwards (or the applicable
------------------------------------
Edwards Subsidiary) shall provide any information that Baxter (or any Baxter
Subsidiary) may reasonably request, including information relating to dates of
termination of employment, in order to provide benefits to any eligible Edwards
Employee under the terms and conditions described herein or under the applicable
Baxter Plans. Any information relating to an employee's termination of
employment shall be provided by Edwards (or the applicable Edwards Subsidiary)
to Baxter as soon as available to Edwards or any of its Subsidiaries, but in any
event no later than 30 days after such information is made available to Edwards
or any such Subsidiaries.
12.19. Corporate Action; Delegation of Authority. Any action taken by
-----------------------------------------
the Senior Vice President of Human Resources for Baxter or the Corporate Vice
President of Human Resources for Edwards shall be considered to be action taken
by either Baxter or Edwards or their respective Subsidiaries for purposes of
this Article XII. Without limiting the generality of the foregoing, the Chief
-----------
Executive Officer of Baxter or Edwards or their respective Subsidiaries may
delegate in writing to any other person the authority to act on behalf of Baxter
of Edwards, respectively, or their respective Subsidiaries, with respect to
actions required under the terms of this Article XII.
-----------
12.20. Transfer of Employee Files. By a specified date as agreed upon by
--------------------------
Edwards and Baxter following the Distribution Date, Baxter shall transfer to
Edwards the personnel files relating to all Edwards Employees.
ARTICLE XIII
INSURANCE MATTERS
-----------------
13.1. Insurance Prior to the Distribution Date. Edwards does hereby
----------------------------------------
agree that Baxter and its Subsidiaries shall not have any Liability whatsoever
as a result of the insurance policies and practices of Baxter and its
Subsidiaries in effect at any time prior to the Distribution Date, including any
assistance rendered to Edwards by Baxter in the placement of their insurance
program, including as a result of the level or scope of any such insurance, the
creditworthiness of any insurance carrier, the terms and conditions of any
policy and the adequacy or timeliness of any notice to any insurance carrier
with respect to any claim or potential claim or otherwise.
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<PAGE>
13.2. Ownership of Existing Policies and Programs. Baxter or one or
-------------------------------------------
more of its Subsidiaries shall continue to own all property, casualty and
liability insurance policies and programs, including primary and excess general
liability, errors and omissions, automobile, workers' compensation, property,
fire, crime, surety and other similar insurance policies, in effect on or before
the Distribution Date (collectively, the "Baxter Policies" and individually, a
---------------
"Baxter Policy"). Baxter shall use commercially reasonable efforts to maintain
- --------------
the Baxter Policies in full force and effect up to and including the
Distribution Date, and, subject to the provisions of this Agreement, Baxter and
its Subsidiaries shall retain all of their respective rights, benefits and
privileges, if any, under the Baxter Policies. Nothing contained herein shall
be construed to be an attempted assignment of or to change the ownership of the
Baxter Policies.
13.3. Procurement of Insurance for Edwards. To the extent not already
------------------------------------
provided for by the terms of a Baxter Policy, Baxter shall use commercially
reasonable efforts to cause Edwards and the appropriate Edwards Subsidiaries to
be named as additional insureds under Baxter Policies whose effective policy
periods include the Distribution Date, in respect of claims for which coverage
is available under the terms and conditions of Baxter's policies, arising out of
or relating to periods prior to the Distribution Date; provided, however, that
-------- -------
nothing contained herein shall be construed to require Baxter or any of its
Subsidiaries to pay any additional premium or other charges in respect to, or
waive or otherwise limit any of its rights, benefits or privileges under, any
Baxter Policy in order to effect the naming of Edwards and its Subsidiaries as
such additional insureds.
13.4. Acquisition and Maintenance of Post-Distribution Edwards Insurance
------------------------------------------------------------------
Policies and Programs. Commencing on and as of the Distribution Date, Edwards
- ---------------------
shall be responsible for establishing and maintaining separate property,
casualty and liability insurance policies and programs (including primary and
excess general liability, errors and omissions, automobile, workers'
compensation, property, fire, crime, surety and other similar insurance
policies) for activities and claims involving Edwards or any of its Subsidiaries
or Affiliates. Edwards will exercise commercially reasonable efforts to secure
liability insurance to avoid potential gaps in coverage for claims arising from
events prior to the Distribution Date, which gap would not exist had the Edwards
Business continued to be covered with the same retroactive dates existing in the
Baxter Policies in effect on the Distribution Date. Edwards and each of its
Subsidiaries and Affiliates, as appropriate, shall be responsible for all
administrative and financial matters relating to insurance policies established
and maintained by Edwards and its Subsidiaries or Affiliates for claims relating
to any period on or after the Distribution Date involving Edwards or any of its
Subsidiaries or Affiliates. Notwithstanding any other agreement or understanding
to the contrary, except as set forth in this Section 13.4 with respect to claims
------------
administration and financial administration of the Baxter Policies, neither
Baxter nor any of its Subsidiaries or Affiliates shall have any responsibility
for or obligation to Edwards or any of its Subsidiaries or Affiliates relating
to property and casualty insurance matters for any period, whether prior to, on
or after the Distribution Date.
13.5. Edwards Directors' and Officers' Insurance. Baxter shall use
------------------------------------------
commercially reasonable efforts to cause the persons currently serving as
officers and/or directors of Baxter or any of its Subsidiaries to be covered for
a period of [six (6)] years from the Distribution Date by the directors' and
officers' liability insurance policy maintained by Baxter (including corporate
reimbursement) (provided that Baxter may substitute therefor policies of at
--------
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<PAGE>
least the same coverage and amounts containing terms and conditions that are not
less advantageous than such policy) with respect to matters covered under the
existing policy occurring prior to the Distribution Date that were committed by
such officers and/or directors in their capacity as such; provided, however,
-------- -------
that in no event shall Baxter be required to expend with respect to any year
more than 200% of the current annual premium expended by Baxter (the "Insurance
---------
Amount") to maintain or procure insurance coverage pursuant hereto; and
- ------
provided, further, that if Baxter is unable to maintain or obtain the insurance
- -------- -------
called for by this Section 13.5, Baxter shall use commercially reasonable
------------
efforts to obtain as much comparable insurance as available for the Insurance
Amount. In the event Baxter or any of its successors or assigns (i)
consolidates with or merges into any other Person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger,
or (ii) transfers or conveys all or substantially all of its properties and
assets to any Person, then, and in each such case, to the extent necessary,
proper provision shall be made so that the successors and assigns of Baxter
assume the obligations set forth in this Section 13.5. The provisions of this
------------
Section 13.5 are intended to be for the benefit of, and shall be enforceable by,
- ------------
each such officer and director and his or her heirs and representatives. As
provided in Section 15.5, any amount Edwards or any of its Subsidiaries is
------------
required to pay to Baxter as an indemnity under this Agreement is reduced to the
extent Baxter receives insurance proceeds from the above coverage, but only to
the extent such proceeds are actually received by Baxter.
13.6. Pre-Distribution Insurance Claims Administration. Edwards and its
------------------------------------------------
Subsidiaries and Affiliates acknowledge that Baxter has previously experienced
losses and received claims that were, or might have been, covered by one or more
Baxter Policies, and prior to the Distribution Date will have made decisions and
commitments regarding administration of such claims, including reaching
agreements and stipulations regarding such claims (collectively, "Pre-
---
Distribution Claims Administration"). Edwards and its Subsidiaries and
- ----------------------------------
Affiliates covenant not to contest or challenge in any manner any action taken
by Baxter prior to the Distribution Date in connection with or relating to Pre-
Distribution Claims Administration, or to interfere with the performance of any
agreement, commitment or stipulation so made by Baxter in connection with or
relating to Pre-Distribution Claims Administration.
13.7. Post-Distribution Insurance Claims Administration. Baxter and its
-------------------------------------------------
Subsidiaries shall have the primary right, responsibility and authority for
claims administration and financial administration of claims that relate to or
affect the Baxter Policies. Upon notification by Edwards or one of its
Subsidiaries or Affiliates of a claim relating to Edwards or a Subsidiary or
Affiliate thereof under one or more of the Baxter Policies, Baxter shall
cooperate with Edwards in asserting and pursuing coverage and payment for such
claim by the appropriate insurance carrier(s). In asserting and pursuing such
coverage and payment, Baxter shall have sole power and authority to make binding
decisions, determinations, commitments and stipulations on its own behalf and on
behalf of Edwards and its Subsidiaries and Affiliates, which decisions,
determinations, commitments and stipulations shall be final and conclusive if
made to maximize the overall economic benefit of the Baxter Policies. Edwards
and its Subsidiaries and Affiliates assume responsibility for, and shall pay to
the appropriate insurance carriers or otherwise, any premiums, retrospectively-
rated premiums, defense costs, indemnity payments, deductibles, retentions or
other charges (collectively, "Insurance Charges") whenever arising, which shall
-----------------
become due and payable under the terms and conditions of any applicable Baxter
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Policy in respect of any liabilities, losses, claims, actions or occurrences,
whenever arising or becoming known, involving or relating to any of the assets,
businesses, operations or liabilities of Edwards or any of its Subsidiaries or
Affiliates, whether the same relate to the period prior to, on or after the
Distribution Date. To the extent that the terms of any applicable Baxter Policy
provide that Baxter or any of its Subsidiaries shall have an obligation to pay
or guarantee the payment of any Insurance Charges relating to Edwards or any of
its Subsidiaries, Baxter shall be entitled to demand that Edwards make such
payment directly to the Person or entity entitled thereto. In connection with
any such demand, Baxter shall submit to Edwards a copy of any invoice received
by Baxter pertaining to such Insurance Charges together with appropriate
supporting documentation, to the extent available. In the event that Edwards
fails to pay any such Insurance Charges when due and payable, whether at the
request of the party entitled to payment or upon demand by Baxter, Baxter and
its Subsidiaries may (but shall not be required to) pay such insurance charges
for and on behalf of Edwards and, thereafter, Edwards shall forthwith reimburse
Baxter for such payment. Subject to the other provisions of this Article XIII,
------------
the retention by Baxter of the Baxter Policies and the responsibility for claims
administration and financial administration of such policies are in no way
intended to limit, inhibit or preclude any right of Edwards, Baxter or any other
insured to insurance coverage for any Insured Claims under the Baxter Policies.
13.8. Non-Waiver of Rights to Coverage. An insurance carrier that
--------------------------------
otherwise would be obligated to pay any claim shall not be relieved of the
responsibility with respect thereto, or, solely by virtue of the provisions of
this Article XIII, have any subrogation rights with respect thereto, it being
------------
expressly understood and agreed that no insurance carrier or any third-party
shall be entitled to a windfall (i.e., a benefit they would not be entitled to
----
receive had no Distribution occurred or in the absence of the provisions of this
Article XIII) by virtue of the provisions hereof.
- ------------
13.9. Scope of Affected Policies of Insurance. The provisions of this
---------------------------------------
Article XIII relate solely to matters involving liability, casualty and workers'
- ------------
compensation insurance, and shall not be construed to affect any obligation of
or impose any obligation on the Parties with respect to any life, health and
accident, dental or medical insurance policies applicable to any of the
officers, directors, employees or other representatives of the Parties or their
Affiliates.
ARTICLE XIV
EXPENSE AND TAX MATTERS
-----------------------
14.1. Allocation of Expenses. (a) Except as otherwise provided in
----------------------
this Agreement or any other agreement contemplated hereby, or as otherwise
agreed to in writing by the Parties, all fees and expenses incurred in
connection with the transactions contemplated hereby or thereby shall be paid by
Baxter. Specifically, (i) Baxter shall absorb all the costs associated with the
dedication of internal resources and personnel to such transaction at all times
prior to the Distribution Date, and (ii) Baxter shall pay all fees and expenses
that are related directly to the implementation of the Distribution transactions
incurred on or prior to the Distribution Date.
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(b) Notwithstanding Section 14.1(a) above, Baxter shall be solely
---------------
responsible for the following costs incurred in connection with the transactions
contemplated hereby: (i) the reasonable fees and expenses of Sidley & Austin in
connection with its representation of Baxter; (ii) the reasonable fees and
expenses of Skadden, Arps, Slate, Meagher & Flom in connection with its
representation of Baxter relating to the tax ruling and the opinion of counsel
on tax matters; (iii) the reasonable fees and expenses of foreign counsel to
Baxter or Edwards in connection with the transactions contemplated by this
Agreement; (iv) the reasonable fees and expenses of Credit Suisse First Boston
and J.P. Morgan & Co. Incorporated relating to their financial advisory services
rendered to Baxter; (v) the reasonable fees and expenses of
PricewaterhouseCoopers LLP in connection with its audit and tax services
rendered to Baxter; (vi) the reasonable fees and expenses of Ernst & Young in
connection with their consulting services relating to the Commissionaire
structure; (vii) the reasonable fees and expenses of Towers, Perrin and Hewitt
Associates in connection with their consulting services relating to benefits
plans rendered to Baxter; (viii) all SEC registration and "blue sky" filing fees
associated with the Registration Statement; (ix) the printing, mailing and
distribution of the Information Statement to Baxter's stockholders; (x) the
reasonable fees and expenses of Edwards' transfer agent and registrar relating
to the initial issuance of Edwards Shares as a dividend to Baxter's
stockholders; (xi) the NYSE listing fees for the Edwards Shares; (xii) the
design and initial printing of certificates of the Edwards Shares; (xiii) the
initial distribution of the certificates of Edwards Common Stock as a dividend
to Baxter stockholders; (xiv) the development, search and registration of the
name "Edwards"; and (xv) various other international professional services
related directly to the Distribution, such as valuation services, legal services
and tax services.
(c) Notwithstanding Section 14.1(a) (i) above, Edwards shall be solely
-------------------
responsible for all fees, expenses and other costs incurred in connection with
the transactions contemplated hereby related to: (i) the reasonable fees and
expenses of [banks] relating to their syndication and arrangement of the Edwards
Credit Facility; (ii) the reasonable fees and expenses of any financial advisors
retained by Edwards in connection with any "road shows" or presentations to
investors; (iii) recruiting fees, signing bonuses and relocation expenses for
new and existing Edwards Employees; (iv) severance payments to Edwards Employees
terminated as a result of the Distribution; (v) Founder's Grant payments to
Edwards Employees; (vi) fees and expenses related to execution of new company
identity and media launch activities; and (vii) costs and expenses related to
product re-registration and product re-labeling.
14.2. Allocation of Taxes. Sales, transfer, V.A.T. or other similar taxes
-------------------
or fees payable in connection with the transactions contemplated by this
Agreement shall be determined and paid as provided in the Tax Sharing Agreement.
ARTICLE XV
RELEASE AND INDEMNIFICATION
---------------------------
15.1. Release of Pre-Distribution Claims. (a) Except as provided in
----------------------------------
Section 15.1(b), effective as of the Distribution Date, each of Baxter and
- ---------------
Edwards does hereby, on behalf of itself and its respective Subsidiaries,
Affiliates, successors and assigns and all Persons who at any time prior to the
Distribution Date have been shareholders, directors, officers, agents or
employees of either Party (in each case, in their respective capacities as
such), remise, release
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and forever discharge the other Party, its Subsidiaries, Affiliates, successors
and assigns and all Persons who at any time prior to the Distribution Date have
been shareholders, directors, officers, agents or employees of such Party (in
each case, in their respective capacities as such), and their respective heirs,
executors, administrators, successors and assigns, from any and all Liabilities
whatsoever, whether at law or in equity (including any right of contribution),
whether arising under any contract or agreement, by operation of law or
otherwise, existing or arising from any acts or events occurring or failing to
occur or alleged to have occurred or to have failed to occur or any conditions
existing or alleged to have existed on or before the Distribution Date,
including in connection with the transactions and all other activities to
implement the Distribution.
(b) Notwithstanding the foregoing, nothing contained in
Section 15.1(a) shall release any Party from:
- ---------------
(i) any Liability transferred, assigned or allocated to, or
assumed or retained by, a Party in accordance with this Agreement, any
Conveyancing Instrument, any Implementation Agreement, any Operating
Agreement or the Tax Sharing Agreement;
(ii) any Liability provided in or resulting from this Agreement,
any Conveyancing Instrument, any Implementation Agreement, any
Operating Agreement, the Tax Sharing Agreement or any agreement
between any of Baxter and its Subsidiaries, on the one hand, and
Edwards and its Subsidiaries, on the other hand, as not to terminate
pursuant to the Distribution or any other agreement between any of the
Parties entered into in contemplation that such agreement would remain
in effect after the Distribution;
(iii) any Liability for unpaid amounts for the sale, lease,
construction or receipt of goods, property or services purchased,
obtained or used in the ordinary course of business by one Party from
the other Party prior to the Distribution Date;
(iv) any Liability for unpaid amounts for products or services
or refunds owing on products or services due on a value-received basis
for work done by one Party at the request or on behalf of the other
Party;
(v) any Liability that the Parties may have with respect to
indemnification or contribution pursuant to this Agreement for claims
brought against the Parties by third Persons, which Liability shall be
governed by the provisions of this Article XV and, if applicable, the
----------
appropriate provisions of any Conveyancing Instrument, any
Implementation Agreement, any Operating Agreement or the Tax Sharing
Agreement; or
(vi) any Liability the release of which would result in the
release of any party other than a Person released pursuant to this
Section 15.1; provided, however, that the Parties agree not to bring
------------ -------- -------
suit or permit any of their Subsidiaries or Affiliates to bring suit
against any Person with respect to any Liability to the
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extent that such Person would be released with respect to such
Liability by this Section 15.1 but for the provisions of this clause
------------
(vi).
(c) Neither Party shall make, nor permit any of its Subsidiaries or
Affiliates to make, any claim or demand, or commence any Action asserting any
claim or demand, including any claim of contribution or indemnification, against
the other Party, or any other Person released pursuant to Section 15.1(a), with
---------------
respect to any Liability released pursuant to Section 15.1(a).
----------------
(d) It is the intent of each of the Parties by virtue of the
provisions of this Section 15.1 to provide for a full and complete release and
------------
discharge of all Liabilities existing or arising from all acts and events
occurring or failing to occur or alleged to have occurred or to have failed to
occur and all conditions existing or alleged to have existed on or before the
Distribution Date, between the Parties (including any contractual agreements or
arrangements existing or alleged to have existed between the Parties on or
before the Distribution Date), except as expressly set forth in Section 15.1(b).
---------------
At any time, at the request of either Party, the other Party shall execute and
deliver releases reflecting the provisions hereof.
15.2. Indemnification by Edwards. Except as provided in Section 15.5,
-------------------------- ------------
Edwards shall indemnify and hold harmless Baxter and each of its Subsidiaries,
Affiliates, directors, officers, employees and agents, and each of the heirs,
executors, successors and assigns of any of the foregoing (collectively, the
"Baxter Indemnified Parties"), from and against any and all Expenses or Losses
--------------------------
incurred or suffered by Baxter (and/or one or more of the Baxter Indemnified
Parties), in connection with, relating to, arising out of or due to, directly or
indirectly, any of the following items:
(a) any claim that the information included in the Registration
Statement or the Information Statement that relates to the Edwards
Business, or any other information relating to the Edwards Business
provided to Baxter or distributed to third parties by employees of Edwards
or individuals who were employees of the Edwards Business prior to the
Distribution Date, is or was false or misleading with respect to any
material fact or omits or omitted to state any material fact required to be
stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading,
regardless of whether the occurrence, action or other event giving rise to
the applicable matter took place prior or subsequent to the Distribution
Date;
(b) the Edwards Business as conducted by Baxter or its Subsidiaries,
Affiliates or predecessors on or at any time prior to the Distribution
Date;
(c) the Transferred Assets;
(d) the Assumed Liabilities;
(e) the Transferred Subsidiaries;
(f) the breach by Edwards or any of its Subsidiaries of any covenant
or agreement set forth in this Agreement, any Conveyancing Instrument, any
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Implementation Agreement, any Operating Agreement or the Tax Sharing
Agreement (subject, in the case of the Operating Agreements, to any
limitations of liability contained therein), regardless of when or where
the loss, claim, accident, occurrence, event or happening giving rise to
the Expense or Loss took place, or whether any such loss, claim, accident,
occurrence, event or happening is known or unknown, or reported or
unreported;
(g) the employee benefits provided or the actions taken or omitted
to be taken with respect thereto in connection with this Agreement or
otherwise relating to the provision of employee benefits to employees or
former employees of Edwards (or its Subsidiaries), their beneficiaries,
alternate payees or any other person claiming benefits through them (except
to the extent such Expenses or Losses are specifically allocated to Baxter
pursuant to Section 15.3(f)), including Expenses or Losses arising in
----------------
connection with (i) Edwards' reduction, elimination or failure to provide
any benefit accrued by its employees or employees of any of its
Subsidiaries (including benefits accrued prior to the Distribution Date)
and (ii) the transfer of account balances and accrued benefits as described
in Section 12.9 where such Expenses or Losses are incurred as a result of
------------
(A) any act or omission by Edwards (or Edwards' representative) or (B) a
determination by the IRS that the transferee plan is not a tax-qualified
plan;
(h) the Indemnifiable matters set forth in Sections 7.3, 9.5(b) and
------------ ------
9.10(c) and Article XII; or
------- ------------
(i) any use of, access to or reliance upon the technical information
or data made available to Edwards or its Subsidiaries pursuant to Section
-------
17.2.
----
15.3. Indemnification by Baxter. Except as provided in Section 15.5,
------------------------- ------------
Baxter shall indemnify and hold harmless Edwards and each of its Subsidiaries,
Affiliates, directors, officers, employees and agents, and each of the heirs,
executors, successors and assigns of any of the foregoing (collectively, the
"Edwards Indemnified Parties"), from and against any and all Expenses or Losses
---------------------------
incurred or suffered by Edwards (and/or one or more of the Edwards Indemnified
Parties) in connection with, relating to, arising out of or due to, directly or
indirectly, any of the following items:
(a) any claim that the information included in the Registration
Statement or the Information Statement that relates to Baxter or the
Retained Business is false or misleading with respect to any material fact
or omits to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, regardless of
whether the occurrence, action or other event giving rise to the applicable
matter took place prior or subsequent to the Distribution;
(b) the business (other than the Edwards Business) conducted by
Baxter or its Subsidiaries, Affiliates or predecessors on or at any time
prior to the Distribution Date;
(c) the assets owned by Baxter or its Subsidiaries other than the
Transferred Assets and the Shared Agreements;
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(d) the Liabilities (including the Retained Liabilities) of Baxter
or its Subsidiaries other than the Assumed Liabilities;
(e) the breach by Baxter or any of its Subsidiaries of any covenant
or agreement set forth in this Agreement, any Conveyancing Instrument, any
Implementation Agreement or the Tax Sharing Agreement , regardless of when
or where the loss, claim, accident, occurrence, event or happening giving
rise to the Expense or Loss took place, or whether any such loss, claim,
accident, occurrence, event or happening is known or unknown, or reported
or unreported;
(f) Baxter's reduction, elimination or failure to provide any
benefit previously provided to its employees (or employees of its
Subsidiaries), other than a benefit assumed by Edwards pursuant to Article
-------
XII, or any act or omission by Baxter in connection with the transfer of
---
assets and liabilities as described in Section 12.9; and
------------
(g) the Indemnifiable matters set forth in Section 9.10(c).
---------------
15.4. Applicability of and Limitation on Indemnification. (a) EXCEPT
--------------------------------------------------
AS EXPRESSLY PROVIDED HEREIN, THE INDEMNITY OBLIGATION UNDER THIS ARTICLE XV
----------
SHALL APPLY NOTWITHSTANDING ANY INVESTIGATION MADE BY OR ON BEHALF OF ANY
INDEMNIFIED PARTY AND SHALL APPLY WITHOUT REGARD TO WHETHER THE LOSS, LIABILITY,
CLAIM, DAMAGE, COST OR EXPENSE FOR WHICH INDEMNITY IS CLAIMED HEREUNDER IS BASED
ON STRICT LIABILITY, ABSOLUTE LIABILITY OR ARISES AS AN OBLIGATION FOR
CONTRIBUTION.
(b) NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, IN
NO EVENT SHALL BAXTER BE LIABLE TO EDWARDS (OR ANY EDWARDS INDEMNIFIED PARTY),
OR EDWARDS BE LIABLE TO BAXTER (OR ANY BAXTER INDEMNIFIED PARTY), UNDER THIS
AGREEMENT FOR ANY SPECIAL, INDIRECT, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE
DAMAGES, INCLUDING LOSS OF ANTICIPATED PROFITS OR LOSS OR DIMINUTION OF
REVENUES, REGARDLESS OF THE FORM OF ACTION, WHETHER IN CONTRACT, TORT OR
OTHERWISE, EXCEPT TO THE EXTENT THAT SUCH LIABILITY HAS BEEN ASSERTED BY A THIRD
PARTY AGAINST A PARTY ENTITLED TO INDEMNIFICATION HEREUNDER.
15.5. Adjustment of Indemnifiable Losses. (a) The amount that any
----------------------------------
Party (an "Indemnifying Party") is required to pay to any Person entitled to
------------------
indemnification hereunder (an "Indemnified Party") shall be reduced (including
-----------------
retroactively) by any Insurance Proceeds and other amounts actually recovered by
or on behalf of such Indemnified Party in reduction of the related Expense or
Loss. If an Indemnified Party receives a payment (an "Indemnity Payment")
-----------------
required by this Agreement from an Indemnifying Party in respect of any Expense
or Loss and subsequently actually receives Insurance Proceeds or other amounts
in respect of such Expense or Loss, then such Indemnified Party shall pay to the
Indemnifying Party a sum equal to the lesser of (i) the amount of such Insurance
Proceeds or other amounts actually received or (ii) the net amount of Indemnity
Payments actually received previously. The Indemnified Party agrees
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that the Indemnifying Party shall be subrogated to such Indemnified Party under
any insurance policy.
(b) An insurer who otherwise would be obligated to pay any claim shall not
be relieved of the responsibility with respect thereto, or, solely by virtue of
the indemnification provisions hereof, have any subrogation rights with respect
thereto, it being expressly understood and agreed that no insurer or any other
third-party shall be entitled to a "windfall" (i.e., a benefit he or she would
----
not be entitled to receive in the absence of the indemnification provisions) by
virtue of the indemnification provisions hereof.
(c) If any Indemnified Party realizes a Tax benefit or detriment in one or
more Tax periods by reason of having incurred a Claim or Loss for which such
Indemnified Party receives an Indemnity Payment from an Indemnifying Party (or
by reason of the receipt of any Indemnity Payment), then such Indemnified Party
shall pay to such Indemnifying Party an amount equal to the Tax benefit or such
Indemnifying Party shall pay to such Indemnified Party an additional amount
equal to the Tax detriment (taking into account, without limitation, any Tax
detriment resulting from the receipt of such additional amounts), as the case
may be. The amount of any Tax benefit or any Tax detriment for a Tax period
realized by an Indemnified Party by reason of having incurred a Claim or Loss
(or by reason of the receipt of any Indemnity Payment) shall be deemed to equal
the product obtained by multiplying (i) the amount of any deduction or loss or
inclusion in income for such period resulting from such Claim or Loss (or the
receipt of any Indemnity Payment or additional amount), as the case may be
(without regard to whether such deduction or loss or such inclusion in income
results in any actual decrease or increase in Tax liability for such period), by
(ii) the highest applicable marginal Tax rate for such period (provided,
--------
however, that the amount of any Tax benefit attributable to an amount that is
- -------
creditable shall be deemed to equal the amount of such creditable item). Any
payment due under this Section 15.5(c) with respect to a Tax benefit or Tax
---------------
detriment realized by an Indemnified Party in a Tax period shall be due and
payable within 30 days from the time the return for such Tax period is due,
without taking into account any extension of time granted to the Party filing
such return.
(d) In the event that an Indemnity Payment shall be denominated in a
currency other than United States dollars, the amount of such payment shall be
translated into United States dollars using the Foreign Exchange Rate for such
currency determined in accordance with the following rules:
(i) with respect to an Expense or a Loss arising from payment by a
financial institution under a guarantee, comfort letter, letter of credit,
foreign exchange contract or similar instrument, the Foreign Exchange Rate
for such currency shall be determined as of the date on which such
financial institution shall have been reimbursed;
(ii) with respect to an Expense or a Loss covered by insurance, the
Foreign Exchange Rate for such currency shall be the Foreign Exchange Rate
employed by the insurance company providing such insurance in settling such
Expense or Loss with the Indemnifying Party; and
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(iii) with respect to an Expense or a Loss not covered by clause
(i) or (ii) above, the Foreign Exchange Rate for such currency shall
be determined as of the date that notice of the claim with respect to
such Expense or Loss shall be given to the Indemnified Party.
15.6. Procedures for Indemnification of Third Party Claims. (a) If
----------------------------------------------------
any third-party shall make any claim or commence any arbitration proceeding or
suit (collectively, a "Third Party Claim") against any one or more of the
-----------------
Indemnified Parties with respect to which an Indemnified Party intends to make
any claim for indemnification against Edwards under Section 15.2 or against
------------
Baxter under Section 15.3, such Indemnified Party shall promptly give written
------------
notice to the Indemnifying Party describing such Third Party Claim in reasonable
detail, and the following provisions shall apply. Notwithstanding the
foregoing, the failure of any Indemnified Party to provide notice in accordance
with this Section 15.6(a) shall not relieve the related Indemnifying Party of
---------------
its obligations under this Article XV, except to the extent that such
----------
Indemnifying Party is actually prejudiced by such failure to provide notice.
(b) The Indemnifying Party shall have 20 business days after receipt
of the notice referred to in Section 15.6(a) to notify the Indemnified Party
---------------
that it elects to conduct and control the defense of such Third Party Claim. If
the Indemnifying Party does not give the foregoing notice, the Indemnified Party
shall have the right to defend, contest, settle or compromise such Third Party
Claim in the exercise of its exclusive discretion subject to the provisions of
Section 15.6(c), and the Indemnifying Party shall, upon request from any of the
- ---------------
Indemnified Parties, promptly pay to such Indemnified Parties in accordance with
the other terms of this Section 15.6(b) the amount of any Expense or Loss
---------------
resulting from their liability to the third-party claimant. If the Indemnifying
Party gives the foregoing notice, the Indemnifying Party shall have the right to
undertake, conduct and control, through counsel reasonably acceptable to the
Indemnified Party, and at its sole expense, the conduct and settlement of such
Third Party Claim, and the Indemnified Party shall cooperate with the
Indemnifying Party in connection therewith, provided that (i) the Indemnifying
--------
Party shall not thereby permit any lien, encumbrance or other adverse charge to
thereafter attach to any asset of any Indemnified Party; (ii) the Indemnifying
Party shall not thereby permit any injunction against any Indemnified Party;
(iii) the Indemnifying Party shall permit the Indemnified Party and counsel
chosen by the Indemnified Party and reasonably acceptable to the Indemnifying
Party to monitor such conduct or settlement and shall provide the Indemnified
Party and such counsel with such information regarding such Third Party Claim as
either of them may reasonably request (which request may be general or
specific), but the fees and expenses of such counsel (including allocated costs
of in-house counsel and other personnel) shall be borne by the Indemnified Party
unless (A) the Indemnifying Party and the Indemnified Party shall have mutually
agreed to the retention of such counsel or (B) the named parties to any such
Third Party Claim include the Indemnified Party and the Indemnifying Party and
in the reasonable opinion of counsel to the Indemnified Party representation of
both parties by the same counsel would be inappropriate due to actual or likely
conflicts of interest between them, in either of which cases the reasonable fees
and disbursements of counsel for such Indemnified Party (including allocated
costs of in-house counsel and other personnel) shall be reimbursed by the
Indemnifying Party to the Indemnified Party; and (iv) the Indemnifying Party
shall agree promptly to reimburse to the extent required under this Article XV
----------
the Indemnified Party for the full amount of any Expense or Loss resulting
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from such Third Party Claim and all related expenses incurred by the Indemnified
Party. In no event shall the Indemnifying Party, without the prior written
consent of the Indemnified Party, settle or compromise any claim or consent to
the entry of any judgment that does not include as an unconditional term thereof
the giving by the claimant or the plaintiff to the Indemnified Party a release
from all Liability in respect of such claim.
If the Indemnifying Party shall not have undertaken the conduct and
control of the defense of any Third Party Claim as provided above, the
Indemnifying Party shall nevertheless be entitled through counsel chosen by the
Indemnifying Party and reasonably acceptable to the Indemnified Party to monitor
the conduct or settlement of such claim by the Indemnified Party, and the
Indemnified Party shall provide the Indemnifying Party and such counsel with
such information regarding such Third Party Claim as either of them may
reasonably request (which request may be general or specific), but all costs and
expenses incurred in connection with such monitoring shall be borne by the
Indemnifying Party.
(c) So long as the Indemnifying Party is contesting any such Third
Party Claim in good faith, the Indemnified Party shall not pay or settle any
such Third Party Claim. Notwithstanding the foregoing, the Indemnified Party
shall have the right to pay or settle any such Third Party Claim, provided that
--------
in such event the Indemnified Party shall waive any right to indemnity therefor
by the Indemnifying Party, and no amount in respect thereof shall be claimed as
an Expense or a Loss under this Section 15.6(c).
---------------
If the Indemnifying Party shall have undertaken the conduct and
control of the defense of any Third Party Claim as provided above, the
Indemnified Party, on not less than 30 days prior written notice to the
Indemnifying Party, may make settlement (including payment in full) of such
Third Party Claim, and such settlement shall be binding upon the Parties for the
purposes hereof, unless within said 30-day period the Indemnifying Party shall
have requested the Indemnified Party to contest such Third Party Claim at the
expense of the Indemnifying Party. In such event, the Indemnified Party shall
promptly comply with such request and the Indemnifying Party shall have the
right to direct the defense of such claim or any litigation based thereon
subject to all the conditions of Section 15.6(b). Notwithstanding anything in
---------------
this Section 15.6(c) to the contrary, if the Indemnified Party, in the belief
---------------
that a claim may materially and adversely affect it other than as a result of
money damages or other money payments, advises the Indemnifying Party that it
has determined to settle a claim, the Indemnified Party shall have the right to
do so at its own cost and expense, without any requirement to contest such claim
at the request of the Indemnifying Party, but without any right under the
provisions of this Section 15.6(c) for indemnification by the Indemnifying
---------------
Party.
(d) The provisions of this Section 15.6 and Section 15.7 shall not
------------ ------------
apply to Taxes (which are covered by the Tax Sharing Agreement).
15.7. Procedures for Indemnification of Direct Claims. Any claim for
-----------------------------------------------
indemnification on account of an Expense or a Loss made directly by the
Indemnified Party against the Indemnifying Party and that does not result from a
Third Party Claim shall be asserted by written notice from the Indemnified Party
to the Indemnifying Party specifically claiming indemnification hereunder. Such
Indemnifying Party shall have a period of 30 business days after the receipt of
such notice within which to respond thereto. If such Indemnifying Party
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does not respond within such 30 business-day period, such Indemnifying Party
shall be deemed to have accepted responsibility to make payment and shall have
no further right to contest the validity of such claim. If such Indemnifying
Party does respond within such 30 business-day period and rejects such claim in
whole or in part, such Indemnified Party shall be free to pursue resolution as
provided in Article XVI.
-----------
15.8. Contribution. If the indemnification provided for in this
------------
Article XV is unavailable to an Indemnified Party in respect of any Expense or
- ----------
Loss arising out of or related to information contained in the Registration
Statement or the Information Statement, then the Indemnifying Party, in lieu of
indemnifying such Indemnified Party, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such Expense or Loss in such
proportion as is appropriate to reflect the relative fault of the Edwards
Indemnified Parties, on the one hand, or the Baxter Indemnified Parties, on the
other hand, in connection with the statements or omissions that resulted in such
Expense or Loss. The relative fault of any Edwards Indemnified Party, on the
one hand, and of any Baxter Indemnified Party, on the other hand, shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission of a
material fact relates to information about or supplied by the Edwards Business
or an Edwards Indemnified Party, on the one hand, or about or by the Retained
Business or a Baxter Indemnified Party, on the other hand.
15.9. No Third-Party Beneficiaries. Except to the extent expressly
----------------------------
provided otherwise in this Article XV, the indemnification provided for in this
----------
Agreement, the Tax Sharing Agreement, any Implementation Agreement or any
Operating Agreement shall not inure to the benefit of any third-party or parties
and shall not relieve any insurer or other third-party who otherwise would be
obligated to pay any claim or assume the responsibility with respect thereto,
or, solely by virtue of the indemnification provisions hereof, provide any
subrogation rights with respect thereto, and each Party agrees to waive such
rights against the other to the fullest extent permitted.
15.10. Remedies Cumulative. The remedies provided in this Article XV
------------------- ----------
shall be cumulative and, subject to the provisions of Article XVI below, shall
-----------
not preclude assertion by an Indemnified Party of any other rights or the
seeking of any and all other remedies against any Indemnifying Party.
15.11. Survival. All covenants and agreements of the Parties contained
--------
in this Agreement relating to indemnification shall survive the Distribution
Date indefinitely, unless a specific survival or other applicable period is
expressly set forth herein.
ARTICLE XVI
DISPUTE RESOLUTION
------------------
16.1. General. Any dispute arising out of or relating to this Agreement
-------
or any of the Implementation Agreements shall be resolved in accordance with the
procedures specified in this Article XVI, which shall be the sole and
-----------
exclusive procedures for the resolution of any such disputes.
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16.2. Escalation. The Parties will attempt in good faith to resolve
----------
expeditiously any dispute, claim or controversy arising out of or relating to
the execution, interpretation and performance of this Agreement (including the
validity, scope and enforceability of this mediation and arbitration provision)
promptly by negotiations between executives who have authority to settle the
controversy and who are at a higher level of management than the persons with
direct responsibility for the administration of this Agreement. Any Party may
give the other Party written notice (an "Escalation Notice") of any dispute not
-----------------
resolved in the normal course of business. Within fifteen days after delivery
of the Escalation Notice, the receiving Party shall submit to the other a
written response. The Escalation Notice and the response thereto shall include
(a) a statement of each Party's position and a summary of arguments supporting
that position, and (b) the name and title of the executive who will represent
that Party and of any other person who will accompany the executive. Within 30
days after delivery of the Escalation Notice, the executives of both Parties
shall meet at a mutually acceptable time and place, and thereafter as often as
they reasonably deem necessary, to attempt to resolve the dispute. All
reasonable requests for information made by one Party to the other will be
honored. All negotiations pursuant to this clause are confidential and shall be
treated as compromise and settlement negotiations for purposes of applicable
rules of evidence..
16.3. Arbitration. Any dispute, claim or controversy arising out of or
-----------
relating to this Agreement or its breach, termination or validity which has not
been resolved by the specified non-binding procedure set forth in Section 16.2
------------
within 90 days of the date of delivery of the Escalation Notice shall be settled
by binding arbitration in accordance with the CPR Non-Administered Arbitration
Rules in effect on the date of this Agreement, by three independent and
impartial arbitrators, none of whom shall be appointed by either Party. The
arbitration shall be governed by the United States Arbitration Act, 9 U.S.C.
(S)(S) 1-16, as the same may be amended from time to time, and judgment upon the
award rendered by the arbitrators may be entered by any court having
jurisdiction thereof. The place of the arbitration shall be Lake County,
Illinois or Orange County, California, and shall be determined by the Party that
initiated the dispute resolution process. The arbitrators may award attorneys'
fees in their discretion. Otherwise, the arbitrators are not empowered to award
damages in excess of compensatory damages, and each Party hereby irrevocably
waives any right to recover such damages.
16.4. Procedures. The Parties may request limited discovery in accordance
----------
with the Federal Rules of Civil Procedure of the United States (the "F.R.C.P.")
--------
for a period of 120 days after the initiation of the arbitration process. All
issues regarding compliance with discovery requests shall be decided by the
arbitrators pursuant to the F.R.C.P. The Parties agree that the recipient of a
discovery request shall have 10 business days after the receipt of such request
to object to any or all portions of such request and shall respond to any
portions of such request not so objected within 30 business days of the receipt
of such request. All objections shall be in writing and shall indicate the
reasons for such objections. The objecting Party shall ensure that all
objections and responses are received by the other Party within the above time
periods; failure to comply with the specified time period shall be addressed as
set forth in F.R.C.P. 37 Any Party seeking to compel discovery following receipt
of an objection shall file with the other Party and the arbitrators a motion to
compel, including a copy of the initial request and the objection. The
arbitrators shall allow 10 business days for the responses to the motion to
compel before ruling. Claims of privilege and other objections shall be
determined as they
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would be in United States federal court in a case applying Illinois law. The
arbitrators may grant or deny the motion to compel, in whole or in part,
concluding that the discovery request is or is not appropriate under the
circumstances, taking into account the needs of the Parties and the desirability
of making discovery expeditious and cost-effective. The statute of limitations
of the State of Illinois applicable to the commencement of a lawsuit shall apply
to the date of initial written notification of a dispute and shall be extended
until commencement of arbitration if all interim deadlines have been complied
with by the notifying Party.
16.5. Injunctive Relief. Nothing contained in this Article XVI shall
----------------- -----------
prevent either Party from resorting to judicial process if injunctive or other
equitable relief from a court is necessary to prevent serious and irreparable
injury to one Party or to others. The use of arbitration procedures will not be
construed under the doctrine of laches, waiver or estoppel to affect adversely
either Party's right to assert any claim or defense.
ARTICLE XVII
ACCESS TO INFORMATION AND SERVICES
----------------------------------
17.1. Access to Financial Information. (a) At all times from and after
-------------------------------
the Distribution Date for a period of ten (10) years, as soon as reasonably
practicable after written request: (i) Baxter shall afford to Edwards, its
Subsidiaries and their authorized accountants, counsel and other designated
representatives reasonable access during normal business hours to, or, at
Edwards' expense, provide copies of, all records, books, contracts, instruments,
data, documents and other information (collectively, "Information") in the
-----------
possession or under the control of Baxter immediately following the Distribution
Date that relates to Edwards, the Edwards Business or the Edwards Employees; and
(ii) Edwards shall afford to Baxter, its Subsidiaries and their authorized
accountants, counsel and other designated representatives reasonable access
during normal business hours to, or, at Baxter's expense, provide copies of, all
Information in the possession or under the control of Edwards immediately
following the Distribution Date that relates to Baxter, the Retained Business or
the employees of Baxter; provided, however, that in the event that either Party
-------- -------
determines that any such provision of or access to Information could be
commercially detrimental, violate any law or agreement or waive any attorney-
client privilege, the Parties shall take all reasonable measures to permit the
compliance with such obligations in a manner that avoids any such harm or
consequence.
(b) Either Party may request Information under Section 17.1(a) (i) to
---------------
comply with reporting, disclosure, filing or other requirements imposed on the
requesting party (including under applicable securities or tax laws) by a
Governmental Authority having jurisdiction over the requesting party, (ii) for
use in any other judicial, regulatory, administrative, Tax or other proceeding
or in order to satisfy audit, accounting, claims defense, regulatory filings,
litigation, Tax or other similar requirements, (iii) for use in compensation,
benefit or welfare plan administration or other bona fide business purposes or
(iv) to comply with its obligations under this Agreement, any Conveyancing
Instrument, any Implementation Agreement, any Operating Agreement or the Tax
Sharing Agreement.
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(c) After the Distribution Date, (i) Edwards shall maintain in effect at
its own cost and expense adequate systems and controls to the extent necessary
to enable Baxter and its Subsidiaries to satisfy their respective reporting,
accounting, audit and other obligations, and (ii) Edwards shall provide, or
cause to be provided, to Baxter in such form as Baxter shall request, at no
charge to Baxter, all financial and other data and information as Baxter
determines necessary or advisable in order to prepare Baxter financial
statements and reports or filings with any Governmental Authority.
17.2. Ownership of Information. Any Information owned by one Party that
------------------------
is provided to a requesting Party pursuant to Section 17.1 shall be deemed to
------------
remain the property of the providing Party. Unless specifically set forth
herein, nothing contained in this Agreement shall be construed to grant or
confer rights of license or otherwise in any such Information.
17.3. Compensation for Providing Information. The Party requesting
--------------------------------------
Information agrees to reimburse the providing Party for the reasonable costs, if
any, of creating, gathering and copying such Information, to the extent that
such costs are incurred for the benefit of the requesting Party. Except as
otherwise specifically provided in this Agreement, such costs shall be computed
in accordance with the providing Party's standard methodology and procedures.
17.4. Retention of Records. To facilitate the possible exchange of
--------------------
Information pursuant to this Article XVII after the Distribution Date, the
------------
Parties agree to use commercially reasonable efforts to retain all Information
in their respective possession or control on the Distribution Date in accordance
with the policies and procedures of Baxter as in effect on the Distribution
Date. No party will destroy, or permit any of its Subsidiaries or Affiliates to
destroy, any Information that the other Party may have the right to obtain
pursuant to this Agreement prior to the tenth anniversary of the date hereof,
and thereafter without first using commercially reasonable efforts to notify the
other Party of the proposed destruction and giving the other Party the
opportunity to take possession of such Information prior to such destruction;
provided, however, that in the case of any Information relating to Taxes, such
- -------- -------
period shall be extended to the expiration of the applicable statute of
limitations (giving effect to any extensions thereof).
17.5. Limitations. (a) Baxter and Edwards make no representations or
-----------
warranties, express or implied, about the accuracy, completeness, adequacy or
sufficiency of the financial and technical information and data compilations and
EXPRESSLY DISCLAIM ALL WARRANTIES WHATSOEVER, WHETHER STATUTORY, WRITTEN, ORAL,
EXPRESS OR IMPLIED, AND EXPRESSLY DISCLAIM EACH SUCH WARRANTY, INCLUDING ANY
WARRANTY OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. Except as
provided in Article X hereof, the rights of access pursuant to Section 17.1
--------- ------------
shall not include, however, such information of either Party and its
Subsidiaries relating to (i) products, materials and components under
development; (ii) information pertaining to potential acquisitions, divestitures
and other business arrangements; (iii) studies and investigations being
undertaken by either Party and its Subsidiaries for its or their own benefit or
for the benefit of a third party; and (iv) information and data either Party and
its Subsidiaries are obligated to a third party to maintain in confidence.
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(b) No Party shall have any liability to the other Party (i) if any
Information exchanged or provided pursuant to this Agreement that is an estimate
or forecast, or that is based on an estimate or forecast, is found to be
inaccurate, in the absence of willful misconduct by the Party providing such
Information, or (ii) if any Information is destroyed after commercially
reasonable efforts to comply with the provisions of Section 17.4.
------------
17.6. Production of Witnesses. At all times from and after the Distribution
-----------------------
Date, each Party shall use commercially reasonable efforts to make available to
the other Party (without cost (other than reimbursement of actual out-of-pocket
expenses) to, and upon prior written request of, the other Party) its directors,
officers, employees and agents as witnesses to the extent that the same may
reasonably be required by the other Party in connection with any legal,
administrative or other proceeding in which the requesting Party may from time
to time be involved with respect to the Edwards Business, the Retained Business
or any transactions contemplated hereby.
17.7. Confidentiality. (a) From and after the Distribution Date, each
---------------
of Baxter and Edwards shall hold, and shall cause their respective Subsidiaries,
directors, officers, employees, agents, consultants, advisors and other
representatives to hold, in strict confidence, with at least the same degree of
care that applies to Baxter's confidential and proprietary information pursuant
to policies in effect as of the Distribution Date, all non-public information
concerning the other Party or any of its Subsidiaries or Affiliates obtained by
it prior to the Distribution Date, accessed by it pursuant to Section 17.1
------------
hereof, or furnished to it by the other Party or any of its Subsidiaries or
Affiliates pursuant to this Agreement or any agreement or document contemplated
hereby, including any trade secrets, technology, know-how and other non-public,
proprietary intellectual property rights licensed pursuant to Sections 10.1 and
-------------
10.2 hereof, and shall not release or disclose such information to any other
- ----
Person, except its representatives, who shall be bound by the provisions of this
Section 17.7; provided, however, that Baxter and Edwards and their respective
- ------------ -------- -------
Subsidiaries, directors, officers, employees, agents, consultants, advisors and
other representatives may disclose such information if, and only to the extent
that, (i) a disclosure of such information is compelled by judicial or
administrative process or, in the opinion of such Party's counsel, by other
requirements of law (in which case the disclosing Party will provide, to the
extent practicable under the circumstances, advance written notice to the other
Party of its intent to make such disclosure), or (ii) such Party can show that
such information (A) is published or is or otherwise becomes available to the
general public as part of the public domain without breach of this Agreement;
(B) has been furnished or made known to the recipient without any obligation to
keep it confidential by a third party under circumstances that are not known to
the recipient to involve a breach of the third party's obligations to a Party
hereto; (C) was developed independently of information furnished to the
recipient under this Agreement; or (D) in the case of information furnished
after the Distribution Date, was known to the recipient at the time of receipt
thereof from the other Party.
(b) Each Party acknowledges that the other Party would not have an
adequate remedy at law for the breach by the acknowledging Party of any one or
more of the covenants contained in this Section 17.7 and agrees that, in the
------------
event of such breach, the other Party may, in addition to the other remedies
that may be available to it, apply to a court for an injunction to prevent
breaches of this Section 17.7 and to enforce specifically the terms and
------------
provisions of this
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Section. Notwithstanding any other Section hereof, the provisions of this
Section 17.7 shall survive the Distribution Date indefinitely.
- ------------
17.8. Privileged Matters. (a) Each of Baxter and Edwards agrees to
------------------
maintain, preserve and assert all privileges, including privileges arising under
or relating to the attorney-client relationship (which shall include without
limitation the attorney-client and work product privileges), not heretofore
waived, that relate to the Edwards Business and the Transferred Assets for any
period prior to the Distribution Date ("Privilege" or "Privileges"). Each Party
--------- ----------
agrees that it shall not waive any Privilege that could be asserted under
applicable law without the prior written consent of the other Party. The
rights and obligations created by this Section 17.8 shall apply to all
------------
information relating to the Edwards Business as to which, but for the
Distribution, either Party would have been entitled to assert or did assert the
protection of a Privilege ("Privileged Information"), including (i) any and all
----------------------
information generated prior to the Distribution Date but which, after the
Distribution, is in the possession of either Party; and (ii) all information
generated, received or arising after the Distribution Date that refers to or
relates to Privileged Information generated, received or arising prior to the
Distribution Date.
(b) Upon receipt by either Party of any subpoena, discovery or other
request that may call for the production or disclosure of Privileged Information
or if either Party obtains knowledge that any current or former employee of
Baxter or Edwards has received any subpoena, discovery or other request that may
call for the production or disclosure of Privileged Information, such Party
shall notify promptly the other Party of the existence of the request and shall
provide the other Party a reasonable opportunity to review the information and
to assert any rights it may have under this Section 17.8 or otherwise to prevent
------------
the production or disclosure of Privileged Information. Each Party agrees that
it will not produce or disclose any information that may be covered by a
Privilege under this Section 17.8 unless (i) the other Party has provided its
------------
written consent to such production or disclosure (which consent will not be
unreasonably withheld), or (ii) a court of competent jurisdiction has entered a
final, nonappealable order finding that the information is not entitled to
protection under any applicable Privilege.
(c) Baxter's transfer of books and records and other information to
Edwards, and Baxter's agreement to permit Edwards to possess Privileged
Information existing or generated prior to the Distribution Date, are made in
reliance on Edwards' agreement, as set forth in Sections 17.7 and 17.8, to
------------- ----
maintain the confidentiality of Privileged Information and to assert and
maintain all applicable Privileges. The access to information being granted
pursuant to Section 17.1, the agreement to provide witnesses and individuals
------------
pursuant to Section 17.6 and the transfer of Privileged Information to Edwards
------------
pursuant to this Agreement shall not be deemed a waiver of any Privilege that
has been or may be asserted under this Section 17.8 or otherwise. Nothing in
------------
this Agreement shall operate to reduce, minimize or condition the rights granted
to Baxter in, or the obligations imposed upon Edwards by, this Section 17.8.
------------
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ARTICLE XVIII
MISCELLANEOUS
-------------
18.1. Entire Agreement. This Agreement, the Conveyancing Instruments,
----------------
the Implementation Agreements, the Operating Agreements and the Tax Sharing
Agreement, including the Schedules and Exhibits referred to herein and therein
and the documents delivered pursuant hereto and thereto, constitute the only
agreements between the Parties with respect to the subject matter contained
herein or therein, and supersede all prior agreements, negotiations,
discussions, understandings, writings and commitments between the Parties with
respect to such subject matter.
18.2. Choice of Law and Forum. This Agreement shall be governed by and
-----------------------
construed and enforced in accordance with the substantive laws (except for any
otherwise applicable conflicts of law provisions) of the State of Illinois and
the federal laws of the United States of America applicable therein, as though
all acts and omissions related hereto occurred in Illinois. Subject to Article
-------
XVI, any lawsuit arising from or related to this Agreement, any of the
- ---
Conveyancing Instruments, Implementation Agreements or Operating Agreements, or
the Tax Sharing Agreement shall be brought only in the United States District
Court for the Northern District of Illinois, the Circuit Court of Lake County,
Illinois, the United States District Court for the Central District of
California or the Superior Court of Orange County, California, and the specific
choice from among the foregoing shall be determined by the Party initiating such
lawsuit. To the extent permissible by law, the Parties hereby consent to the
jurisdiction and venue of such courts. Each Party hereby waives, releases and
agrees not to assert, and agrees to cause its Affiliates to waive, release and
not to assert, any rights such Party or its Affiliates may have under any
foreign law or regulation that would be inconsistent with the terms of this
Agreement as governed by Illinois law.
18.3. Amendment. This Agreement shall not be amended, modified or
---------
supplemented except by a written instrument signed by an authorized
representative of each of the Parties.
18.4. Waiver. Any term or provision of this Agreement may be waived,
------
or the time for its performance may be extended, by the Party or Parties
entitled to the benefit thereof. Any such waiver shall be validly and
sufficiently given for the purposes of this Agreement if, as to any Party, it is
in writing signed by an authorized representative of such Party. The failure of
any Party to enforce at any time any provision of this Agreement shall not be
construed to be a waiver of such provision, or in any way to affect the validity
of this Agreement or any part hereof or the right of any Party thereafter to
enforce each and every such provision. No waiver of any breach of this
Agreement shall be held to constitute a waiver of any other or subsequent
breach.
18.5. Partial Invalidity. Wherever possible, each provision hereof
------------------
shall be interpreted in such a manner as to be effective and valid under
applicable law, but in case any one or more of the provisions contained herein
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such provision or provisions shall be ineffective to the extent, but
only to the extent, of such invalidity, illegality or unenforceability without
invalidating the
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remainder of such provision or provisions or any other provisions hereof, unless
such a construction would be unreasonable.
18.6. Execution in Counterparts. This Agreement may be executed in one
-------------------------
or more counterparts, each of which shall be deemed an original instrument, but
all of which shall be considered one and the same agreement, and shall become
binding when one or more counterparts have been signed by and delivered to each
of the Parties.
18.7. Successors and Assigns. This Agreement shall be binding upon and
----------------------
inure to the benefit of the Parties and their respective successors and
permitted assigns; provided, however, that the rights of either Party under this
-------- -------
Agreement shall not be assignable by such Party without the prior written
consent of the other Party. The successors and permitted assigns hereunder
shall include, without limitation, any permitted assignee as well as the
successors in interest to such permitted assignee (whether by merger,
liquidation (including successive mergers or liquidations) or otherwise).
18.8. Third Party Beneficiaries. Except to the extent otherwise
-------------------------
provided in Section 13.5 or Article XV hereof the provisions of this Agreement
------------ ----------
are solely for the benefit of the Parties and their respective Affiliates,
successors and permitted assigns and shall not confer upon any third Person any
remedy, claim, liability, reimbursement or other right in excess of those
existing without reference to this Agreement. Nothing in this Agreement, the
Tax Sharing Agreement or any Operating Agreement shall obligate Baxter or
Edwards to assist any Edwards Employee to enforce any rights such employee may
have with respect to any of the employee benefits described in this Agreement.
18.9. Notices. All notices, requests, claims, demands and other
-------
communications required or permitted hereunder shall be in writing and shall be
deemed given or delivered (i) when delivered personally, (ii) if transmitted by
facsimile when confirmation of transmission is received, (iii) if transmitted by
electronic mail when confirmation of such transmission is received, (iv) if sent
by registered or certified mail, postage prepaid, return receipt requested, on
the third business day after mailing or (v) if sent by private courier when
received; and shall be addressed as follows:
If to Baxter, to:
Baxter International Inc.
One Baxter Parkway
Deerfield, IL 60015-4633
Attention: General Counsel
Facsimile: (847) 948-2450
If to Edwards, to:
Edwards Lifesciences Corporation
17221 Red Hill Avenue
Irvine, CA 92614
Attention: General Counsel
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Facsimile: (949) ______________
or to such other address as such Party may indicate by a notice delivered to the
other Party.
18.10. Performance. Each Party shall cause to be performed, and hereby
-----------
guarantees the performance of, all actions, agreements and obligations set forth
herein to be performed by any Subsidiary or Affiliate of such Party.
18.11. Force Majeure. No Party shall be deemed in fault of this
-------------
Agreement, any Conveyancing Instrument, any Implementation Agreement, any
Operating Agreement or the Tax Sharing Agreement to the extent that any delay or
failure in the performance of its obligations under this Agreement, any
Conveyancing Instrument, any Implementation Agreement, any Operating Agreement
or the Tax Sharing Agreement results from any cause beyond its reasonable
control and without its fault or negligence, including acts of God, acts of
civil or military authority, embargoes, epidemics, war, riots, insurrections,
fires, explosions, earthquakes, floods, unusually severe weather conditions,
labor problems or unavailability of parts, or, in the case of computer systems,
any failure in electrical or air conditioning equipment. In the event of any
such excused delay, the time for performance shall be extended for a period
equal to the time lost by reason of the delay.
18.12. No Public Announcement. Neither Baxter nor Edwards shall,
----------------------
without the approval of the other, make any press release or other public
announcement concerning the transactions contemplated by this Agreement, except
as and to the extent that any such Party shall be so obligated by law or the
rules of any stock exchange or quotation system, in which case the other Party
shall be advised and the Parties shall use commercially reasonable efforts to
cause a mutually agreeable release or announcement to be issued; provided,
--------
however, that the foregoing shall not preclude communications or disclosures
- -------
necessary to implement the provisions of this Agreement or to comply with the
accounting and SEC disclosure obligations or the rules of any stock exchange.
18.13. Termination. Notwithstanding any provision hereof, this
-----------
Agreement may be terminated and the Distribution abandoned at any time prior to
the Distribution Date by and in the sole discretion of the Board of Directors of
Baxter without the approval of any Person. In the event of such termination,
this Agreement shall forthwith become void and no Party shall have any liability
to any Person by reason of this Agreement, except that Baxter shall be liable
for any costs and expenses, including attorneys' fees, incurred by Edwards or
its Subsidiaries prior to or arising out of such termination.
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed by their authorized representatives as of the date first above written.
BAXTER INTERNATIONAL INC.
By: __________________________
Harry M. Jansen Kraemer, Jr.
Chairman and Chief Executive Officer
EDWARDS LIFESCIENCES CORPORATION
By: __________________________
Michael A. Mussallem
Chairman and Chief Executive Officer
<PAGE>
Exhibit 10.2
TAX SHARING AGREEMENT
Tax Sharing Agreement (the "Agreement") dated as of March 31, 2000
by and between Baxter International Inc. a Delaware corporation ("Baxter") and,
Edwards Lifesciences Corporation, a Delaware corporation (CVG):
WHEREAS, Baxter and CVG have entered into an Agreement and Plan of
Reorganization dated as of March 15, 2000 (the "Reorganization Agreement"); and;
WHEREAS, pursuant to the Reorganization Agreement all the issued and
outstanding common stock of CVG will be distributed by Baxter (pro rata) to the
holders of its common stock (the "Distribution"); and
WHEREAS, the parties hereto desire to provide for the payment of tax
liabilities and entitlement to tax refunds for the taxable periods ending
before, on or after the date of the Distribution, to allocate responsibility and
provide for cooperation in the preparation and filing of tax returns with
respect to such taxable periods, and to provide for certain other related
matters:
NOW, THEREFORE, Baxter, on behalf of itself and members of the Baxter Group
(as hereinafter defined), and CVG, on behalf of itself and members of the CVG
Group (as hereinafter defined), in consideration of the mutual covenants
contained herein, agree as follows:
1
<PAGE>
ARTICLE I
DEFINITIONS
-----------
As used in this Agreement, the following terms shall have the following
meanings, (such meanings to be equally applicable to both the singular and the
plural forms of the terms defined):
"CVG" means the present and future subsidiaries, divisions and businesses
and former divisions and businesses of any member of the CVG Group which are
not, or are not contemplated by the Reorganization Agreement to be, part of the
Baxter Group immediately after the Distribution, including former divisions or
subsidiaries described as the Divested Businesses in the Reorganization
Agreement.
"CVG Business" has the meaning set forth in the Reorganization Agreement
but shall also be defined to include any operations consolidated with CVG for
financial reporting purposes
"CVG Employee" has the meaning set forth in section 12.1 of the
Reorganization Agreement.
"CVG Group" means CVG and its direct and indirect subsidiaries on and after
the Distribution Date, including former divisions and subsidiaries described as
the Divested Businesses as defined in the Reorganization Agreement.
" CVG Distribution Date Balance Sheet" means the CVG balance sheet as of
the Distribution Date
"CVG 1999 Currently Payable Federal Income Tax Expense" means the amount of
U.S. Baxter consolidated federal income tax liability attributable to the CVG
Business for
2
<PAGE>
items reported in Baxter's 1999 consolidated federal income tax return as filed,
computed at a 35% tax rate. This amount shall be determined in good faith by
Baxter, after consulting with CVG, on the basis of CVG Business items as such
items are reported (or should properly have been reported) on the tax packages
and other information provided by CVG under section 2.08 of this Agreement.
"CVG 1999 Estimated Currently Payable Federal Income Tax Expense" means the
U.S. Baxter 1999 consolidated federal income tax expense attributable to the CVG
Business for the taxable year ended December 31 1999, less the net increase (or
plus the net decrease) in the deferred federal income tax liabilities
attributable to the CVG Business through December 31, 1999, as reported in CVG's
consolidated balance sheet as of the December 31, 1999 and consolidated income
statement through December 31, 1999. Any adjustments to CVG's deferred tax
liabilities for periods ending prior to January 1, 1999 shall be disregarded for
this purpose.
"CVG 1999 Currently Payable State Income Tax Expense" means the amount of
U.S. state income tax liability attributable to the CVG Business for items
reported in Baxter's 1999 state income tax returns as filed, computed at an 8%
tax rate. This amount shall be determined in good faith by Baxter, after
consulting with CVG, on the basis of CVG Business items as such items are
reported (or should properly have been reported) on the tax packages and other
information provided by CVG under section 2.05 of this Agreement.
"CVG's 1999 Estimated Currently Payable State Income Tax Expense" means the
U.S. state income tax expense attributable to the CVG Business through the
Distribution Date, less the net increase (or plus the net decrease) in the
deferred state income tax liabilities attributable to the CVG Business through
December 31, 1999, as reported in CVG's consolidated balance sheet as of
December 31, 1999 and consolidated income statement through December 31, 1999.
Any adjustments to CVG's deferred tax liabilities for periods ending prior to
January 1, 1999 shall be disregarded for this purpose.
3
<PAGE>
"CVG 2000 Currently Payable Federal Income Tax Expense" means the amount of
U.S. Baxter consolidated federal income tax liability attributable to the CVG
Business for items reported in Baxter's 2000 consolidated federal income tax
return as filed, computed at a 35% tax rate. This amount shall be determined in
good faith by Baxter, after consulting with CVG, on the basis of CVG Business
items as such items are reported (or should properly have been reported) on the
tax packages and other information provided by CVG under section 2.08 of this
Agreement.
"CVG 2000 Estimated Currently Payable Federal Income Tax Expense" means
the U.S. Baxter 2000 consolidated federal income tax expense attributable to the
CVG Business through the Distribution Date, less the net increase (or plus the
net decrease) in the deferred federal income tax liabilities attributable to the
CVG Business through the Distribution Date, as reported in CVG's consolidated
balance sheet as of the Distribution Date and consolidated income statement
through the Distribution Date. Any adjustments to CVG's deferred tax liabilities
for periods ending prior to January 1, 2000 shall be disregarded for this
purpose.
"CVG 2000 Currently Payable State Income Tax Expense" means the amount of
U.S. state income tax liability attributable to the CVG Business for items
reported in Baxter's 2000 state income tax returns as filed, computed at an 8%
tax rate. This amount shall be determined in good faith by Baxter, after
consulting with CVG, on the basis of CVG Business items as such items are
reported (or should properly have been reported) on the tax packages and other
information provided by CVG under section 2.05 of this Agreement.
"CVG's 2000 Estimated Currently Payable State Income Tax Expense" means the
U.S. state income tax expense attributable to the CVG Business through the
Distribution Date, less the net increase (or plus the net decrease) in the
deferred state income tax liabilities attributable to the CVG Business through
the Distribution Date, as reported in
4
<PAGE>
CVG's consolidated balance sheet as of the Distribution Date and consolidated
income statement through the Distribution Date. Any adjustments to CVG's
deferred tax liabilities for periods ending prior to January 1, 2000 shall be
disregarded for this purpose.
"Baxter Businesses" means the present and former subsidiaries, divisions
and businesses of any member of the Baxter Group, other than the CVG
Business.
"Baxter Employee" means any employee of the Baxter Group who is not a CVG
Employee.
"Baxter Group" means Baxter and its past and present subsidiaries, except
for: (1) members of the CVG Group, (2) the CVG Business, and (3) any past or
present subsidiaries, divisions or businesses of Baxter (or of any of its past
or present subsidiaries) which (i) relate to the CVG Business and (ii) which are
not, or are not contemplated by the Reorganization Agreement to be, part of the
Baxter Group after the Distribution.
"Code" means the Internal Revenue Code of 1986, as amended, or any
successor thereto.
"Disqualifying Disposition" means any disposition of Section 423 CVG Stock
or Section 423 Baxter Stock which does not meet the requirements of section
423(a) of the Code.
"Distribution Date" means the date of the Distribution. For all purposes
of this Agreement, the Distribution shall be deemed effective as of the close of
business on the Distribution Date.
"Final Determination" means, with respect to any issue or item for any
taxable period the earliest to occur of the following: (i) a decision by a court
of competent jurisdiction, but only after such decision has become final and
unappealable; (ii) the
5
<PAGE>
expiration of the time for filing a claim for refund or, if a refund claim has
been timely filed, the time for instituting a suit in respect of such refund
claim, provided that no further adjustment to the items of income, gain, loss,
deduction or credit for such period may thereafter be made; (iii) the execution
by or on behalf of the taxpayer and the IRS of a closing agreement under Section
7121 of the Code or comparable agreements under the laws of other jurisdictions;
(iv) the acceptance by the IRS or its counsel of a tender pursuant to an offer
in compromise under Section 7122 of the Code, or comparable agreements under the
laws of other jurisdictions; (v) the execution of a Form 870 or Form 870AD and
the subsequent payment of the tax deficiency or the receipt of the refund
reflected therein; or (vi) any other final and irrevocable determination of the
tax liability of a party to this Agreement for any taxable period.
"IRS Adjustments" means any adjustments made by the Internal Revenue
Service ("IRS") with respect to any United States ("U.S.") Federal income Tax
Returns of Baxter (or any member of the Baxter Group) in which any part of CVG
is included for taxable periods beginning before the Distribution Date.
"Sales, Use, or Property Tax" means any sales, use, or property tax (and
any related interest or penalties) relating to the CVG Businesses conducted in
the United States.
"Section 423 CVG Stock" means CVG Stock received as a distribution on
Section 423 Baxter Stock pursuant to the Reorganization Agreement.
"Section 423 Baxter Stock" means Baxter stock acquired pursuant to the
Baxter Qualified Employee Stock Purchase Plan, adopted pursuant to the 1987
Incentive Compensation Program.
"Tax" means any of the Taxes.
6
<PAGE>
"Taxes" means taxes arising from all forms of taxation, whenever created or
imposed, and whether of the United States of America or elsewhere, and whether
imposed by a local, municipal, governmental, state, federation or other body,
and without limiting the generality of the foregoing, shall include income,
sales, use, ad valorem, gross receipts, value added, franchise, transfer, stamp,
recording, withholding, payroll, employment, excise, occupation, premium or
property taxes, together with any related interest, penalties and additions to
tax, or additional amounts imposed by any taxing authority (domestic or foreign)
upon the CVG Group, the Baxter Group or any of their respective members or
divisions or branches.
A "Tax Benefit" arises whenever a member's liability for Taxes may be
reduced in future periods as a result of an adjustment by a taxing authority in
the year under examination, whether or not such reduction is presently assured.
Examples of a Tax Benefit include the Taxes associated with an increase in the
basis of an asset or the deferral of a deduction. A Tax Benefit does not
include a change in the amount of a tax credit available. The amount of any Tax
Benefit shall be computed using a tax rate of 35% for federal income tax
purposes and 5.2% (8% state income tax rate less a 35% federal benefit) for
state income tax purposes.
A "Tax Detriment" arises whenever a member's liability for Taxes may be
increased in future periods as a result of an adjustment by a taxing
jurisdiction in the year under examination, whether or not such increase is
presently assured. Examples of a Tax Detriment include the Taxes associated
with a decrease in the basis of an asset or the acceleration of a deduction. A
Tax Detriment does not include a change in the amount of a tax credit available.
The amount of a Tax Detriment shall be computed using a tax rate of 35% for
federal income tax purposes and 5.2% (8% state income tax rate less a 35%
federal benefit) for state income tax purposes.
"Tax Return" means any return, filing, questionnaire or other document
required to be filed, including amended returns that may be filed, for any
period with any taxing
7
<PAGE>
authority (whether domestic or foreign) in connection with any Tax or Taxes
(whether or not a payment is required to be made with respect to such filing).
"Transaction Taxes" means all sales, use, transfer, VAT, stamp,
registration, capital gains, income tax, ad valorem, gross receipts, recording,
withholding (other than payroll tax withholding), and similar taxes or fees
(including, without limitation, all real estate, patent, copyright and trademark
transfer taxes and recording fees) payable in connection with the transactions
contemplated in the Reorganization Agreement, together with any related
interest, penalties, or additions to tax.
ARTICLE II
PREPARATION AND FILING OF TAX RETURNS
-------------------------------------
Section 2.01. Manner of Preparation. All Tax Returns for taxable periods
----------------------
beginning before the Distribution Date which are filed after the Distribution
Date shall be prepared on a basis consistent with prior return treatment
(provided such basis does not have an adverse effect on the elections,
accounting methods, conventions, and principles of taxation used for any taxable
period ending on or before the Distribution Date), and shall be filed on a
timely basis by the party responsible for such filing under this Agreement.
Subject to the provisions of this Agreement, all decisions relating to the
preparation and filing of Tax Returns and any audit or other review of such Tax
Returns shall be made in the sole discretion of the party responsible under this
Agreement for such filing.
Section 2.02. Pre-Distribution Consolidated U.S. Federal Income Tax
-----------------------------------------------------
Returns. Baxter shall prepare and file all consolidated U.S. federal income
- --------
Tax Returns that include both a member of the Baxter Group and part of the CVG
Business, and that are required to be filed for periods beginning before the
Distribution Date. Baxter agrees to pay to the
8
<PAGE>
IRS the consolidated U.S. federal income tax liabilities reported on these
returns on a timely basis.
Baxter shall refund to CVG any excess of: (i) CVG's 1999 Estimated
Currently Payable Federal Income Tax Expense, over (ii) CVG's 1999 Currently
Payable Federal Income Tax Expense. CVG shall refund to Baxter any excess of:
(i) CVG's 1999 Currently Payable Federal Income Tax Expense, over (ii) CVG's
1999 Estimated Currently Payable Federal Income Tax Expense. Payments under
this section shall be due within 30 days after the due date (including
extensions) of Baxter's 1999 consolidated U.S. federal income tax return.
Baxter shall refund to CVG any excess of: (i) CVG's 2000 Estimated
Currently Payable Federal Income Tax Expense, over (ii) CVG's 2000 Currently
Payable Federal Income Tax Expense. CVG shall refund to Baxter any excess of:
(i) CVG's 2000 Currently Payable Federal Income Tax Expense, over (ii) CVG's
2000 Estimated Currently Payable Federal Income Tax Expense. Payments under
this section shall be due within 30 days after the due date (including
extensions) of Baxter's 2000 consolidated U.S. federal income tax return.
Section 2.03 Pre-Distribution U.S. State Income Tax Returns. All U.S.
-----------------------------------------------
state income tax returns (whether consolidated, unitary, combined, or separate)
of a member of the Baxter Group which:
(i) include part of the CVG Business, and
(ii) are required to be filed for periods beginning before the Distribution Date
shall be filed by the Baxter member. The Baxter member shall also be responsible
for paying the tax liability shown on the return to the appropriate taxing
authority.
9
<PAGE>
Baxter shall refund to CVG any excess of: (i) CVG's 1999 Estimated
Currently Payable State Income Tax Expense, over (ii) CVG's 1999 Currently
Payable State Income Tax Expense. CVG shall refund to Baxter any excess of: (i)
CVG's 1999 Currently Payable State Income Tax Expense, over (ii) CVG's
1999 Estimated Currently Payable State Income Tax Expense. Payments under this
section shall be due within 30 days after the due date (including extensions) of
the relevant state income tax return.
Baxter shall refund to CVG any excess of: (i) CVG's 2000 Estimated
Currently Payable State Income Tax Expense, over (ii) CVG's 2000 Currently
Payable State Income Tax Expense. CVG shall refund to Baxter any excess of: (i)
CVG's 2000 Currently Payable State Income Tax Expense, over (ii) CVG's
2000 Estimated Currently Payable State Income Tax Expense. Payments under this
section shall be due within 30 days after the due date (including extensions) of
the relevant state income tax return.
Section 2.04 International Tax Returns-CVG Entities. CVG shall be
---------------------------------------
responsible for filing Tax Returns and paying all Tax Liabilities with respect
to the following entities for all taxable periods:
Baxter Participacoes e Commercial Ltda. (Brazil)
Macchi Engenharia Ltda. (Brazil)
Baxter Cardiovascular Private Limited (India)
Xenomedica A.G
PAS Palzer GmbH and Co. KG
PAS Palzer Verwaltungs GmbH
CVG shall also be responsible for filing Tax Returns and paying all Tax
Liabilities with respect to CVG entities that are formed pursuant to the
Reorganization Agreement.
10
<PAGE>
Section 2.05 Other Pre-Distribution Tax Returns. All Tax Returns (except
-----------------------------------
as provided hereunder or in Sections 2.02, 2.03 or 2.04 above) which:
(i) include or are filed by a member of the Baxter Group or the CVG
Group, and
(ii) are required to be filed for periods beginning before the Distribution Date
shall be filed by the appropriate Baxter or CVG member in accordance with local
law or custom. The party filing such return shall also be responsible for
paying the tax liability shown on the return to the appropriate taxing
authority.
Section 2.06 Sales, Use, or Property Tax Returns. Sales, Use, or Property
-----------------------------------
Tax Returns and all liability for payment of Sales, Use or Property Tax relating
to the CVG Business for all periods shall be the responsibility of the CVG
Group. $600,000 of existing sales use and property tax reserves relating to the
CVG group will be transferred to CVG
Section 2.07 Franchise Tax Returns. U.S. state franchise taxes and tax
----------------------
returns for all periods beginning before the Distribution Date shall be the
responsibility of the Baxter Group. Notwithstanding the foregoing, U.S. state
franchise taxes and tax returns for entities formed pursuant to the
Reorganization Agreement shall be the responsibility of the CVG Group.
Section 2.08 Tax packages and other information. CVG shall provide
-----------------------------------
Baxter with: (i) domestic and foreign income tax packages prepared for 1999 and
2000 on a basis consistent with prior treatment, (ii) any and all information,
documentation, working papers and schedules relating to the CVG Businesses and
the CVG Group reasonably requested by Baxter for use in connection with the
preparation and filing of any Tax Return required to be filed by Baxter, and
(iii) a reconciliation of book income to U.S. federal taxable income for the CVG
Businesses for 1999 and the period January 1, 2000 through the Distribution
Date.
11
<PAGE>
CVG shall use its best efforts to provide Baxter with such tax packages,
information, documentation, working papers, schedules and book-tax
reconciliation on or before the first day of the fourth month following the end
of the period to which they relate, but in any event shall provide them no later
than the fifteenth day of the sixth month following the end of the period to
which they relate.
Section 2.09. Post-Distribution Date Tax Returns. To the extent not
-----------------------------------
covered above, all Tax Returns and liability for payment of Taxes for periods
ending after the Distribution Date shall be the responsibility of the Baxter
Group if such Tax Returns or taxes relate to Baxter Businesses, and shall be the
responsibility of the CVG Group if such Tax Returns or Taxes relate to the CVG
Business.
Section 2.10. Allocation of Tax Attributes.
-----------------------------
(a) Foreign Tax Credit Related Items. Earnings and profits and foreign
---------------------------------
taxes paid shall be allocated between Baxter and CVG in accordance with
applicable Treasury Regulations.
(b) Research Credit Base. For purposes of the research and
---------------------
experimentation tax credit under section 41 of the Code, the parties agree to
allocate a portion of the Baxter Group's gross receipts and qualified research
expenses to the CVG Group as set forth in the attached schedule, pursuant to
section 41(f)(3)(B) of the Code. No adjustments or payments shall be made if a
subsequent audit or other event results in a determination that this allocation
was not correct. Baxter has provided documentation to CVG to support such gross
receipts and qualified research expenses, and will provide CVG with access to
the original tax packages and tax returns as necessary for audit purposes.
(c) Other Tax Attributes. All other tax attributes of the Baxter Group
---------------------
(including, but not limited to, net operating loss carryforwards) shall remain
with the Baxter Group
12
<PAGE>
and shall not be allocated in whole or in part to the CVG Group If pursuant to a
Final Determination, any portion of the consolidated AMT credit is allocated to
CVG (the "Excess Credit"), an amount equal to the Excess Credit shall be paid by
CVG to Baxter at the time of such Final Determination.
Section 2.11. Employee Stock Incentives. Baxter shall be entitled to
--------------------------
all tax deductions arising by reason of any Disqualifying Disposition by: (i)
Baxter Employees of Section 423 CVG Stock or Section 423 Baxter Stock, or (ii)
CVG Employees of Section 423 Baxter Stock. CVG shall be entitled to all tax
deductions arising by reason of any Disqualifying Disposition by CVG Employees
of Section 423 CVG Stock. The party entitled to tax deductions under this
Section 2.11 shall also be responsible for any employment related taxes and
governmental filings associated with the tax deduction being claimed.
Baxter shall be responsible to make all reports required to be made to the
relevant tax authorities with respect to Disqualifying Dispositions where Baxter
is entitled to the corresponding tax deductions hereunder. CVG shall be
responsible to make all reports required to be made to the relevant tax
authorities with respect to Disqualifying Dispositions where CVG is entitled to
the corresponding tax deductions hereunder.
CVG shall report to Baxter, in no case later than 30 days after the end of
each calendar month, any Disqualifying Disposition made by Baxter Employees
during such month of Section 423 CVG Stock.
Baxter shall be entitled to all tax deductions arising: (i) by reason of
any exercises of nonqualified stock options to purchase Baxter shares of stock,
or (ii) with respect to vesting on or after the Distribution Date of any shares
of Baxter restricted stock which are owned by Baxter Employees or CVG Employees.
13
<PAGE>
If, pursuant to a Final Determination, all or any part of a tax deduction
described in this section is disallowed to Baxter, then CVG shall reimburse
Baxter for any additional Taxes owed by reason of such disallowance, but only to
the extent that, as a result of such disallowance, CVG is allowed a tax
deduction attributable to such Disqualifying Disposition. In such case, CVG
shall report the allowed tax deduction and shall reimburse Baxter at the time
CVG receives a refund attributable to such deduction or otherwise realizes the
economic benefit thereof.
2.12 Abandoned/Unclaimed Property. Baxter will retain liability for
----------------------------
abandoned and unclaimed property reported to it by CVG as of the Distribution
Date in accordance with the Baxter corporate policy for reporting unclaimed
property. CVG to retain liability for abandoned and unclaimed property of CVG
not reported to Baxter as of the Distribution Date.
ARTICLE III
TAX DEFICIENCIES AND OVERPAYMENTS
---------------------------------
Section 3.01. General Rule. Except as otherwise provided in this
-------------
Agreement, Baxter is responsible for paying all tax deficiencies, interest,
penalties, and additions to tax (and entitled to receive all refunds and
interest) resulting from any adjustment made by any taxing authority with
respect to any tax return of Baxter (or any member of the Baxter Group) in which
any member of the CVG Group is included.
Pursuant to Sections 3.02 through 3.05 hereof, Baxter is entitled to cash
reimbursements from CVG, or must make cash payments to CVG, in certain
circumstances described below.
14
<PAGE>
No cash reimbursements or payments are required with respect to adjustments
made by any taxing authority relating to the returns of any member of the CVG
Group which do not include Baxter or a member of the Baxter Group.
Section 3.02. Payments by CVG (a) U.S. Federal or State Income Tax
--------------- --------------------------------
Adjustments. To the extent that any IRS Adjustment or similar adjustment by a
- -----------
state tax authority of a Tax Return filed by a member of the Baxter Group that
includes any part of the CVG Business for taxable periods beginning before the
Distribution Date 1.) results in a Tax Benefit to any member of the CVG Group,
or 2) results in additional Taxes to Baxter and is attributable solely to CVG's
failure to provide timely sufficient documentation under Section 4.03 of this
Agreement, CVG shall pay Baxter the amount of such Tax Benefit or additional
Taxes as the case may be. Where any such adjustment is attributable solely to
CVG's failure to provide timely documentation pursuant to the request of the IRS
or any state tax authority, CVG shall also pay Baxter any interest, penalties,
or additions to tax attributable to such adjustment (per Section 3.02(a)(2). The
amount of such Tax Benefit shall be determined in good faith by Baxter, after
consulting with CVG.
(b) Other Tax Adjustments-Pre Distribution Date Taxable Periods. If any
------------------------------------------------------------
adjustments (including the filing of an amended return to reflect any such
adjustments) are made by any taxing authority with respect to any Tax Returns
(other than U.S. federal or state income tax returns) of Baxter (or any member
of the Baxter Group) in which any part of the CVG Business is included for
taxable periods beginning before the Distribution Date, then to the extent that
such adjustments:
i) are attributable to part of the CVG Business; and
ii) may decrease the net taxable income of, or increase the net taxable loss
or tax credits of, any member of the CVG Business for taxable periods
beginning on or after the Distribution Date, and
15
<PAGE>
iii) result in a greater Tax liability for Baxter or any member of the Baxter
Group (in either case without regard to any offsetting adjustments to
other members of the Baxter Group),
CVG and each other member of the CVG Group shall pay Baxter the difference
between the Tax liability on the respective Tax Return before and after taking
into account the adjustment, determined without regard to any interest,
penalties, or additions to tax, unless such interest, penalties, or additions to
tax are attributable to failure to provide timely sufficient documentation under
Section 4.03 of this Agreement by any member of the CVG Group. The amount of
such adjustment shall be determined in good faith by Baxter, after consulting
with CVG
c) Other Tax Adjustments-Post Distribution Date Taxable Periods. If any
-------------------------------------------------------------
adjustments (including the filing of an amended return to reflect any such
adjustments) are made by any taxing authority with respect to any Tax Returns
(other than U.S. federal or state income tax returns) of Baxter (or any member
of the Baxter Group) in which any part of the CVG Business is included for
taxable periods ending after the Distribution Date, then to the extent that such
adjustments:
i) are attributable to the transfer of the CVG Business; and
ii) result in a greater Tax liability for Baxter or any member of the Baxter
Group (in either case without regard to any offsetting adjustments to
other members of the Baxter Group),
CVG and each other member of the CVG Group shall pay Baxter the difference
between the Tax liability on the respective Tax Return before and after taking
into account the adjustment, determined without regard to any interest,
penalties, or additions to tax. The
16
<PAGE>
amount of such adjustment shall be determined in good faith by Baxter, after
consulting with CVG
(d) Manner of Payment. If CVG shall have any liability as a result of
-----------------
this Section 3.02, the amount thereof shall be paid by CVG to Baxter within
thirty (30) days after the receipt by CVG of written notice of such liability,
together with a computation of the amount due and supporting documentation in
such detail as CVG may reasonably request to verify the computation of the
amount due. Baxter may give such written notice to CVG only after a Final
Determination has occurred.
(e) Notwithstanding Paragraph 3.02(d) above, any liability of CVG to
Baxter arising under Paragraph 3.02(c) shall be payable by CVG only at such time
as it realizes the economic benefit of any increase in tax basis arising from
the transfer of the CVG Business (Basis Increase). The calculation of economic
benefit shall utilize the respective country's statutory tax rate in effect
during the tax year in which the CVG Business claims a tax deduction relating to
the Basis Increase. In determining whether CVG has realized any economic benefit
with respect to the Basis Increase, tax deductions relating thereto shall be
deemed utilized prior to any other tax deductions.
Section 3.03. Payments by Baxter. (a) U.S. Federal or State Income Tax
------------------- --------------------------------
Adjustments. To the extent that any IRS Adjustment or similar adjustment by a
- -----------
state tax authority of a Tax Return filed by a member of the Baxter Group that
includes any part of the CVG Business for taxable periods beginning before the
Distribution Date results in a Tax Detriment to any member of the CVG Group,
Baxter shall remit to CVG the amount of such Tax Detriment, determined without
regard to any interest, penalties, or additions to tax. The amount of such Tax
Detriment shall be determined in good faith by Baxter, after consulting with
CVG.
(b) Other Tax Adjustments-Pre Distribution Date Taxable Periods. If any
------------------------------------------------------------
adjustments (including the filing of an amended return to reflect any such
adjustments) are
17
<PAGE>
made by any taxing authority with respect to any Tax Returns (other than U.S.
federal or state tax returns) of Baxter (or any member of the Baxter Group) in
which any part of the CVG Business is included for taxable periods beginning
before the Distribution Date, then to the extent that such adjustments are
attributable to part of the CVG BUSINESS;
i) result in a reduced Tax liability for Baxter (without regard to any
offsetting adjustments to other members of the Baxter Group),and
ii) may increase the net taxable income of, or decrease the net taxable loss
or tax credits of, any member of the CVG Business for taxable periods
beginning on or after the Distribution Date,
then Baxter shall pay to CVG the difference between the Tax liability on the
respective tax return before and after taking into account the adjustment,
determined without regard to any interest, penalties, or additions to tax. The
amount of such adjustment shall be determined in good faith by Baxter, after
consulting with CVG.
(c) Manner of Payment. Baxter shall pay amounts due from it to CVG
------------------
as a result of this Section 3.03 within thirty (30) days after a Final
Determination. Such payments shall be accompanied by a computation of the
amount due and supporting documentation in such detail as CVG may reasonably
request to verify the computation of the amount due.
Section 3.04. Transaction Taxes. Except as otherwise provided in this
------------------
Agreement, CVG is responsible for the payment of all Transaction Taxes other
than income taxes and capital gains taxes.
Section 3.05. No Other Payments. Anything to the contrary
------------------
notwithstanding, except as provided in this Article III or the Reorganization
Agreement, no member of the
18
<PAGE>
CVG Group shall be entitled to any payment from any member of the Baxter Group,
and no member of the Baxter Group shall be entitled to any payment from any
member of the CVG Group, as a result of any IRS Adjustment or adjustment by any
other taxing authority.
ARTICLE IV
TAX AUDITS AND ADMINISTRATIVE MATTERS
-------------------------------------
Section 4.01. Tax Audits and Controversies. (a) U.S. Federal
----------------------------- ------------
Income Taxes. Except as otherwise provided in this Section 4.01, Baxter shall
- ------------
have the exclusive authority and obligation to represent each member of the CVG
Group before the IRS or any other governmental agency or authority or before any
court with respect to any matter affecting the U.S. federal income tax liability
of any member of either the Baxter Group or the CVG Group for any tax period
beginning before the Distribution Date, in each such case (i) consulting with
CVG with regard to any such administrative or judicial proceeding and any
proposed compromise or settlement thereof, and (ii) acting in good faith. Such
representation shall include, but shall not be limited to exclusive control over
(i) any response to any examination by the IRS of U.S. federal income tax
returns and (ii) any contest through a Final Determination of any issue included
in any U.S. federal income Tax Return that includes a member of the Baxter
Group, including, but not limited to (A) whether and in what forum to conduct
such contest, and (B) whether and on what basis to settle such contest.
Baxter shall give timely notice to CVG of any inquiry, the assertion
of any claim or the commencement of any suit, action or proceeding in respect of
which any member of the CVG Group may incur any then known (by Baxter) future
U.S. federal income Tax liability or in respect of which indemnity for U.S.
federal corporate income taxes may be sought under this Agreement against CVG or
any member of the CVG Group and will give CVG such information with respect
thereto as CVG may reasonably request.
19
<PAGE>
(b) Other Taxes. Except as otherwise provided in this Section 4.01,
------------
the party responsible for filing any Tax Return (other than U.S. federal income
tax returns) pursuant to Sections 2.03 through 2.07 hereof shall, at its own
expense, have the exclusive authority to represent each member of the Baxter
Group and of the CVG Group before any governmental agency or authority or before
any court with respect to any matter affecting the Tax liability of any member
of either the Baxter Group or the CVG Group for any tax period beginning before
the Distribution Date and ending after the Distribution Date, in each case (i)
consulting with the other group and the other group's tax counsel with regard to
any such administrative or judicial proceeding and any proposed compromise or
settlement thereof, and (ii) acting in good faith. The Baxter Group shall have,
at its own expense, the exclusive authority as described above to represent each
member of the Baxter Group and of the CVG Group for all taxable periods ending
on or before the Distribution Date.
Section 4.02. Retention of Books and Records. In accordance with
-------------------------------
Baxter's records retention guidelines as of the date hereof, CVG will retain
(for 10 years or longer as required) all information with respect to Baxter in
the possession of any member of the CVG Group on the Distribution Date which is
needed to support Tax Returns and Tax audits. CVG shall ensure that it retains
access to any equipment necessary to read any of the information to be retained
by CVG pursuant to this section 4.02. CVG will provide Baxter (and afford
Baxter full access to, and the right to inspect and copy at any reasonable time)
such information and use of such equipment upon Baxter's reasonable request, at
no cost to Baxter (other than reasonable out-of-pocket expenses of CVG). At the
expiration of the applicable records retention period, CVG may dispose of the
information upon prior notice to Baxter. For a period of 45 days immediately
following such notice, Baxter shall have the right to remove and take title to
all such information (in any form including, without limitation, books, records,
computer tapes, and computer disks).
20
<PAGE>
This section 4.02 is in addition to any records retention requirements
contained in the Reorganization Agreement. In the event of any conflict, the
provisions of this Tax Sharing Agreement shall govern.
Section 4.03. Cooperation regarding Return Filing, Examinations and
-----------------------------------------------------
Controversies. (a) CVG's Obligations. In addition to any obligations
- ------------- -----------------
imposed pursuant to the Reorganization Agreement, CVG and each other member of
the CVG Group shall fully cooperate with Baxter and its representatives, in a
prompt and timely manner, in connection with the preparation and filing of and
any inquiry, audit, examination, investigation, dispute, or litigation involving
any Tax Return filed or required to be filed by or for any member of the Baxter
Group for any taxable period beginning before the Distribution Date, and
relating to issues involving the CVG Business. Such cooperation shall include,
but not be limited to, making available to Baxter, during normal business hours,
and within thirty (30) days after any request therefor, all books, records and
information, and the assistance of all officers and employees, necessary or
useful in connection with any tax inquiry, audit, examination, investigation,
dispute, litigation, or any other matter.
CVG agrees on behalf of itself and each member of the CVG Group to
execute and deliver to Baxter, when so requested by Baxter, any power of
attorney required to allow Baxter and its counsel to represent CVG or such other
CVG Group member in any controversy which Baxter shall have the right to control
pursuant to the terms of Section 4.01 of this Agreement.
(b) Baxter's Obligations. In addition to any obligations imposed
--------------------
pursuant to the Reorganization Agreement, Baxter shall fully cooperate with CVG
and its representatives, in a prompt and timely manner, in connection with (i)
the preparation and filing of and (ii) any inquiry, audit, examination,
investigation, dispute, or litigation involving, any Tax Return filed or
required to be filed by or for any member of the CVG Group. Such cooperation
shall include, but not be limited to, making available to CVG,
21
<PAGE>
during normal business hours, and within thirty (30) days after any request
therefor, all books, records and information, and the assistance of all officers
and employees, necessary or useful in connection with any tax inquiry, audit,
examination, investigation, dispute, litigation or any other matter.
Baxter agrees on behalf of itself and each member of the Baxter Group
to execute and deliver to CVG, when so requested by CVG, any power of attorney
required to allow CVG and its counsel to represent Baxter or such other Baxter
Group member in any controversy which CVG shall have the right to control
pursuant to the terms of Section 4.01(b) of this Agreement.
(c) Remedy for Failure to Comply. If Baxter reasonably determines
-----------------------------
that CVG is not for any reason fulfilling its obligations under Section 4.03
(a), or if CVG reasonably determines that Baxter is not for any reason
fulfilling its obligations under Section 4.03(b), then Baxter or CVG, as the
case may be, shall have the right to appoint, at the expense of the other, an
independent entity such as a nationally-recognized public accounting firm to
assist the other in meeting its obligations under this Section 4.03. Such entity
shall have complete access to all books, records and information, and the
complete cooperation of all officers and employees, of CVG or Baxter, as the
case may be.
Section 4.04. Interest on Late Payments. Any amount payable under
--------------------------
this Agreement by CVG to Baxter, or by Baxter to CVG, shall (if not paid within
ten (10) business days after the due date specified in this Agreement) bear
interest from such due date until the date paid, at the rate of one percent (1%)
per month, or portion thereof, until received.
Section 4.05. Character and Effect of Payments. All amounts paid
---------------------------------
pursuant to this Agreement by one party to another party (other than interest
payable under Section 4.04, above) shall be treated by such parties as
intercompany settlements or liabilities existing on the Distribution Date for
income tax and other tax purposes.
22
<PAGE>
Section 4.06. Agency. It is understood and acknowledged that in
-------
accordance with Reg. 1.1502-77, Baxter shall be the agent for the Baxter Group
(including the CVG Group with respect to taxable years ending on or before the
Distribution Date) with respect to all matters referred to therein.
ARTICLE V
MISCELLANEOUS
-------------
Section 5.01. Severability. In case any one or more of the
-------------
provisions contained in this Agreement should be invalid, illegal or
unenforceable, the enforceability of the remaining provisions contained herein
shall not in any way be affected or impaired thereby.
Section 5.02. Modification of Agreement. No modification,
--------------------------
amendment or waiver of any provision of this Agreement shall be effective unless
the same shall be in writing and signed by each of the parties hereto and then
such modification, amendment or waiver shall be effective only in the specific
instance and for the purpose for which given.
Section 5.03. Conflict with the Reorganization Agreement or Other
---------------------------------------------------
Tax Agreements. Anything in the Reorganization Agreement to the contrary
- ---------------
notwithstanding, in the event and to the extent that there shall be a conflict
between the provisions of this Agreement and the Reorganization Agreement, the
provisions of this Agreement shall control. This Agreement supersedes any tax
sharing, tax indemnity or similar agreement that may have previously existed
between any member of the Baxter Group and any member of the CVG Group.
Section 5.04. Notices. All notices or other communications required
--------
or permitted under this Agreement shall be delivered by hand, mailed by
certified or registered mail, postage prepaid and return receipt requested, or
sent by cable, telegram,
23
<PAGE>
telex or telecopy (confirmed by regular, first-class mail), to the parties at
the following addresses (or at such other addresses for a party as shall be
specified by like notice) and shall be deemed given on the date on which such
notice is received:
(a) In the case of Baxter, to:
Baxter International Inc.
One Baxter Parkway
Deerfield, IL 60015
Attn: Vice President - Taxes
(b) In the case of CVG, to:
Edwards Lifesciences Corporation
17221 Red Hill Avenue
Irvine, CA 92614
Attn: Vice President or Director - Taxes
Section 5.05. Application to Present and Future Subsidiaries.
-----------------------------------------------
This Agreement is being entered into by Baxter and CVG on behalf of themselves
and each member of the Baxter Group and the CVG Group, respectively. This
Agreement shall constitute a direct obligation of each such member and shall be
deemed to have been readopted and affirmed on behalf of any corporation which
becomes a member of the Baxter Group or the CVG Group in the future. Baxter and
CVG hereby guarantee the performance of all actions, agreements and obligations
provided for under this Agreement of each member of the Baxter Group and the CVG
Group, respectively. Baxter and CVG shall, upon the written request of the
other, cause any of their respective group members formally to execute this
Agreement. This Agreement shall be binding upon, and shall inure to the benefit
of, the successors, assigns and persons controlling any of the corporations
bound hereby.
24
<PAGE>
Section 5.06. Term. This Agreement shall commence on the date of
-----
execution indicated above and shall continue in effect until otherwise agreed to
in writing by Baxter and CVG, or their successors.
Section 5.07. Titles and Headings. Titles and headings to sections
--------------------
herein are inserted for the convenience of reference only and are not intended
to be a part of to affect the meaning or interpretation of this Agreement.
Section 5.08. Singular and Plural. As used herein, the singular
--------------------
shall include the plural and vice versa.
Section 5.09. Governing Law. This Agreement shall be governed by the
--------------
laws of the state of Illinois, without regard to the principles of conflicts of
laws thereof.
Section 5.10 Dispute Resolution. (a) Escalation. The parties
------------------- -----------
agree that they will attempt to settle any claim or controversy arising out of
this Agreement through good faith negotiations in the spirit of mutual
cooperation between senior business executives with authority to resolve the
controversy. Before taking action as provided in subsection (b), the parties
shall first submit such claim or controversy to the appropriate Vice
President/Director of Taxes of each party for resolution. If such individuals
are unable to resolve such claim or controversy, either party may request that
their respective chief executive officers, or their respective delegees, attempt
to resolve the dispute. The officers or delegees to whom any such claim or
controversy is submitted as provided above shall attempt to resolve the dispute
through good faith negotiations over a reasonable period, not to exceed 30 days
in the aggregate unless otherwise agreed. Such 30 day period shall be deemed to
commence on the date of a notice from either party under Section 5.04 describing
the particular claim or controversy.
25
<PAGE>
(b) Arbitration. Any dispute that is not resolved by negotiations
------------
pursuant to subsection (a) will, upon the written request of either party, be
resolved by binding arbitration conducted in accordance with the Rules of the
CPR Institute for Dispute Resolution by a sole arbitrator who is a former
federal judge or other mutually agreed upon individual. Such arbitrator shall
set a schedule for determination of such dispute that is reasonable under the
circumstances. Such arbitrator shall determine the dispute in accordance with
this Agreement and the substantive rules of law (but not the rules of procedure)
that would be applied by a federal court sitting in Illinois. The arbitration
shall take place in Lake Country, Illinois. The arbitration will be governed by
the United States Arbitration Act, 9 U.S.C. (S)(S) 1 - 16. Judgment upon the
award rendered by the arbitrator may be entered by any court having
jurisdiction. Where this Agreement provides for future agreement by the
parties, failure to reach such agreement shall not constitute a dispute subject
to the provisions of this Section 24.2 except as expressly provided otherwise.
Section 5.11. Counterparts. This Agreement may be executed in one or
-------------
more counterparts, all of which shall be considered one and the same agreement,
and shall become a binding agreement when one or more counterparts have been
signed by each party and delivered to the other parties.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their duly authorized officers, all on the day and year
first above written.
BAXTER INTERNATIONAL INC.
a Delaware corporation
By:____________________________
Its
26
<PAGE>
Edwards Lifesciences Corporation
a Delaware corporation
By:_____________________________
Its
27
<PAGE>
Exhibit 10.6
Edwards Lifesciences Corporation
Employee Stock Purchase Plan
For United States Employees
(Effective April 1, 2000)
<PAGE>
Exhibit 10.6
Edwards Lifesciences Corporation
Employee Stock Purchase Plan
For United States Employees
(Effective April 1, 2000)
ARTICLE I-PURPOSE
1.01. Purpose
The Edwards Lifesciences Corporation Employee Stock Purchase Plan for United
States Employees is intended to provide a method whereby employees of Edwards
Lifesciences Corporation and its participating subsidiary corporations
(hereinafter referred to, unless the context otherwise requires, as the
"Company") will have an opportunity to acquire a proprietary interest in the
Company through the purchase of shares of the Common Stock of the Company
("Stock"). It is the intention of the Company to have the Plan qualify as an
"employee stock purchase plan" under Section 423 of the Internal Revenue Code of
1986, as amended (the "Code"). The provisions of the Plan shall be construed so
as to extend and limit participation in a manner consistent with the
requirements of Code Section 423.
ARTICLE II-DEFINITIONS
2.01. Base Pay
"Base Pay" shall mean regular straight-time earnings plus commissions and
payments in lieu of regular earnings (such as vacation, sick pay and holiday
pay). In the case of a part-time hourly employee, such employee's base pay
during an Offering shall be determined by multiplying such employee's hourly
rate of pay by the number of regularly scheduled hours of work for such employee
during such Offering.
2.02. Committee
"Committee" shall mean the individuals appointed by the Company to administer
the Plan as described in Article IX.
2.03. Eligible Employee
"Eligible Employee" means any regular employee of the Company who is paid from
the United States payroll and is scheduled to work 20 or more hours per week.
<PAGE>
2.04. Enrollment Period
"Enrollment Period" shall mean with respect to any Offering, the period
designated by the Committee prior to such Offering during which Eligible
Employees may authorize payroll deductions through a Subscription. Unless the
Committee determines otherwise, the Enrollment Period with respect to any
Offering shall end on the twenty-fifth day of the month immediately preceding
the Offering Commencement Date or, if such day is not a business day, the
immediately preceding business day, and any Subscription received after such
date shall be deemed to be an enrollment in the next following Offering.
2.05. Offering Commencement Date
"Offering Commencement Date" shall mean April 3, 2000, and unless determined
otherwise by the Committee, the first day of each calendar quarter thereafter.
2.06. Offering
"Offering" shall mean the quarterly offering of the Company's Stock.
2.07. Offering End Date
"Offering End Date" shall mean, with respect to each Offering, the day preceding
the second annual anniversary of the Offering Commencement Date for such
Offering.
2.08. Participant
"Participant" shall mean an Eligible Employee who has elected to participate in
an Offering by entering a Subscription during the Enrollment Period for such
Offering.
2.09. Plan
"Plan" shall mean the Edwards Lifesciences Corporation Employee Stock Purchase
Plan for United States Employees, as amended from time to time.
2.10. Purchase Date
"Purchase Date" shall mean with respect to any Offering, the last day of each
calendar quarter during the period beginning with the Offering Commencement Date
for such Offering and ending with the Offering End Date; provided, however, if
any such day is not a business day, the Purchase Date shall be the next
preceding business date on which shares of Stock are traded.
2
<PAGE>
2.11. Subscription
"Subscription" shall mean an Eligible Employee's authorization for payroll
deductions made in the form and manner specified by the Committee (which may
include enrollment by submitting forms, by voice response, internet access or
other electronic means). Unless withdrawn earlier in accordance with Section
6.02, each Subscription shall be in effect for 24 months. No more than one
Subscription may be in effect for an Eligible Employee during any calendar
quarter.
2.12. Subsidiary Corporation
"Subsidiary Corporation" shall mean any present or future corporation which
would be a "subsidiary corporation" of the Company as that term is defined in
Section 424 of the Code.
ARTICLE III-ELIGIBILITY AND PARTICIPATION
3.01. Initial Eligibility
Any individual who is an Eligible Employee on an Offering Commencement Date
shall be eligible to participate in the Offering commencing on such date,
subject to the terms and conditions of the Plan.
3.02. Leave of Absence
For purposes of participation in the Plan, a Participant on a leave of absence
shall be deemed to be an employee for a period of up to 90 days or, if longer,
during the period the Participant's right to reemployment is guaranteed by
statute or contract. If the leave of absence is paid, deductions authorized
under any Subscription in effect at the time the leave began will continue. If
the leave of absence is unpaid, no deductions or contributions will be permitted
during the leave. If such a Participant returns to active status within 90 days
or the guaranteed reemployment period, as applicable, payroll deductions under
the Subscription in effect at the time the leave began will automatically begin
again upon the Participant's return to active status, unless the Subscription
Period has expired. If the Participant does not return to active status within
90 days or the guaranteed reemployment period, as applicable, the Participant
shall be treated as having terminated employment for all purposes of the Plan.
If such individual later returns to active employment as an Eligible Employee,
such individual will be treated as a new employee and will be eligible to
participate in Offerings commencing after his or her reemployment date by filing
a Subscription during the applicable Enrollment Period for such Offering.
3
<PAGE>
3.03. Restrictions on Participation
Notwithstanding any provisions of the Plan to the contrary, no Eligible Employee
shall be granted an option to participate in the Plan:
(a) if, immediately after the grant, such employee would own stock,
and/or hold outstanding options to purchase stock, possessing 5%
or more of the total combined voting power or value of all
classes of stock of the Company (for purposes of this paragraph,
the rules of Section 424(d) of the Code shall apply in
determining stock ownership of any employee); or
(b) which permits the employee's rights to purchase stock under all
employee stock purchase plans of the Company to accrue at a rate
which exceeds $25,000 in fair market value of the stock
(determined at the time such option is granted) for each calendar
year in which such option is outstanding.
3.04. Commencement of Participation
An Eligible Employee may become a Participant in any Offering by entering a
Subscription during the Enrollment Period for such Offering. Payroll deductions
for such Offering shall commence on the applicable Offering Commencement Date
and shall end on the applicable Offering End Date unless withdrawn by the
Participant or sooner terminated in accordance with Article VII. Only one
Subscription may be in effect with respect to any Participant at any one time.
3.05. Participation After Rehire
An Eligible Employee's Subscription will automatically terminate on his or her
termination of employment with the Company. If the Eligible Employee terminates
employment with a Subscription in effect with respect to an Offering and is
rehired prior to the Offering End Date for that Offering, the Subscription will
not be reinstated and the Eligible Employee will not be allowed to again make
payroll deductions under such Offering. The Eligible Employee may elect to
participate in Offerings commencing after his or her reemployment date by
entering a Subscription during the applicable Enrollment Period for such
Offering.
3.06. International Employees/International Transfers
Eligible Employees who transfer to the United States and are placed on a U. S.
payroll may not participate in Offerings which had an Offering Commencement Date
prior to such transfer, regardless of whether such Eligible Employee was
participating in an offering under a stock purchase plan for international
employees prior to the transfer. Such Eligible Employee may participate in
Offerings commencing after such transfer, by entering a Subscription during the
applicable Enrollment Period for such Offering.
4
<PAGE>
A Participant who transfers outside of the United States and is no longer paid
on a U.S. payroll will be treated as a terminated Participant under this Plan.
For purposes of the Plan, Puerto Rico is not considered U.S. payroll.
ARTICLE IV-OFFERINGS
4.01. Quarterly Offerings
The Plan will be implemented by Offerings beginning on April 3, 2000 and, unless
determined otherwise by the Committee, on the first day of each calendar quarter
thereafter. Eligible Employees may not have in effect more than one Subscription
at a time.
Participants may subscribe to any Offering by entering a Subscription during the
Enrollment Period for such Offering in such manner as the Committee may
prescribe (which may include enrollment by submitting forms, by voice response,
internet access or other electronic means).
A Subscription that is in effect on an Offering End Date will automatically be
deemed to be a Subscription for the Offering that commences immediately
following such Offering End Date, provided that the Participant is still an
Eligible Employee and has not withdrawn the Subscription. Under the foregoing
automatic enrollment provisions, payroll deductions will continue at the level
in effect immediately prior to the new Offering Commencement Date, unless
changed in advance by the Participant in accordance with Section 5.03.
4.02. Purchase Price
The purchase price per share of Stock under each Offering shall be the lower of:
(a) 85% of the closing price of the Stock on the Offering
Commencement Date or the nearest preceding business day on which
trading occurred on the New York Stock Exchange; or
(b) 85% of the closing price of the Stock on the Purchase Date or the
nearest prior business day on which trading occurred on the New
York Stock Exchange. If the Common Stock of the Company is not
admitted to trading on any of the aforesaid dates for which
closing prices of the stock are to be determined, then reference
shall be made to the next preceding date on which Common Stock
was so admitted.
Such purchase price may only be paid with accumulated payroll deductions in
accordance with Article V.
5
<PAGE>
ARTICLE V-PAYROLL DEDUCTIONS
5.01. Amount of Deduction
An Eligible Employee's Subscription shall authorize payroll deductions at a
rate, in whole percentages, of no less than 1% and no more than 12% of Base Pay
on each payday that the Subscription is in effect.
5.02. Participant's Account
All payroll deductions made with respect to a Participant shall be credited to
his or her recordkeeping account under the Plan. A Participant may not make any
separate cash payment into such account. No interest will accrue or be paid on
any amount withheld from a Participant's pay under the Plan or credited to the
Participant's account. Except as otherwise provided in this Section 5.02, all
amounts in a Participant's account will be used to purchase Stock and no cash
refunds shall be made from such account. Any amounts remaining in a
Participant's account pursuant to the Participant's Subscription election or
because of the limitations of Section 3.03 shall be returned to the Participant
without interest and will not be used to purchase shares with respect to any
other Offering under the Plan.
5.03. Changes in Payroll Deductions
During an Offering period, a Participant may change his or her level of payroll
deduction with respect to such Offering within the limits described in Section
5.01 in accordance with procedures established by the Committee (including,
without limitation, rules relating to the frequency of such changes); provided,
however, if the Participant reduces his or her payroll deductions to zero, it
shall be deemed to be a withdrawal of the Subscription and the Participant may
not thereafter participate in such Offering but must wait until the next
quarterly Offering to resubscribe to the Plan. Any such discontinuance or
change in level shall be effective as soon as administratively practicable.
ARTICLE VI-EXERCISE OF OPTION
6.01. Automatic Exercise
A Participant's option for the purchase of Stock with respect to any Offering
will be automatically exercised on each Purchase Date for the Offering. The
option will be exercised by using the accumulated payroll deductions in the
Participant's account as of each such Purchase Date to purchase the number of
full and fractional shares of Stock that may be purchased at the purchase price
on such date, determined in accordance with Section 4.02.
6
<PAGE>
6.02. Withdrawal From Offering
A Participant may not withdraw the accumulated payroll deductions in his or her
account during an Offering period. If the Participant withdraws his or her
Subscription with respect to any Offering, the accumulated payroll deductions in
the Participant's account at the time the Subscription is withdrawn will be used
to purchase shares of Stock at the next Purchase Date for the Offering to which
the Subscription related, in accordance with Section 6.01.
6.03 Delivery of Stock
Stock purchases under the Plan will be held in an account in the Participant's
name in uncertificated form unless certification is requested by the
Participant.
ARTICLE VII- WITHDRAWAL
7.01. Effect on Subsequent Participation
A Participant's election to withdraw from any Offering will not have any effect
upon the Participant's eligibility to participate in any succeeding Offering or
in any similar plan which may hereafter be adopted by the Company.
7.02. Termination of Employment
Subject to the following provisions of this Section 7.02, upon termination of
the Participant's employment for any reason, any Subscription then in effect
will be deemed to have been withdrawn and any payroll deductions credited to the
Participant's account will be used to purchase Stock on the next Purchase Date
for the Offering with respect to which such deductions relate. Notwithstanding
the foregoing, if the Participant has a Subscription in effect on the
Participant's termination of employment, payroll deductions (at the rate in
effect on the termination date) shall continue to be made from Base Pay earned
prior to termination of employment, if any, that is paid to the Participant
after such termination of employment and before the earlier of (i) the three-
month anniversary of such termination of employment, or (ii) the Offering End
Date of such Offering. Any such payroll deduction shall be used to purchase
Stock on the next Purchase Date for the Offering after the deduction is made.
7
<PAGE>
ARTICLE VIII-STOCK
8.01. Maximum Shares
The maximum number of shares which may be issued under the Plan, subject to
adjustment upon changes in capitalization of the Company as provided in Section
10.04, shall be ____________ shares. If the total number of shares for which
options are exercised on any Purchase Date in accordance with Article IV exceeds
the maximum number of shares for the applicable Offering, the Company shall make
a pro rata allocation of the shares available for delivery and distribution in
as nearly a uniform manner as shall be practicable and as it shall determine to
be equitable, and the balance of payroll deductions credited to the account of
each Participant under the Plan shall be returned to him as promptly as
possible.
8.02. Participant's Interest in Option Stock
The Participant will have no interest in Stock covered by an option under the
Plan until such option has been exercised.
8.03. Registration of Stock
Stock to be delivered to a Participant under the Plan will be registered in the
name of the Participant.
ARTICLE IX-ADMINISTRATION
9.01. Appointment of Committee
The Board of Directors shall appoint a Committee to administer the Plan. No
member of the Committee who is not an Eligible Employee shall be eligible to
purchase Stock under the Plan.
9.02. Authority of Committee
Subject to the express provisions of the Plan, the Committee shall have plenary
authority in its discretion to interpret and construe any and all provisions of
the Plan, to adopt rules and regulations for administering the Plan, and to make
all other determinations deemed necessary or advisable for administering the
Plan. The Committee's determination on the foregoing matters shall be
conclusive. The Committee shall also have the authority to determine whether
the employees of divisions or subsidiaries of the Company organized or acquired
after the Effective Date shall be eligible for participation in the Plan.
8
<PAGE>
9.03. Rules Governing the Administration of the Committee
The Board of Directors may from time to time appoint members of the Committee in
substitution for or in addition to members previously appointed and may fill
vacancies, however caused, in the Committee. The Committee may select one of its
members as its Chairman and shall hold its meetings at such times and places as
it shall deem advisable and may hold telephonic meetings. A majority of its
members shall constitute a quorum. All determinations of the Committee shall be
made by a majority of its members. The Committee may correct any defect or
omission or reconcile any inconsistency in the Plan, in the manner and to the
extent it shall deem desirable. Any decision or determination reduced to writing
and signed by a majority of the members of the Committee shall be as fully
effective as if it had been made by a majority vote at a meeting duly called and
held. The Committee may appoint a secretary and shall make such rules and
regulations for the conduct of its business as it shall deem advisable.
9.04. Statements
Each Participant shall receive a statement of his account showing the number of
shares of Stock held and the amount of cash credited to such account. Such
statements will be provided as soon as administratively feasible following the
end of each calendar quarter.
ARTICLE X-MISCELLANEOUS
10.01. Transferability
Neither payroll deductions credited to a Participant's account nor any rights
with regard to the exercise of an option or to receive Stock under the Plan may
be assigned, transferred, pledged, or otherwise disposed of in any way by the
Participant other than by will or the laws of descent and distribution. Any such
attempted assignment, transfer, pledge or other disposition shall be without
effect. During a Participant's lifetime, options held by such Participant
shall be exercisable only by that Participant.
10.02. Use of Funds
All payroll deductions received or held by the Company under this Plan may be
used by the Company for any corporate purpose and the Company shall not be
obligated to segregate such payroll deductions.
10.03. Adjustment Upon Changes in Capitalization
In the event of a stock split, stock dividend, recapitalization,
reclassification or combination of shares, merger, sale of assets or similar
event, the Committee shall adjust equitably (a) the number and class of shares
or other securities that are reserved for sale under the Plan, (b) the number
and class of shares or other securities that are subject to outstanding options,
and (c) the appropriate
9
<PAGE>
market value and other price determinations applicable to options. The Committee
shall make all determinations under this Section 10.03, and all such
determinations shall be conclusive and binding.
10.04. Amendment and Termination
The Board of Directors shall have complete power and authority to terminate or
amend the Plan; provided, however, that the Board of Directors shall not,
without the approval of the stockholders of the Company (i) increase the maximum
number of shares which may be issued under any Offering (except pursuant to
Section 10.03); (ii) amend the requirements as to the class of employees
eligible to purchase stock under the Plan; or (iii) permit the members of the
Committee to purchase stock under the Plan.
Upon termination, any cash remaining in Participant accounts will be applied to
the purchase of Stock. For purposes of valuing the Stock, the closing price of
the Stock on the New York Stock Exchange on the most recent preceding trading
-----------------------
day will determine the purchase price. At the discretion of the Board of
Directors, Participants will be permitted to exercise their options for any
unpurchased shares by either requiring direct payment from the Participants,
cashless exercise or any other arrangement deemed appropriate by the Board of
Directors.
10.05. Effective Date
This Plan shall be effective as of April 1, 2000.
10.06. No Employment Rights
The Plan does not, directly or indirectly, create any right for the benefit of
any employee or class of employees to purchase any shares under the Plan, or
create in any employee or class of employees any right with respect to
continuation of employment by the Company, and it shall not be deemed to
interfere in any way with the Company's right to terminate, or otherwise modify,
an employee's employment at any time.
10.07. Effect of Plan
The provisions of the Plan shall, in accordance with its terms, be binding upon,
and inure to the benefit of, all successors of each employee participating in
the Plan, including, without limitation, such employee's estate and the
executors, administrators or trustees thereof, heirs and legatees, and any
receiver, trustee in bankruptcy or representative of creditors of such employee.
10
<PAGE>
10.08. Governing Law
The law of the State of California will govern all matters relating to this Plan
except to the extent it is superseded by the laws of the United States.
IN WITNESS WHEREOF, the company has caused this instrument to be executed on the
___ day of _________________, 2000.
EDWARDS LIFESCIENCES CORPORATION
By:_____________________________________
Its:____________________________________
11
<PAGE>
EXHIBIT 10.7
EDWARDS LIFESCIENCES CORPORATION
DEFERRED COMPENSATION PLAN
(Effective April 1, 2000)
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE I PURPOSE, EFFECTIVE DATE, EMPLOYER........................ 1
1.1 Purpose....................................................... 1
1.2 Effective Date................................................ 1
1.3 Employer...................................................... 1
ARTICLE II DEFINITIONS............................................. 1
2.1 Accounts...................................................... 1
2.2 Administrative Committee...................................... 1
2.3 Beneficiary................................................... 1
2.4 Bonus......................................................... 2
2.5 Bonus Deferral................................................ 2
2.6 Compensation.................................................. 2
2.7 Compensation Committee........................................ 2
2.8 Deferral Election Form........................................ 2
2.9 Distribution Election Form.................................... 2
2.10 Eligible Employee............................................. 2
2.11 Excess Matching Contribution.................................. 2
2.12 Matching Contribution......................................... 3
2.13 Participant................................................... 3
2.14 Pay Deferral Contribution..................................... 3
2.15 Plan Year..................................................... 3
2.16 Termination of Employment..................................... 3
2.17 Unforeseeable Emergency....................................... 3
2.18 Vesting....................................................... 3
ARTICLE III ELIGIBILITY FOR EXCESS MATCHING CONTRIBUTIONS, BONUS
DEFERRALS AND PAY DEFERRALS......................................... 3
3.1 Eligibility for Excess Matching Contribution.................. 3
3.2 Bonus Deferral Elections...................................... 3
3.3 Pay Deferral Elections........................................ 4
ARTICLE IV CREDITING OF ACCOUNTS................................... 4
4.1 Crediting of Accounts......................................... 4
4.2 Earnings...................................................... 4
4.3 Account Statements............................................ 4
4.4 Vesting....................................................... 4
ARTICLE V DISTRIBUTION OF BENEFITS................................. 4
5.1 Distribution of Benefits...................................... 5
5.2 Distribution.................................................. 5
5.3 Effect of Payment............................................. 5
5.4 Taxation of Plan Benefits..................................... 6
5.5 Withholding and Payroll Taxes................................. 6
5.6 Distribution Due to Unforeseeable Emergency................... 6
ARTICLE VI BENEFICIARY DESIGNATION................................. 7
6.1 Beneficiary Designation....................................... 7
6.2 Amendments to Beneficiary Designation......................... 7
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
6.3 No Beneficiary Designation.................................... 7
ARTICLE VII ADMINISTRATION......................................... 7
7.1 Administrative Committee...................................... 7
7.2 Administrative Committee Powers............................... 7
7.3 Uniform Application of Rules.................................. 8
7.4 Claims Procedure.............................................. 8
7.5 Action by Administrative Committee............................ 8
7.6 Indemnity..................................................... 9
ARTICLE VIII AMENDMENT AND TERMINATION OF PLAN..................... 9
8.1 Amendment..................................................... 9
8.2 Right to Terminate............................................ 9
8.3 Payment at Termination........................................ 9
ARTICLE IX MISCELLANEOUS...........................................10
9.1 Unfunded Plan.................................................10
9.2 Unsecured General Creditor....................................10
9.3 Nonassignability..............................................10
9.4 Not a Contract of Employment..................................10
9.5 Protective Provisions.........................................10
9.6 Governing Law.................................................11
9.7 Severability..................................................11
9.8 Notice........................................................11
9.9 Successors....................................................11
9.10 Action by Baxter..............................................11
9.11 Effect on Benefit Plans.......................................11
9.12 Participant Litigation........................................11
</TABLE>
ii
<PAGE>
EDWARDS LIFESCIENCES CORPORATION DEFERRED COMPENSATION PLAN
(Effective April 1, 2000)
ARTICLE I
PURPOSE, EFFECTIVE DATE, EMPLOYER
1.1 Purpose. The Edwards Lifesciences Corporation 401(k) Savings and
Investment Plan (the "401(k) Plan") is a defined contribution benefit plan
maintained by Edwards Lifesciences Corporation ("Edwards") to provide eligible
participants with retirement benefits. Limitations imposed by the Internal
Revenue Code of 1986, as amended, ("Code"), prevent some participants from
receiving the full Matching Contribution under the 401(k) Plan, a tax qualified
defined contribution plan. In addition, Edwards desires to maintain an unfunded
plan of deferred compensation for a select group of management and highly
compensated employees. Accordingly, Edwards hereby establishes the Edwards
Lifesciences Corporation Deferred Compensation Plan and the Edwards Lifesciences
Corporation 401(k) Plan Excess Plan and combines them into a single plan to be
known as the Edwards Lifesciences Corporation Deferred Compensation Plan
("Plan"). The purpose of the Plan is to enable certain Participants in the
401(k) Plan to receive the full Matching Contribution under the 401(k) Plan
formula which is limited by the Code, or the Plan, and/or to elect to defer
additional compensation until retirement, except as otherwise set forth on their
election form. Participation in the Plan is limited to a select group of
management or highly compensated employees of Edwards. Capitalized terms not
defined in this Plan are deemed to have the meaning given them in the 401(k)
Plan.
1.2 Effective Date. The Plan is effective as of April 1, 2000.
1.3 Employer. The Plan is adopted for the benefit of a select group of
management or highly compensated employees of Edwards or of any subsidiaries or
affiliates of Edwards, as set forth below. The Plan may be adopted by any
subsidiaries or affiliates of Edwards with the consent of the Administrative
Committee. Adopting Employers are listed on Appendix A as attached and updated
from time to time.
ARTICLE II
DEFINITIONS
2.1 Accounts. Accounts means the sum of the Participant's Excess Matching
Contribution Account balance, the Participant's Bonus Deferral Account balance
and the Participant's Pay Deferral Account balance.
2.2 Administrative Committee. For purposes of the Plan, Administrative
Committee has the same meaning as the Administrative Committee in the 401(k)
Plan.
2.3 Beneficiary. A Participant's Beneficiary, as defined in Article VI,
is the Beneficiary designated to receive the Participant's Accounts, if any,
from the Plan, upon the death of the Participant.
<PAGE>
2.4 Bonus. The term Bonus means those bonuses that are included in the
definition of Compensation in the 401(k) Plan and also includes any other bonus
which is approved by the Administrative Committee and listed on Attachment A to
this Plan. Attachment A may be updated from time to time to accurately reflect
the approved bonuses for purpose of this definition.
2.5 Bonus Deferral. The Bonus Deferral is the amount of the Participant's
Bonus which the Participant elected to defer and contribute to the Plan which,
but for such election, would have otherwise been paid to him/her.
2.6 Compensation. For purposes of the Plan, Compensation has the same
meaning as Compensation in the 401(k) Plan without regard to Section 401(a)(17)
of the Code, except that the Bonuses deferred under the Plan are included in
Compensation in the Plan Year in which such amounts would be paid if they were
not deferred and not in the Plan Year in which such amounts are actually paid.
2.7 Compensation Committee. The Compensation Committee of the Board of
Directors of Edwards.
2.8 Deferral Election Form. The form which a Participant must complete
and return to the Administrative Committee, in accordance with the rules and
procedures as may be established by the Administrative Committee, in order to
elect to defer a portion of his or her Bonus into the Plan and to designate his
Pay Deferral Election.
2.9 Distribution Election Form. The form which a Participant must
complete and return to the Administrative Committee, in accordance with the
rules and procedures as may be established by the Administrative Committee. This
form is to be used by Participants who are not eligible to defer a portion of
their Bonus or make a Pay Deferral Contribution to the Plan.
2.10 Eligible Employee. An Eligible Employee is anyone who:
(a) is a participant in the Edwards Long Term Incentive Plan for the
Plan Year to which deferrals relate who has contributed the
maximum annual contribution limit under Sections 401(k) and
402(g) of the Code to the 401(k) Plan; or
(b) is a participant in the 401(k) Plan whose Matching Contributions
to the 401(k) Plan for the Plan Year are limited because of the
application of the Code, provided he or she has met the
eligibility rules set forth in Section 3.1 below.
2.11 Excess Matching. The Excess Matching Contribution is the difference
between the Matching Contributions allocated to a Participant's 401(k) Plan
Account during the Plan Year and the amount that would have been allocated if
the limitations of Sections 415, 401(k), 402(g) and 401(m) of the Code, as well
as the limitations of Section 401(a)(17) of the Code, were disregarded.
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2.12 Matching Contribution. The term Matching Contribution has the same
meaning in the Plan as it does in the 401(k)Plan.
2.13 Participant. A Participant is any Eligible Employee who has an Account
balance in the Plan.
2.14 Pay Deferral Contribution. The term Pay Deferral Contribution has the
same meaning as Pay Deferral Contribution in the 401(k) Plan. The Pay Deferral
Contribution is the amount of the Participant's Compensation which the
Participant elected to defer into the Plan which, but for such election, would
have otherwise been paid to him/her.
2.15 Plan Year. The Plan Year is the calendar year.
2.16 Termination of Employment. For purposes of the Plan, Termination of
Employment has the same meaning as Termination of Employment in the 401(k) Plan.
2.17 Unforeseeable Emergency. A severe financial hardship resulting from a
sudden or unexpected illness or accident of the Participant or one of his or her
dependents, loss of the Participant's property due to casualty or similar
extraordinary and unforeseeable circumstances arising as a result of one or more
recent events beyond the control of the Participant, as determined by the
Administrative Committee.
2.18 Vesting. For purposes of the Plan, Vesting has the same
meaning as Vesting in the 401(k) Plan.
ARTICLE III
ELIGIBILITY FOR EXCESS MATCHING CONTRIBUTIONS, BONUS DEFERRALS
AND PAY DEFERRALS
3.1 Eligibility for Excess Matching Contribution. An Eligible Employee
is a Participant in the Plan and eligible to receive a contribution to his or
her Excess Matching Contribution Account in the Plan for a Plan Year if such
Participant's allocation of Matching Contributions in the 401(k) Plan during the
Plan Year is less than five percent (5%) of Compensation because of the
application of the Code.
3.2 Bonus Deferral Elections. An Eligible Employee is a Participant in
the Plan if he or she defers the maximum amount of Compensation allowed under
the Code to the 401(k) Plan for the Plan Year and he or she elects to defer all
or a portion of his or her Bonus through the Plan until his or her Termination
of Employment, or such other time as specified on his or her Deferral Election
Form, by completing a Deferral Election Form in accordance with applicable rules
and procedures established by the Administrative Committee. A Participant may
elect to defer up to 100% of his or her Bonus, in whole percentages. Beginning
January 1 of the year to which the Deferral Election Form applies, the Deferral
Election Form is irrevocable, except as provided in Section 5.6. The Deferral
Election Form must be filed with the Administrative Committee in accordance with
the rules established by the Administrative Committee before January 1 of the
Plan Year to which the Deferral Election Form applies. For purposes of Bonus
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Deferral Elections, eligible employees are those employees who are participants
in the Long Term Incentive Plan for the Plan Year to which deferrals relate.
3.3 Pay Deferral Elections. An Eligible Employee is a Participant in the
Plan if he or she elects to defer a portion of his or her Compensation in excess
of the annual contribution limit under Sections 401(k) and 402(g) of the Code
(as contributed to the 401(k) Plan) as set forth on his or her Deferral Election
Form, in accordance with applicable rules and procedures established by the
Administrative Committee. A Participant may elect to defer up to a total of 15%
of his or her Compensation to the 401(k) Plan and the Plan; however, such
election must be the same election as the Participant made for the 401(k) Plan
for such Plan Year, and the Participant may not change his/her 401(k) Plan
election for the Plan Year. For purposes of Pay Deferral Elections, eligible
employees are those employees who are participants in the Long Term Incentive
Plan for the Plan Year to which deferrals relate.
ARTICLE IV
CREDITING OF ACCOUNTS
4.1 Crediting of Accounts.
---------------------
A. Excess Matching Contribution Account. An account equal to the
Excess Matching Contributions, if any, of each Participant plus Earnings.
B. Bonus Deferral Account. An account equal to the Bonus Deferrals,
if any, of each Participant plus Earnings.
C. Pay Deferral Account. An account equal to the Pay Deferral
Contributions, if any, of each Participant plus Earnings.
4.2 Earnings. Each Participant's Excess Matching Contribution Account,
Bonus Deferral Account, and Pay Deferral Account, if any, will be credited with
Earnings at a rate determined by the Administrative Committee from time to time.
As of the Effective Date of this Plan, Earnings will be credited at the same
rate as the Stable Income Fund in the 401(k) Plan. Earnings will be credited to
each Participant's Account weekly.
4.3 Account Statements. Account Statements will be generated effective
as of the last day of each calendar quarter and mailed to each Participant as
soon as administratively feasible. Account Statements will reflect all Account
activity during the reporting quarter, including Account contributions,
distributions and earnings credits.
4.4 Vesting. Subject to Sections 9.1 and 9.2, a Participant is always
100% Vested in his or her Accounts in the Plan at all times.
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ARTICLE V
DISTRIBUTION OF BENEFITS
5.1 Distribution of Benefits. Subject to Section 5.2, distribution of a
Participant's Accounts, if any, will commence in accordance with the
Participant's Distribution Election Form or Deferral Election Form as soon as
administratively feasible after the Participant's Termination of Employment. Any
spousal consent requirements under the 401(k) Plan will not apply to
distributions under the Plan.
5.2 Distribution.
A. Deferral Election Form. A Participant's Accounts will be paid in
accordance with the form of payment designated in such Participant's
Deferral Election Form.
B. Distribution Election Form. A Participant's Accounts will be paid
after a Participant's Termination of Employment, in accordance with the
form of payment designated in such Participant's Distribution Election
Form.
C. Forms of Distribution. The forms of distribution are:
(a) A lump sum payment, or
(b) Annual installments of at least 2 years, but not to exceed
15 years.
Annual installments will commence in the first quarter of the Plan Year as
specified in the Participant's Deferral Election Form or Distribution
Election Form. Subsequent installments will be paid annually in the first
quarter of subsequent Plan Years. Lump sum payments will be made in the
first quarter of the Plan Year as specified in the Participant's Deferral
Election Form. Lump sum payments pursuant to a Distribution Election Form
will be made in the first quarter of the Plan Year following the Plan Year
in which the Participant incurs a Termination of Employment or any
subsequent Plan Year as indicated on the Distribution Election Form.
If a Participant does not elect a form of distribution by the time the
Deferral Election Form or the Distribution Election Form is required to be
completed, the Participant's election will default to a lump sum payment in
the first quarter of the Plan Year following the Plan Year in which the
Participant incurs a Termination of Employment.
Notwithstanding the above, a Participant whose Accounts under the Plan
total less than $50,000 as of the last day of the Plan Year in which he or
she incurs a Termination of Employment will receive lump sum payment of his
or her Accounts in the first quarter of the Plan Year following the Plan
Year in which the Participant incurs a Termination of Employment.
The Administrative Committee has the right to postpone the payment of any
Accounts for up to one year from the date on which the credits would
otherwise be paid.
5.3 Effect of Payment. Payment to the person or trust reasonably and in
good faith determined by the Administrative Committee to be the Participant's
Beneficiary will completely
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discharge any obligations Edwards or any other Employer may have under the Plan.
If a Plan benefit is payable to a minor or a person declared to be incompetent
or to a person the Administrative Committee in good faith believes to be
incompetent or incapable of handling the disposition of property, the
Administrative Committee may direct payment of such Plan benefit to the
guardian, legal representative or person having the care and custody of such
minor and such decision by the Administrative Committee is binding on all
parties. The Administrative Committee may initiate whatever action it deems
appropriate to ensure that benefits are properly paid to an appropriate
guardian.
The Administrative Committee may require proof of incompetence, minority,
incapacity or guardianship as it may deem appropriate prior to distribution of
the Plan benefit. Such distribution will completely discharge the Administrative
Committee and the Employer from all liability with respect to such benefit.
5.4 Taxation of Plan Benefits. It is intended that each Participant
will be taxed on amounts credited to him or her under the Plan at the time such
amounts are received, and the provisions of the Plan will be interpreted
consistent with that intention.
5.5 Withholding and Payroll Taxes. Edwards will withhold from payments
made hereunder any taxes required to be withheld for the payment of taxes to the
Federal, or any state or local government.
5.6 Distribution Due to Unforeseeable Emergency. Upon written request
of a Participant and the showing of Unforeseeable Emergency, the Administrative
Committee may authorize distribution of all or a portion of the Participant's
Accounts, and or the acceleration of any installment payments being made from
the Plan, but only to the extent reasonably necessary to relieve the
Unforeseeable Emergency. In any event, payment may not be made to the extent
such Unforeseeable Emergency is or may be satisfied through reimbursement by
insurance or otherwise, including, but not limited to, liquidation of the
Participant's assets, to the extent that such liquidation would not in and of
itself cause severe financial hardship. In addition, such Participant is
precluded from enrolling in the Plan for the entire Plan Year beginning January
1 after the request is approved.
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<PAGE>
ARTICLE VI
BENEFICIARY DESIGNATION
6.1 Beneficiary Designation. Each Participant has the right to designate
one or more persons or trusts as the Participant's Beneficiary, primary as well
as secondary, to whom benefits under this Plan will be paid in the event of the
Participant's death prior to complete distribution to the Participant of the
benefits due under the Plan. Each Beneficiary designation will be in a written
form prescribed by the Administrative Committee and will be effective only when
filed with the Administrative Committee during the Participant's lifetime.
6.2 Amendments to Beneficiary Designation. Any Beneficiary designation may
be changed by a Participant without the consent of any Beneficiary by the filing
of a new Beneficiary designation with the Administrative Committee. Filing a
Beneficiary designation as to any benefits available under the Plan revokes all
prior Beneficiary designations effective as of the date such Beneficiary
designation is received by the Administrative Committee. If a Participant's
Accounts are community property, any Beneficiary designation will be valid or
effective only as permitted under applicable law.
6.3 No Beneficiary Designation. In the absence of an effective Beneficiary
designation, or if all Beneficiaries predecease the Participant, the
Participant's estate will be the Beneficiary. If a Beneficiary dies after the
Participant and before payment of benefits under this Plan has been completed,
and no secondary Beneficiary has been designated to receive such Beneficiary's
share, the remaining benefits will be payable to the Beneficiary's estate.
ARTICLE VII
ADMINISTRATION
7.1 Administrative Committee. The Plan is administered by the
Administrative Committee, which is the Plan Administrator for purposes of
Section 3(16)(A) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"). Edwards has appointed the members of the Administrative
Committee to administer the Plan. Members of the Administrative Committee may
be Participants in the Plan.
7.2 Administrative Committee Powers. The Administrative Committee has
such powers as may be necessary to discharge its duties hereunder, including,
but not by way of limitation, the following powers, rights and duties:
(a) Interpretation of Plan. The Administrative Committee has the
power, right and duty to construe, interpret and enforce the Plan
provisions and to determine all questions arising under the Plan
including, but not by way of limitation, questions of Plan
participation, eligibility for Plan benefits and the rights of
employees, Participants, Beneficiaries and other persons to
benefits under the Plan and to determine the amount, manner and
time of payment of any benefits hereunder;
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<PAGE>
(b) Plan Procedures. The Administrative Committee has the power,
right and duty to adopt procedures, rules, regulations and forms
to be followed by employees, Participants, Beneficiaries and
other persons or to be otherwise utilized in the efficient
administration of the Plan which may alter any procedural
provision of the Plan without the necessity of an amendment;
(c) Benefit Determinations. The Administrative Committee has the
power, right and duty to make determinations as to the rights of
employees, Participants, Beneficiaries and other persons to
benefits under the Plan and to afford any Participant or
Beneficiary dissatisfied with such determination with rights
pursuant to a claims procedure adopted by the Committee; and
(d) Allocation of Duties. The Administrative Committee is empowered
to employ agents (who may also be employees of Edwards) and to
delegate to them any of the administrative duties imposed upon
the Administrative Committee or Edwards.
7.3 Uniform Application of Rules. The Administrative Committee will
apply all rules, regulations, procedures and decisions uniformly and
consistently to all Participants similarly situated. Any ruling, regulation,
procedure or decision of the Administrative Committee will be conclusive and
binding upon all persons affected by it. There will be no appeal from any
ruling by the Administrative Committee which is within its authority, except as
provided in Section 7.4 below. When making a determination or a calculation,
the Administrative Committee will be entitled to rely on information supplied by
any Employer, accountants and other professionals including, but not by way of
limitation, legal counsel for Edwards or any Employer.
7.4 Claims Procedure. If a claim for benefits by a Participant or his
or her beneficiary or beneficiaries (the "applicant") is denied, the
Administrative Committee will furnish the applicant within 90 days after receipt
of such claim (or within 180 days after receipt if the Administrative Committee
notifies the applicant prior to the end of the 90 day period that special
circumstances require an extension of time), a written notice which specifies
the reason for the denial, refers to the pertinent provisions of the Plan on
which the denial is based, describes any additional material or information
necessary for properly completing the claim and explains why such material or
information is necessary, and explains the claim review procedures of this
Section 7.4. If, within 60 days after receipt of such notice, the applicant so
requests in writing, the Administrative Committee will review its earlier
decision. The Administrative Committee's decision on review will be in writing,
and will include specific reasons for the decision, written in a manner
calculated to be understood by the claimant, and will include specific
references to the pertinent provisions of the Plan on which the decision is
based. It will be delivered to the claimant within 60 days after the request
for review is received, unless extraordinary circumstances require a longer
period, but in no event more than 120 days after the request for review is
received.
7.5 Action by Administrative Committee. Action by the Administrative
Committee will be subject to the following special rules:
8
<PAGE>
(a) Meetings and Documents. The Administrative Committee may act by
meeting or by document signed without meeting and documents may
be signed through the use of a single document or concurrent
documents.
(b) Action by Majority. The Administrative Committee will act by a
majority decision which action will be as effective as if such
action had been taken by all Administrative Committee members,
provided that by majority action one or more Administrative
Committee members or other persons may be authorized to act with
respect to particular matters on behalf of all Administrative
Committee members.
(c) Resolving Deadlocks. If there is an equal division among the
Administrative Committee members with respect to any question a
disinterested party may be selected by a majority vote to decide
the matter. Any decision by such disinterested party will be
binding.
7.6 Indemnity. To the extent permitted by applicable law and to the
extent that they are not indemnified or saved harmless under any liability
insurance contracts, any present or former Administrative Committee members,
officers, or directors of Edwards, the Employers or their subsidiaries or
affiliates, if any, will be indemnified and saved harmless by the Employers from
and against any and all liabilities or allegations of liability to which they
may be subjected by reason of any act done or omitted to be done in good faith
in the administration of the Plan, including all expenses reasonably incurred in
their defense in the event that Edwards fails to provide such defense after
having been requested in writing to do so.
ARTICLE VIII
AMENDMENT AND TERMINATION OF PLAN
8.1 Amendment. The Compensation Committee may amend the Plan at any time,
except that no amendment will decrease or restrict the Accounts of Participants
and Beneficiaries at the time of the amendment. Notwithstanding the foregoing,
the Compensation Committee may delegate certain authority to amend the Plan to
the Administrative Committee.
8.2 Right to Terminate. The Compensation Committee may at any time
terminate the Plan. Any Employer may terminate its participation in the Plan by
notice to Edwards.
8.3 Payment at Termination. If the Plan is terminated payment of each
affected Participant's Accounts to the Participant or Beneficiary for whom they
are held will commence within 60 days of such termination in the form determined
under Article 5.
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ARTICLE IX
MISCELLANEOUS
9.1 Unfunded Plan. This Plan is intended to be an unfunded retirement
plan maintained primarily to provide retirement benefits for a select group of
management or highly compensated employees. All credited amounts are unfunded,
general obligations of the appropriate Employer. This Plan is not intended to
create an investment contract, but to provide retirement benefits to eligible
employees who participate in the Plan. Eligible employees are members of a
select group of management or are highly compensated employees, who, by virtue
of their position with an Employer, are uniquely informed as to such Employer's
operations and have the ability to affect materially Employer's profitability
and operations.
9.2 Unsecured General Creditor. In the event of an Employer's
insolvency, Participants and their Beneficiaries, heirs, successors and assigns
will have no legal or equitable rights, interest or claims in any property or
assets of such Employer, nor will they be Beneficiaries of, or have any rights,
claims or interests in any life insurance policies, annuity contracts or the
proceeds therefrom owned or which may be acquired by such Employer (the
"Policies") greater than those of any other unsecured general creditors. In
that event, any and all of the Employer's assets and Policies will be, and
remain, the general, unpledged, unrestricted assets of Employer. Employer's
obligation under the Plan will be merely that of an unfunded and unsecured
promise of Employer to pay money in the future.
9.3 Nonassignability. Neither a Participant nor any other person will
have any right to commute, sell, assign, transfer, pledge, anticipate, mortgage
or otherwise encumber, transfer, hypothecate or convey in advance of actual
receipt the amounts, if any, payable hereunder, or any part thereof, which are,
and all rights to which are, expressly declared to be nonassignable and
nontransferable. No part of the amounts payable will, prior to actual payment,
be subject to seizure or sequestration for the payment of any debts, judgments,
alimony or separate maintenance owed by a Participant or any other person, nor
be transferable by operation of law in the event of a Participant's or any other
person's bankruptcy or insolvency. Nothing contained herein will preclude an
Employer from offsetting any amount owed to it by a Participant against payments
to such Participant or his or her Beneficiary.
9.4 Not a Contract of Employment. The terms and conditions of this Plan
will not be deemed to constitute a contract of employment between a Participant
and such Participant's Employer, and neither the Participant nor the
Participant's Beneficiary will have any rights against such Participant's
Employer except as may otherwise be specifically provided herein. Moreover,
nothing in this Plan is deemed to give a Participant the right to be retained in
the service of his or her Employer or to interfere with the right of such
Employer to discipline or discharge him or her at any time.
9.5 Protective Provisions. A Participant will cooperate with Edwards by
furnishing any and all information requested by Edwards, in order to facilitate
the payment of benefits hereunder.
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9.6 Governing Law. The provisions of this Plan will be construed and
interpreted according to the laws of the State of California, to the extent not
preempted by ERISA.
9.7 Severability. In the event any provision of the Plan is held
invalid or illegal for any reason, any illegality or invalidity will not affect
the remaining parts of the Plan, but the Plan will be construed and enforced as
if the illegal or invalid provision had never been inserted, and Edwards will
have the privilege and opportunity to correct and remedy such questions of
illegality or invalidity by amendment as provided in the Plan, including, but
not by way of limitation, the opportunity to construe and enforce the Plan as if
such illegal and invalid provision had never been inserted herein.
9.8 Notice. Any notice or filing required or permitted to be given to
Edwards or the Administrative Committee under the Plan will be sufficient if in
writing and hand delivered, or sent by registered or certified mail to any
member of the Administrative Committee, or to Edwards's Chief Financial Officer
and, if mailed, will be addressed to the principal executive offices of Edwards.
Notice to a Participant or Beneficiary may be hand delivered or mailed to the
Participant or Beneficiary at his or her most recent address as listed in the
employment records of Edwards. Notices will be deemed given as of the date of
delivery or mailing or, if delivery is made by certified or registered mail, as
of the date shown on the receipt for registration or certification. Any person
entitled to notice hereunder may waive such notice.
9.9 Successors. The provisions of this Plan will bind and inure to the
benefit of Edwards, each Employer, the Participants and Beneficiaries, and their
respective successors, heirs and assigns. The term successors as used herein
will include any corporate or other business entity which, whether by merger,
consolidation, purchase or otherwise acquires all or substantially all of the
business and assets of Edwards, and successors of any such corporation or other
business entity.
9.10 Action by Edwards. Except as otherwise provided herein, any action
required of or permitted by Edwards under the Plan will be by resolution of the
Compensation Committee or any person or persons authorized by resolution of the
Compensation Committee.
9.11 Effect on Benefit Plans. Amounts paid under this Plan, will not by
operation of this Plan be considered to be compensation for the purposes of any
benefit plan maintained by any Employer. The treatment of such amounts under
other employee benefit plans will be determined pursuant to the provisions of
such plans.
9.12 Participant Litigation. In any action or proceeding regarding the
Plan, employees or former employees of Edwards or an Employer, Participants,
Beneficiaries or any other persons having or claiming to have an interest in
this Plan will not be necessary parties and will not be entitled to any notice
or process. Any final judgment which is not appealed or appealable and may be
entered in any such action or proceeding will be binding and conclusive on the
parties hereto and all persons having or claiming to have any interest in this
Plan. To the extent permitted by law, if a legal action is begun against
Edwards, an Employer, the Administrative Committee, or any member of the
Administrative Committee by or on behalf of any person and such action results
adversely to such person or if a legal action arises because of conflicting
claims to a
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Participant's or other person's benefits, the costs to such person of defending
the action will be charged to the amounts, if any, which were involved in the
action or were payable to the Participant or other person concerned. To the
extent permitted by applicable law, acceptance of participation in this Plan
will constitute a release of Edwards, each Employer, the Administrative
Committee and each member thereof, and their respective agents from any and all
liability and obligation not involving willful misconduct or gross neglect.
Edwards Lifesciences Corporation has caused this instrument to be executed by
its authorized officer, as of the _____ day of ________________, 2000.
EDWARDS LIFESCIENCES CORPORATION
By: ______________________________
Its: ______________________________
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Exhibit 10.9
Edwards Lifesciences Corporation
and
First Chicago Trust Company of
New York, a division of Equiserve
as
Rights Agent
Rights Agreement
Dated as of March __, 2000
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
Section Page
------- ----
<S> <C>
Section 1. Certain Definitions............................................................................................. 1
Section 2. Appointment of Rights Agent..................................................................................... 4
Section 3. Issue of Rights Certificates.................................................................................... 4
Section 4. Form of Rights Certificates..................................................................................... 6
Section 5. Countersignature and Registration............................................................................... 7
Section 6. Transfer, Split Up, Combination and Exchange of Rights Certificates; Mutilated, Destroyed, Lost or Stolen Rights
Certificates.................................................................................................... 7
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights................................................... 8
Section 8. Cancellation of Rights Certificates............................................................................. 10
Section 9. Reservation and Availability of Capital Stock................................................................... 10
Section 10. Preferred Stock Record Date..................................................................................... 11
Section 11. Adjustment of Purchase Price, Number and Kind of Shares or Number of Rights..................................... 12
Section 12. Certificate of Adjusted Purchase Price or Number of Shares...................................................... 19
Section 13. Consolidation, Merger or Sale or Transfer of Assets, Cash Flow or Earning Power................................. 19
Section 14. Fractional Rights and Fractional Shares......................................................................... 21
Section 15. Rights of Action................................................................................................ 23
Section 16. Agreement of Rights Holders..................................................................................... 23
Section 17. Rights Certificate Holder Not Deemed a Stockholder.............................................................. 24
Section 18. Concerning the Rights Agent..................................................................................... 24
Section 19. Merger or Consolidation or Change of Name of Rights Agent....................................................... 24
Section 20. Duties of Rights Agent.......................................................................................... 25
Section 21. Change of Rights Agent.......................................................................................... 27
Section 22. Issuance of New Rights Certificates............................................................................. 27
Section 23. Redemption and Termination...................................................................................... 28
</TABLE>
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<TABLE>
<S> <C>
Section 24. Exchange........................................................................................................ 28
Section 25. Notice of Certain Events........................................................................................ 29
Section 26. Notices......................................................................................................... 30
Section 27. Supplements and Amendments...................................................................................... 31
Section 28. Successors...................................................................................................... 31
Section 29. Determination and Actions by the Board of Directors, etc........................................................ 31
Section 30. Benefits of this Agreement...................................................................................... 32
Section 31. Severability.................................................................................................... 32
Section 32. Governing Law................................................................................................... 32
Section 33. Counterparts.................................................................................................... 33
Section 34. Descriptive Headings............................................................................................ 33
</TABLE>
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RIGHTS AGREEMENT
RIGHTS AGREEMENT, dated as of March __, 2000 (the "Agreement"),
between Edwards Lifesciences Corporation, a Delaware corporation (the
"Company"), and First Chicago Trust Company of New York, a division of
Equiserve, a ______________ corporation (the "Rights Agent").
W I T N E S S E T H:
WHEREAS, on ____________, 2000 (the "Rights Dividend Declaration
Date"), the Board of Directors of the Company authorized and declared a dividend
distribution of one Right (as hereinafter defined) for each share of Common
Stock (as hereinafter defined) of the Company outstanding at the Close of
Business on March __, 2000, after giving effect to the distribution of
shares of Common Stock by Baxter International Inc. to its stockholders (the
"Record Date"), each Right initially representing the right to purchase one one-
hundredth of a share of Series A Junior Participating Preferred Stock of the
Company having the rights, powers and preferences set forth in the form of
Certificate of Designations attached hereto as Exhibit A, upon the terms and
subject to the conditions hereinafter set forth (the "Rights"), and has further
authorized the issuance of one Right (as such number may hereinafter be adjusted
pursuant to the provisions of Section 11(p) hereof) for each share of Common
Stock of the Company issued between the Record Date and the earlier of the
Distribution Date or the Expiration Date (as such terms are hereinafter defined)
or, in certain circumstances provided in Section 22 hereof, after the
Distribution Date (as hereinafter defined);
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, the
-------------------
following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person who or which, together
with all Affiliates and Associates of such Person, shall be the Beneficial
Owner of 15% or more of the shares of Common Stock then outstanding, but
shall not include the Company, any Subsidiary of the Company, any employee
benefit plan of the Company or of any Subsidiary of the Company, or any
Person organized, appointed and acting in such appointed capacity, or
established by the Company for or pursuant to the terms of any such plan.
Notwithstanding the foregoing, no Person shall become an "Acquiring Person"
as the result of an acquisition of shares of Common Stock by the Company
which, by reducing the number of shares outstanding, increases the
proportionate number of shares beneficially owned by such Person to 15% or
more of the shares of Common Stock then outstanding; provided, however,
-------- -------
that if a Person shall become the Beneficial Owner of 15% or more of the
shares of Common Stock then outstanding by reason of share purchases by the
Company and shall, after such share purchases by the Company, become the
Beneficial Owner of any additional shares of Common Stock, then such Person
shall be deemed to be an "Acquiring Person". Notwithstanding the
foregoing, no Person shall become an "Acquiring Person" if (i) such Person
has reported or is required to report such ownership on Schedule 13G under
the Securities Exchange Act of 1934, as amended and in effect on the date
of this Agreement (the "Exchange Act") (or any comparable or successor
report) or on Schedule 13D under the Exchange Act (or any comparable or
successor report) which Schedule 13D does not state any intention to or
reserve the right to control or influence the management or policies of the
Company or engage in any of the actions specified in Item 4 of such
schedule (other than the
<PAGE>
disposition of the Common Stock), (ii) such Person, together with all
Affiliates and Associates of such Person, does not beneficially own 20% or
more of the outstanding shares of Common Stock then outstanding and (iii)
within ten (10) Business Days of being requested by the Company to advise
it regarding the same, such Person properly certifies to the Company that
such Person acquired shares of Common Stock in excess of 14.9%
inadvertently or without knowledge of the terms of the Rights and who,
together with all Affiliates and Associates, thereafter does not acquire
any additional shares of Common Stock while the Beneficial Owner of 15% or
more of the shares of Common Stock then outstanding; provided, however,
-------- -------
that (i) if the Person requested to so certify fails to do so within ten
(10) Business Days, then such Person shall become an Acquiring Person
immediately after such ten-Business-Day period, (ii) if the Person
requested to so certify, so certifies but the Board of Directors determines
that such Person so certified falsely, then such Person shall become an
Acquiring Person immediately upon such determination and (iii) if the
Person acquires additional shares of Common Stock while the Beneficial
Owner of 15% or more of the shares of Common Stock then outstanding, then
such Person shall immediately become an Acquiring Person.
(b) "Act" shall mean the Securities Act of 1933, as amended.
(c) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Exchange Act.
(d) A Person shall be deemed the "Beneficial Owner" of, and shall be
deemed to "beneficially own," any securities:
(i) which such Person or any of such Person's Affiliates
or Associates, directly or indirectly, has the right to acquire
(whether such right is exercisable immediately or only after the
passage of time) pursuant to any agreement, arrangement or
understanding (whether or not in writing) or upon the exercise of
conversion rights, exchange rights, rights, warrants or options,
or otherwise; provided, however, that a Person shall not be
-------- -------
deemed the "Beneficial Owner" of, or to "beneficially own," (A)
securities tendered pursuant to a tender or exchange offer made by
such Person or any of such Person's Affiliates or Associates until
such tendered securities are accepted for purchase or exchange, or (B)
securities issuable upon exercise of Rights at any time prior to the
occurrence of a Triggering Event, or (C) securities issuable upon
exercise of Rights from and after the occurrence of a Triggering Event
which Rights were acquired by such Person or any such Person's
Affiliates or Associates prior to the Distribution Date or pursuant to
Section 3(a) or Section 22 hereof (the "Original Rights") or pursuant
to Section 11(i) hereof in connection with an adjustment made with
respect to any Original Rights;
(ii) which such Person or any of such Person's Affiliates
or Associates, directly or indirectly, has the right to vote or
dispose of or has "beneficial ownership" of (as determined
pursuant to Rule 13d-3 of the General Rules and Regulations
under the Exchange Act), including pursuant to any agreement,
arrangement or understanding, whether or not in writing;
2
<PAGE>
provided, however, that a Person shall not be deemed the
-------- -------
"Beneficial Owner" of, or to "beneficially own," any
security under this subparagraph (ii) as a result of an
agreement, arrangement or understanding to vote such
security if such agreement, arrangement or understanding:
(A) arises solely from a revocable proxy given in response
to a public proxy or consent solicitation made pursuant to,
and in accordance with, the applicable provisions of the
General Rules and Regulations under the Exchange Act, and
(B) is not also then reportable by such Person on Schedule
13D under the Exchange Act (or any comparable or successor
report); or
(iii) which are beneficially owned, directly or
indirectly, by any other Person (or any Affiliate or
Associate thereof) with which such Person (or any of such
Person's Affiliates or Associates) has any agreement,
arrangement or understanding (whether or not in writing),
for the purpose of acquiring, holding, voting (except
pursuant to a revocable proxy as described in the proviso to
subparagraph (ii) of this paragraph (d)) or disposing of any
voting securities of the Company;
provided, however, that nothing in this paragraph (d) shall cause a
-------- -------
Person engaged in business as an underwriter of securities to be
the "Beneficial Owner" of, or to "beneficially own," any
securities acquired through such Person's participation in good
faith in a firm commitment underwriting until the expiration of
forty days after the date of such acquisition.
(e) "Business Day" shall mean any day other than a Saturday,
Sunday or a day on which banking institutions in the State of New
York are authorized or obligated by law or executive order to
close.
(f) "Close of Business" on any given date shall mean 5:00
P.M., New York time, on such date, provided, however, that if
-------- -------
such date is not a Business Day it shall mean 5:00 P.M., New York
time, on the next succeeding Business Day.
(g) "Common Stock" shall mean the common stock, par value
$1.00 per share, of the Company, except that "Common Stock" when
used with reference to any Person other than the Company shall
mean the capital stock of such Person with the greatest voting
power, or the equity securities or other equity interest having
power to control or direct the management, of such Person.
(h) "Person" shall mean any individual, firm, limited
liability company, corporation, partnership or other entity and
shall include any successor (by merger or otherwise) of such
entity.
(i) "Preferred Stock" shall mean shares of Series A Junior
Participating Preferred Stock, par value $.01 per share, of the
Company, and, to the extent that there is not a sufficient number
of shares of Series A Junior Participating Preferred Stock
authorized to permit the full exercise of the Rights, any other
series of preferred stock, par value $.01 per share, of the
Company designated for such purpose containing terms
substantially similar to the terms of the Series A Junior
Participating Preferred Stock.
3
<PAGE>
(j) "Section 11(a)(ii) Event" shall mean the event described
in Section 11(a)(ii) hereof.
(k) "Section 13 Event" shall have the meaning set forth in
Section 13(a) hereof.
(l) "Stock Acquisition Date" shall mean the first date of
public announcement (which, for purposes of this definition,
shall include, without limitation, a report filed pursuant to
Section 13(d) under the Exchange Act) by the Company or an
Acquiring Person that an Acquiring Person has become such.
(m) "Subsidiary" shall mean, with reference to any Person,
any corporation or other entity of which an amount of voting
securities sufficient to elect at least a majority of the
directors, or other Persons acting in a capacity similar to
directors, of such corporation or other entity is beneficially
owned, directly or indirectly, by such Person, or otherwise
controlled by such Person.
(n) "Triggering Event" shall mean any Section 11(a)(ii)
Event or any Section 13 Event.
In addition, for purposes of this Agreement, the following terms have
the meanings indicated in specified sections of this Agreement: (i) "Adjustment
Shares" shall have the meaning set forth in Section 11(a)(ii) hereof; (ii)
"common stock equivalents" shall have the meaning set forth in Section
11(a)(iii) hereof; (iii) "current market price" shall have the meaning set forth
in Section 11(d) hereof; (iv) "Current Value" shall have the meaning set forth
in Section 11(a)(iii) hereof; (v) "Distribution Date" shall have the meaning set
forth in Section 3(a) hereof; (vi) "equivalent preferred stock" shall have the
meaning set forth in Section 11(b) hereof; (vii) "Exchange Ratio" shall have the
meaning set forth in Section 24(a) hereof; (viii) "Expiration Date" shall have
the meaning set forth in Section 7(a) hereof; (ix) "Final Expiration Date" shall
have the meaning set forth in Section 7(a) hereof; (x) "Nasdaq" shall have the
meaning set forth in Section 11(d)(i) hereof; (xi) "Principal Party" shall have
the meaning set forth in Section 13(b) hereof; (xii) "Purchase Price" shall have
the meaning set forth in Section 4(a); (xiii) "Record Date" shall have the
meaning set forth in the recitals hereof; (xiv) "Redemption Price" shall have
the meaning set forth in Section 23(a) hereof; (xv) "Rights" shall have the
meaning set forth in the recitals hereof; (xvi) "Rights Certificates" shall have
the meaning set forth in Section 3(a) hereof; (xvii) "Section 11(a)(ii) Trigger
Date" shall have the meaning set forth in Section 11(a)(iii) hereof; (xviii)
"Spread" shall have the meaning set forth in Section 11(a)(iii) hereof; (xix)
"Substitution Period" shall have the meaning set forth in Section 11(a)(iii)
hereof; (xx) "Summary of Rights" shall have the meaning set forth in Section
3(b) hereof; and (xxi) "Trading Day" shall have the meaning set forth in Section
11(d)(i) hereof.
Section 2. Appointment of Rights Agent. The Company hereby appoints
---------------------------
the Rights Agent to act as agent for the Company in accordance with the terms
and conditions hereof, and the Rights Agent hereby accepts such appointment. The
Company may from time to time appoint such co-Rights Agents as it may deem
necessary or desirable upon ten (10) days' prior written notice to the Rights
Agent.
Section 3. Issue of Rights Certificates.
----------------------------
(a) Until the earlier of (i) the Close of Business on the tenth day
after the Stock Acquisition Date (or, if the tenth day after the Stock
Acquisition Date occurs before the Record Date,
4
<PAGE>
the Close of Business on the Record Date) or (ii) the Close of Business on the
tenth Business Day (or such later date as may be determined by action of the
Board of Directors of the Company prior to such time as any Person becomes an
Acquiring Person) after the date that a tender or exchange offer by any Person
(other than the Company, any Subsidiary of the Company, any employee benefit
plan of the Company or of any Subsidiary of the Company, or any Person
organized, appointed or established by the Company for or pursuant to the terms
of any such plan) is first published or sent or given within the meaning of Rule
14d-2(a) of the General Rules and Regulations under the Exchange Act, if upon
consummation thereof, such Person would be the Beneficial Owner of 15% or more
of the shares of Common Stock then outstanding, (the earlier of (i) and (ii)
being herein referred to as the "Distribution Date"), (x) the Rights will be
evidenced (subject to the provisions of paragraph (b) of this Section 3) by the
certificates for the Common Stock registered in the names of the holders of the
Common Stock (which certificates for Common Stock shall be deemed also to be
certificates for Rights) and not by separate certificates and (y) the Rights
will be transferable only in connection with the transfer of the underlying
shares of Common Stock (including a transfer to the Company). The Company shall
give the Rights Agent prompt written notice of the Distribution Date. As soon as
practicable after the Distribution Date, and receipt of written notice of the
Distribution Date from the Company, the Rights Agent will, at the Company's
expense, send by first-class, insured, postage prepaid mail, to each record
holder of the Common Stock as of the Close of Business on the Distribution Date,
at the address of such holder shown on the records of the Company, one or more
Rights certificates, in substantially the form of Exhibit B hereto (the "Rights
Certificates"), evidencing one Right for each share of Common Stock so held,
subject to adjustment as provided herein. In the event that an adjustment in the
number of Rights per share of Common Stock has been made pursuant to Section
11(p) hereof, at the time of distribution of the Rights Certificates, the
Company shall make the necessary and appropriate rounding adjustments (in
accordance with Section 14(a) hereof) so that Rights Certificates representing
only whole numbers of Rights are distributed and cash is paid in lieu of any
fractional Rights. As of and after the Distribution Date, the Rights will be
evidenced solely by such Rights Certificates.
(b) As promptly as practicable following the Record Date, the Company
will send a copy of a Summary of Rights to Purchase Preferred Stock, in
substantially the form attached hereto as Exhibit C (the "Summary of Rights"),
by first-class, postage prepaid mail, to each record holder of the Common Stock
as of the Close of Business on the Record Date, at the address of such holder
shown on the records of the Company. With respect to certificates for the
Common Stock outstanding as of the Record Date, until the Distribution Date, the
Rights will be evidenced by such certificates registered in the names of the
holders thereof together with a copy of the Summary of Rights attached thereto.
Until the earlier of the Distribution Date or the Expiration Date, the surrender
for transfer of any certificate representing shares of Common Stock in respect
of which Rights have been issued, with or without a copy of the Summary of
Rights attached thereto, shall also constitute the transfer of the Rights
associated with such shares of Common Stock.
(c) Rights shall be issued in respect of all shares of Common Stock
which are issued after the Record Date but prior to the earlier of the
Distribution Date or the Expiration Date or, in certain circumstances provided
in Section 22 hereof, after the Distribution Date. Certificates representing
such shares of Common Stock shall also be deemed to be certificates for Rights,
and shall bear a legend substantially in the following form:
This certificate also evidences and entitles the holder
hereof to certain rights as set forth in the Rights Agreement
between Edwards Lifesciences Corporation (the "Company") and
First Chicago Trust Company of New York, a division of Equiserve (the
"Rights Agent") dated as of March __, 2000 (the "Rights Agreement"),
the terms of
5
<PAGE>
which are hereby incorporated herein by reference and a copy of
which is on file at the principal offices of the Company. Under
certain circumstances, as set forth in the Rights Agreement, such
Rights will be evidenced by separate certificates and will no
longer be evidenced by this certificate. The Company will mail to
the holder of this certificate a copy of the Rights Agreement, as
in effect on the date of mailing, without charge promptly after
receipt of a written request therefor. Under certain
circumstances set forth in the Rights Agreement, Rights issued
to, or held by, any Person who is, was or becomes an Acquiring
Person or any Affiliate or Associate thereof (as such terms are
defined in the Rights Agreement), whether currently held by or on
behalf of such Person or by any subsequent holder, may become
null and void.
With respect to such certificates containing the foregoing legend, until the
earlier of the Distribution Date or the Expiration Date, the Rights associated
with the Common Stock represented by such certificates shall be evidenced by
such certificates alone and registered holders of Common Stock shall also be the
registered holders of the associated Rights, and the surrender for transfer of
any of such certificates shall also constitute the transfer of the Rights
associated with the Common Stock represented by such certificates. In the event
the Company purchases or acquires any shares of its Common Stock after the
Record Date but prior to the Distribution Date, any Rights associated with such
shares shall be deemed cancelled and retired so that the Company shall not be
entitled to exercise any Rights associated with shares of Common Stock that are
not outstanding.
Section 4. Form of Rights Certificates.
---------------------------
(a) The Rights Certificates (and the forms of election to purchase
and of assignment to be printed on the reverse thereof) shall each be
substantially in the form set forth in Exhibit B hereto and may have such marks
of identification or designation and such legends, summaries or endorsements
printed thereon as the Company may deem appropriate and as are not inconsistent
with the provisions of this Agreement, or as may be required to comply with any
applicable law or with any rule or regulation made pursuant thereto or with any
rule or regulation of any stock exchange on which the Rights may from time to
time be listed, or to conform to usage. The Rights Certificates shall be in a
machine printable format reasonably satisfactory to the Rights Agent. Subject
to the provisions of Section 11 and Section 22 hereof, the Rights Certificates,
whenever distributed, shall be dated as of the Record Date or, in the case of
Rights with respect to shares of Common Stock issued or becoming outstanding
after the Record Date, the same date as the stock certificate evidencing such
shares, shall show the date of countersignature, and on their face shall entitle
the holders thereof to purchase such number of one one-hundredths of a share of
Preferred Stock as shall be set forth therein at the price set forth therein
(such exercise price per one one-hundredth of a share, the "Purchase Price"),
but the amount and type of securities purchasable upon the exercise of each
Right and the Purchase Price thereof shall be subject to adjustment from time to
time as provided in Sections 11 and 13(a) hereof.
(b) Any Rights Certificate issued pursuant to Section 3(a) or Section
22 hereof that represents Rights beneficially owned by any Person known to be:
(i) an Acquiring Person or any Associate or Affiliate of an Acquiring Person,
(ii) a transferee of an Acquiring Person (or of any such Associate or Affiliate)
who becomes a transferee after the Acquiring Person becomes such, or (iii) a
transferee of an Acquiring Person (or of any such Associate or Affiliate) who
becomes a transferee prior to or concurrently with the Acquiring Person becoming
such and receives such Rights pursuant to either (A) a transfer (whether or not
for consideration) from the Acquiring Person to holders of equity interests in
such Acquiring Person or to any Person with whom such Acquiring Person has any
6
<PAGE>
continuing agreement, arrangement or understanding regarding the transferred
Rights or (B) a transfer which the Board of Directors of the Company has
determined is part of a plan, arrangement or understanding which has as a
primary purpose or effect avoidance of Section 7(e) hereof, and any Rights
Certificate issued pursuant to Section 6 or Section 11 hereof upon transfer,
exchange, replacement or adjustment of any other Rights Certificate referred to
in this sentence, shall contain (to the extent feasible) the following legend:
The Rights represented by this Rights Certificate are or were
beneficially owned by a Person who was or became an Acquiring
Person or an Affiliate or Associate of an Acquiring Person (as
such terms are defined in the Rights Agreement). Accordingly,
this Rights Certificate and the Rights represented hereby may
become null and void in the circumstances specified in Section
7(e) of such Agreement.
The Company shall instruct the Rights Agent in writing of the Rights which
should be so legended.
Section 5. Countersignature and Registration.
---------------------------------
(a) The Rights Certificates shall be executed on behalf of the
Company by its Chairman of the Board, its Chief Executive Officer, its President
or any Vice President, either manually or by facsimile signature, and shall have
affixed thereto the Company's seal or a facsimile thereof which shall be
attested by the Secretary or an Assistant Secretary of the Company, either
manually or by facsimile signature. The Rights Certificates shall be
countersigned manually by the Rights Agent and shall not be valid for any
purpose unless so countersigned. In case any officer of the Company who shall
have signed any of the Rights Certificates shall cease to be such officer of the
Company before countersignature by the Rights Agent and issuance and delivery by
the Company, such Rights Certificates, nevertheless, may be countersigned by the
Rights Agent and issued and delivered by the Company with the same force and
effect as though the person who signed such Rights Certificates had not ceased
to be such officer of the Company; and any Rights Certificates may be signed on
behalf of the Company by any person who, at the actual date of the execution of
such Rights Certificate, shall be a proper officer of the Company to sign such
Rights Certificate, although at the date of the execution of this Rights
Agreement any such person was not such an officer.
(b) Following the Distribution Date, the Rights Agent will keep or
cause to be kept, at its principal office or offices designated as the
appropriate place for surrender of Rights Certificates upon exercise or
transfer, books for registration and transfer of the Rights Certificates issued
hereunder. Such books shall show the names and addresses of the respective
holders of the Rights Certificates, the number of Rights evidenced on its face
by each of the Rights Certificates and the certificate number and the date of
each of the Rights Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of Rights
------------------------------------------------------
Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates.
- ----------------------------------------------------------------------
(a) Subject to the provisions of Section 4(b), Section 7(e) and
Section 14 hereof, at any time after the Close of Business on the Distribution
Date, and at or prior to the Close of Business on the Expiration Date, any
Rights Certificate or Certificates (other than Rights Certificates representing
Rights that have become null and void pursuant to Section 7(e) or that have been
exchanged pursuant to Section 24 hereof) may be transferred, split up, combined
or exchanged for another Rights Certificate or Certificates, entitling the
registered holder to purchase a like number of
7
<PAGE>
one one-hundredths of a share of Preferred Stock (or, following a Triggering
Event, Common Stock, other securities, cash or other assets, as the case may be)
as the Rights Certificate or Certificates surrendered then entitled such holder
(or former holder in the case of a transfer) to purchase. Any registered holder
desiring to transfer, split up, combine or exchange any Rights Certificate or
Certificates shall make such request in writing delivered to the Rights Agent,
and shall surrender the Rights Certificate or Certificates to be transferred,
split up, combined or exchanged at the principal office or offices of the Rights
Agent designated for such purpose. Neither the Rights Agent nor the Company
shall be obligated to take any action whatsoever with respect to the transfer of
any such surrendered Rights Certificate until the registered holder shall have
completed and signed the certificate contained in the form of assignment on the
reverse side of such Rights Certificate and shall have provided such additional
evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or
Affiliates or Associates thereof as the Company or the Rights Agent shall
reasonably request. Thereupon the Rights Agent shall, subject to Section 4(b),
Section 7(e), Section 14 and Section 24 hereof, countersign and deliver to the
Person entitled thereto a Rights Certificate or Rights Certificates, as the case
may be, as so requested. The Company may require payment by the holders of
Rights of a sum sufficient to cover any tax or governmental charge that may be
imposed in connection with any transfer, split up, combination or exchange of
Rights Certificates.
(b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Rights Certificate, and, in case of loss, theft or destruction, of indemnity
or security reasonably satisfactory to them, and reimbursement to the Company
and the Rights Agent of all reasonable expenses incidental thereto, and upon
surrender to the Rights Agent and cancellation of the Rights Certificates if
mutilated, the Company will execute and deliver a new Rights Certificate of like
tenor to the Rights Agent for countersignature and delivery to the registered
owner in lieu of the Rights Certificate so lost, stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date of
------------------------------------------------------
Rights.
- ------
(a) Subject to Section 7(e) hereof, the registered holder of any
Rights Certificate may exercise the Rights evidenced thereby (except as
otherwise provided herein including, without limitation, the restrictions on
exercisability set forth in Section 9(c), Section 11(a)(iii) and Section 23(a)
hereof) in whole or in part at any time after the Distribution Date upon
surrender of the Rights Certificate, with the form of election to purchase and
the certificate on the reverse side thereof duly executed, to the Rights Agent
at the principal office or offices of the Rights Agent designated for such
purpose, together with payment of the aggregate Purchase Price with respect to
the total number of one one-hundredths of a share of Preferred Stock (or other
securities, cash or other assets, as the case may be) as to which such
surrendered Rights are then exercisable, at or prior to the earliest of (i) the
Close of Business on March __, 2010 (the "Final Expiration Date"), (ii) the time
at which the Rights are redeemed as provided in Section 23 hereof or (iii) the
time at which such Rights are exchanged pursuant to Section 24 hereof (the
earliest of (i), (ii) and (iii) being herein referred to as the "Expiration
Date"). Notwithstanding anything in this Agreement to the contrary, the Rights
shall not be exercisable prior to the Distribution Date.
(b) The Purchase Price for each one one-hundredth of a share of
Preferred Stock pursuant to the exercise of a Right shall initially be $___,
and shall be subject to adjustment from time to time as provided in Sections 11
and 13(a) hereof and shall be payable in accordance with paragraph (c) below.
8
<PAGE>
(c) Upon receipt of a Rights Certificate representing exercisable
Rights, with the form of election to purchase and the certificate duly executed,
accompanied by payment, with respect to each Right so exercised, of the Purchase
Price per one one-hundredth of a share of Preferred Stock (or other securities,
cash or other assets, as the case may be) to be purchased as set forth below and
an amount equal to any applicable transfer tax required to be paid by the holder
of the Rights Certificate in accordance with Section 9(e) hereof, the Rights
Agent shall, subject to Section 20(k) hereof, thereupon promptly (i) (A)
requisition from any transfer agent of the shares of Preferred Stock (or make
available, if the Rights Agent is the transfer agent for such shares)
certificates for the total number of one one-hundredths of a share of Preferred
Stock to be purchased and the Company hereby irrevocably authorizes its transfer
agent to comply with all such requests, or (B) if the Company shall have elected
to deposit the total number of shares of Preferred Stock issuable upon exercise
of the Rights hereunder with a depositary agent, requisition from the depositary
agent depositary receipts representing such number of one one-hundredths of a
share of Preferred Stock as are to be purchased (in which case certificates for
the shares of Preferred Stock represented by such receipts shall be deposited by
the transfer agent with the depositary agent) and the Company will direct the
depositary agent to comply with such request, (ii) requisition from the Company
the amount of cash, if any, to be paid in lieu of fractional shares in
accordance with Section 14 hereof, (iii) after receipt of such certificates or
depositary receipts, cause the same to be delivered to or upon the order of the
registered holder of such Rights Certificate, registered in such name or names
as may be designated by such holder, and (iv) after receipt thereof, deliver
such cash, if any, to or upon the order of the registered holder of such Rights
Certificate. The payment of the Purchase Price (as such amount may be reduced
pursuant to Section 11(a)(iii) hereof) shall be made in cash or by certified
bank check or bank draft payable to the order of the Company. In the event that
the Company is obligated to issue other securities (including Common Stock) of
the Company, pay cash and/or distribute other property pursuant to Section 11(a)
hereof, the Company will make all arrangements necessary so that such other
securities, cash and/or other property are available for distribution by the
Rights Agent, if and when necessary to comply with the terms of this Agreement.
The Company reserves the right to require prior to the occurrence of a
Triggering Event that, upon any exercise of Rights, a number of Rights be
exercised so that only whole shares of Preferred Stock would be issued.
(d) In case the registered holder of any Rights Certificate shall
exercise less than all the Rights evidenced thereby, a new Rights Certificate
evidencing Rights equivalent to the Rights remaining unexercised shall be issued
by the Rights Agent and delivered to, or upon the order of, the registered
holder of such Rights Certificate, registered in such name or names as may be
designated by such holder, subject to the provisions of Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the contrary, from
and after the first occurrence of a Section 11(a) (ii) Event, any Rights
beneficially owned by (i) an Acquiring Person or an Associate or Affiliate of an
Acquiring Person, (ii) a transferee of an Acquiring Person (or of any such
Associate or Affiliate) who becomes a transferee after the Acquiring Person
becomes such, or (iii) a transferee of an Acquiring Person (or of any such
Associate or Affiliate) who becomes a transferee prior to or concurrently with
the Acquiring Person becoming such and receives such Rights pursuant to either
(A) a transfer (whether or not for consideration) from the Acquiring Person (or
any Affiliate or Associate thereof) to holders of equity interests in such
Acquiring Person (or any Affiliate or Associate thereof) or to any Person with
whom the Acquiring Person (or any Affiliate or Associate thereof) has any
continuing agreement, arrangement or understanding regarding the transferred
Rights or (B) a transfer which the Board of Directors of the Company has
determined is part of a plan, arrangement or understanding which has as a
primary purpose or effect the avoidance
9
<PAGE>
of this Section 7(e), shall become null and void without any further action and
no holder of such Rights shall have any rights whatsoever with respect to such
Rights, whether under any provision of this Agreement or otherwise. The Company
shall use all reasonable efforts to ensure that the provisions of this Section
7(e) and Section 4(b) hereof are complied with, but neither the Company nor the
Rights Agent shall have any liability to any holder of Rights Certificates or
other Person as a result of the Company's failure to make any determinations
with respect to an Acquiring Person or any of its Affiliates, Associates or
transferees hereunder. The Rights Agent will endeavor to comply with the
provisions of this Section 7(e) to the extent it has received instructions from
the Company concerning such matters.
(f) Notwithstanding anything in this Agreement to the contrary,
neither the Rights Agent nor the Company shall be obligated to undertake any
action with respect to a registered holder upon the occurrence of any purported
exercise as set forth in this Section 7 unless such registered holder shall have
(i) properly completed and signed the certificate contained in the form of
election to purchase set forth on the reverse side of the Rights Certificate
surrendered for such exercise, and (ii) provided such additional evidence of the
identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or
Associates thereof as the Company or the Rights Agent shall reasonably request.
Section 8. Cancellation and Destruction of Rights Certificates.
---------------------------------------------------
All Rights Certificates surrendered for the purpose of exercise,
transfer, split up, combination or exchange shall, if surrendered to the Company
or any of its agents, be delivered to the Rights Agent for cancellation or in
cancelled form, or, if surrendered to the Rights Agent, shall be cancelled by
it, and no Rights Certificates shall be issued in lieu thereof, except as
expressly permitted by any of the provisions of this Agreement. The Company
shall deliver to the Rights Agent for cancellation and retirement, and the
Rights Agent shall so cancel and retire, any other Rights Certificates purchased
or acquired by the Company otherwise than upon the exercise thereof. The Rights
Agent shall deliver all cancelled Rights Certificates to the Company, or shall,
at the written request of the Company, destroy such cancelled Rights
Certificates, and in such case shall deliver a certificate of destruction
thereof to the Company.
Section 9. Reservation and Availability of Capital Stock.
---------------------------------------------
(a) The Company covenants and agrees that it will cause to be
reserved and kept available out of its authorized and unissued shares of
Preferred Stock (and, following the occurrence of a Triggering Event, out of its
authorized and unissued shares of Common Stock and/or other securities) the
number of shares of Preferred Stock (and, following the occurrence of a
Triggering Event, Common Stock and/or other securities) that, as provided in
this Agreement, including Section 11(a)(iii) hereof, will be sufficient to
permit the exercise in full of all outstanding Rights.
(b) So long as the shares of Preferred Stock (and, following the
occurrence of a Triggering Event, Common Stock and/or other securities) issuable
and deliverable upon the exercise of the Rights may be listed on any national
securities exchange or The Nasdaq National Market (or any successor), the
Company shall use its reasonable best efforts to cause, from and after such time
as the Rights become exercisable, all shares reserved for such issuance to be
listed on such exchange or The Nasdaq National Market (or any successor), upon
official notice of issuance upon such exercise.
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(c) The Company shall use its reasonable best efforts to (i) file, as
soon as practicable following the earliest date after the first occurrence of a
Section 11(a)(ii) Event on which the consideration to be delivered by the
Company upon exercise of the Rights has been determined in accordance with
Section 11(a)(iii) hereof, a registration statement under the Act with respect
to the securities purchasable upon exercise of the Rights on an appropriate
form, (ii) cause such registration statement to become effective as soon as
practicable after such filing, and (iii) cause such registration statement to
remain effective (with a prospectus at all times meeting the requirements of the
Act) until the earlier of (A) the date as of which the Rights are no longer
exercisable for such securities, and (B) the date of the expiration of the
Rights. The Company will also take such action as may be appropriate under, or
to ensure compliance with, the securities or "blue sky" laws of the various
states in connection with the exercisability of the Rights. The Company may
temporarily suspend, for a period of time not to exceed ninety (90) days after
the date set forth in clause (i) of the first sentence of this Section 9(c), the
exercisability of the Rights in order to prepare and file such registration
statement and permit it to become effective. Upon any such suspension, the
Company shall issue a public announcement, in each case with simultaneous
written notice to the Rights Agent, stating that the exercisability of the
Rights has been temporarily suspended, as well as a public announcement at such
time as the suspension is no longer in effect. In addition, if the Company
shall determine that a registration statement is required following the
Distribution Date, and a Section 11(a)(ii) Event has not occurred, the Company
may temporarily suspend the exercisability of Rights until such time as a
registration statement has been declared effective. Notwithstanding any
provision of this Agreement to the contrary, the Rights shall not be exercisable
in any jurisdiction if the requisite qualification or exemption in such
jurisdiction shall not have been obtained, the exercise thereof shall not be
permitted under applicable law or a registration statement shall not have been
declared effective.
(d) The Company covenants and agrees that it will take all such
actions as may be necessary to ensure that all one one-hundredths of a share of
Preferred Stock (and, following the occurrence of a Triggering Event, Common
Stock and/or other securities) delivered upon exercise of Rights shall, at the
time of delivery of the certificates for such shares (subject to payment of the
Purchase Price), be duly and validly authorized and issued and fully paid and
nonassessable.
(e) The Company further covenants and agrees that it will pay, when
due and payable, any and all transfer taxes and governmental charges which may
be payable in respect of the issuance or delivery of the Rights Certificates and
of any certificates for a number of one one-hundredths of a share of Preferred
Stock (or Common Stock and/or other securities, as the case may be) upon the
exercise of Rights. The Company shall not, however, be required to pay any
transfer tax which may be payable in respect of any transfer or delivery of
Rights Certificates to a Person other than, or the issuance or delivery of a
number of one one-hundredths of a share of Preferred Stock (or Common Stock
and/or other securities, as the case may be) in respect of a name other than
that of, the registered holder of the Rights Certificates evidencing Rights
surrendered for exercise or to issue or deliver any certificates for a number of
one one-hundredths of a share of Preferred Stock (or Common Stock and/or other
securities, as the case may be) in a name other than that of the registered
holder upon the exercise of any Rights until such tax shall have been paid (any
such tax being payable by the holder of such Rights Certificate at the time of
surrender) or until it has been established to the Company's satisfaction that
no such tax is due.
Section 10. Preferred Stock Record Date.
---------------------------
Each Person in whose name any certificate for a number of one one-
hundredths of a share of Preferred Stock (or Common Stock and/or other
securities, as the case may be) is issued
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upon the exercise of Rights shall for all purposes be deemed to have become the
holder of record of such fractional shares of Preferred Stock (or Common Stock
and/or other securities, as the case may be) represented thereby on, and such
certificate shall be dated, the date upon which the Rights Certificate
evidencing such Rights was duly surrendered and payment of the Purchase Price
(and all applicable transfer taxes) was made; provided, however, that if the
-------- -------
date of such surrender and payment is a date upon which the Preferred Stock (or
Common Stock and/or other securities, as the case may be) transfer books of the
Company are closed, such Person shall be deemed to have become the record holder
of such shares (fractional or otherwise) on, and such certificate shall be
dated, the next succeeding Business Day on which the Preferred Stock (or Common
Stock and/or other securities, as the case may be) transfer books of the Company
are open. Prior to the exercise of the Rights evidenced thereby, the holder of a
Rights Certificate shall not be entitled to any rights of a stockholder of the
Company with respect to shares or other securities for which the Rights shall be
exercisable, including, without limitation, the right to vote, to receive
dividends or other distributions or to exercise any preemptive rights, and shall
not be entitled to receive any notice of any proceedings of the Company, except
as provided herein.
Section 11. Adjustment of Purchase Price, Number and Kind of Shares
-------------------------------------------------------
or Number of Rights.
- -------------------
The Purchase Price, the number and kind of shares covered by each
Right and the number of Rights outstanding are subject to adjustment from time
to time as provided in this Section 11.
(a)(i) In the event the Company shall at any time after the
date of this Agreement (A) declare a dividend on the Preferred
Stock payable in shares of Preferred Stock, (B) subdivide the
outstanding Preferred Stock, (C) combine the outstanding
Preferred Stock into a smaller number of shares, or (D) issue any
shares of its capital stock in a reclassification of the
Preferred Stock (including any such reclassification in
connection with a consolidation or merger in which the Company is
the continuing or surviving corporation), except as otherwise
provided in this Section 11(a) and Section 7(e) hereof, the
Purchase Price in effect at the time of the record date for such
dividend or of the effective date of such subdivision,
combination or reclassification, and the number and kind of
shares of Preferred Stock or capital stock, as the case may be,
issuable on such date, shall be proportionately adjusted so that
the holder of any Right exercised after such time shall be
entitled to receive, upon payment of the Purchase Price then in
effect, the aggregate number and kind of shares of Preferred
Stock or capital stock, as the case may be, which, if such Right
had been exercised immediately prior to such date and at a time
when the Preferred Stock transfer books of the Company were open,
such holder would have owned upon such exercise and been entitled
to receive by virtue of such dividend, subdivision, combination
or reclassification. If an event occurs which would require an
adjustment under both this Section 11(a)(i) and Section 11(a)(ii)
hereof, the adjustment provided for in this Section 11(a)(i)
shall be in addition to, and shall be made prior to, any
adjustment required pursuant to Section 11(a)(ii) hereof.
(ii) Subject to Section 24 hereof, in the event any Person
at any time after the Rights Dividend Declaration Date becomes an
Acquiring Person, then each holder of a Right (except as provided
below and in Section 7(e) hereof) shall thereafter have the right
to receive, upon exercise thereof at a price equal to the then
current Purchase Price in accordance with the terms of this
Agreement, in lieu of a number of one one-
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<PAGE>
hundredths of a share of Preferred Stock, such number of shares
of Common Stock of the Company as shall equal the result obtained
by (x) multiplying the then current Purchase Price by the then
number of one one-hundredths of a share of Preferred Stock for
which a Right was exercisable immediately prior to the first
occurrence of a Section 11(a)(ii) Event and (y) dividing that
product (which, following such first occurrence shall thereafter
be referred to as the "Purchase Price" for each Right and for all
purposes of this Agreement) by 50% of the current market price
(determined pursuant to Section 11(d) hereof) per share of Common
Stock on the date of such first occurrence (such number of
shares, the "Adjustment Shares").
(iii) In the event that the number of shares of Common Stock
which are authorized by the Company's certificate of
incorporation, as amended, but not outstanding or reserved for
issuance for purposes other than upon exercise of the Rights, is
not sufficient to permit the exercise in full of the Rights in
accordance with the foregoing subparagraph (ii) of this Section
11(a), the Company shall: (A) determine the value of the
Adjustment Shares issuable upon the exercise of a Right (the
"Current Value"), and (B) with respect to each Right, make
adequate provision to substitute for the Adjustment Shares, upon
payment of the applicable Purchase Price, (1) cash, (2) a
reduction in the Purchase Price, (3) Common Stock or other equity
securities of the Company (including, without limitation, shares,
or units of shares, of preferred stock, such as the Preferred
Stock, which the Board of Directors of the Company has deemed to
have substantially the same value or economic rights as shares of
Common Stock (such shares of preferred stock, "common stock
equivalents")), (4) debt securities of the Company, (5) other
assets, or (6) any combination of the foregoing, having an
aggregate value equal to the Current Value (less the amount of
any reduction in the Purchase Price), where such aggregate value
has been determined by the Board of Directors of the Company
based upon the advice of a nationally recognized investment
banking firm selected by the Board of Directors of the Company;
provided, however, if the Company shall not have made adequate
provision to deliver value pursuant to clause (B) above within
thirty (30) days following the later of (x) the first occurrence
of a Section 11(a)(ii) Event and (y) the date on which the
Company's right of redemption pursuant to Section 23(a) expires
(the later of (x) and (y) being referred to herein as the
"Section 11(a)(ii) Trigger Date"), then the Company shall be
obligated to deliver, upon the surrender for exercise of a Right
and without requiring payment of the Purchase Price, shares of
Common Stock (to the extent available) and then, if necessary,
cash, which shares and/or cash have an aggregate value equal to
the Spread. For purposes of the preceding sentence, the term
"Spread" shall mean the excess of (i) the Current Value over (ii)
the Purchase Price. If the Board of Directors of the Company
shall determine in good faith that it is likely that sufficient
additional shares of Common Stock could be authorized for
issuance upon exercise in full of the Rights, the thirty (30) day
period set forth above may be extended to the extent necessary,
but not more than ninety (90) days after the Section 11(a)(ii)
Trigger Date, in order that the Company may seek stockholder
approval for the authorization of such additional shares (such
thirty (30) day period, as it may be extended, the "Substitution
Period"). To the extent that action is to be taken pursuant to
the first and/or third sentences of this Section 11(a)(iii), the
Company (x) shall provide, subject to Section 7(e) hereof, that
such action shall apply uniformly to all outstanding Rights, and
(y) may suspend the exercisability of the Rights until the
expiration of the Substitution Period in order
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<PAGE>
to seek such stockholder approval for such authorization of
additional shares and/or to decide the appropriate form of
distribution to be made pursuant to such first sentence and to
determine the value thereof. In the event of any such suspension,
the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as
well as a public announcement at such time as the suspension is
no longer in effect. For purposes of this Section 11(a)(iii), the
value of each Adjustment Share shall be the current market price
(as determined pursuant to Section 11(d) hereof) per share of
Common Stock on the Section 11(a)(ii) Trigger Date and the value
of any "common stock equivalent" shall be deemed to equal the
current market price (as determined pursuant to Section 11(d)
hereof) per share of the Common Stock on such date.
(b) In case the Company shall fix a record date for the issuance of
rights (other than the Rights), options or warrants to all holders of Preferred
Stock entitling them to subscribe for or purchase (for a period expiring within
forty-five (45) calendar days after such record date) Preferred Stock (or shares
having the same rights, privileges and preferences as the shares of Preferred
Stock ("equivalent preferred stock")) or securities convertible into Preferred
Stock or equivalent preferred stock at a price per share of Preferred Stock or
per share of equivalent preferred stock (or having a conversion price per share,
if a security convertible into Preferred Stock or equivalent preferred stock)
less than the current market price (as determined pursuant to Section 11(d)
hereof) per share of Preferred Stock on such record date, the Purchase Price to
be in effect after such record date shall be determined by multiplying the
Purchase Price in effect immediately prior to such record date by a fraction,
the numerator of which shall be the number of shares of Preferred Stock
outstanding on such record date, plus the number of shares of Preferred Stock
which the aggregate offering price of the total number of shares of Preferred
Stock and/or equivalent preferred stock so to be offered (and/or the aggregate
initial conversion price of the convertible securities so to be offered) would
purchase at such current market price, and the denominator of which shall be the
number of shares of Preferred Stock outstanding on such record date, plus the
number of additional shares of Preferred Stock and/or equivalent preferred stock
to be offered for subscription or purchase (or into which the convertible
securities so to be offered are initially convertible). In case such
subscription price may be paid by delivery of consideration part or all of which
may be in a form other than cash, the value of such consideration shall be as
determined in good faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the Rights Agent and
shall be binding on the Rights Agent and the holders of the Rights. Shares of
Preferred Stock owned by or held for the account of the Company shall not be
deemed outstanding for the purpose of any such computation. Such adjustment
shall be made successively whenever such a record date is fixed, and in the
event that such rights, options or warrants are not so issued, the Purchase
Price shall be adjusted to be the Purchase Price which would then be in effect
if such record date had not been fixed.
(c) In case the Company shall fix a record date for the making of a
distribution to all holders of Preferred Stock (including any such distribution
made in connection with a consolidation or merger in which the Company is the
continuing corporation) of evidences of indebtedness, cash (other than a regular
periodic cash dividend out of the earnings or retained earnings of the Company),
assets (other than a dividend payable in Preferred Stock, but including any
dividend payable in stock other than Preferred Stock) or subscription rights or
warrants (excluding those referred to in Section 11(b) hereof), the Purchase
Price to be in effect after such record date shall be determined by multiplying
the Purchase Price in effect immediately prior to such record date by a
fraction, the numerator of which shall be the current market price (as
determined pursuant to
14
<PAGE>
Section 11(d) hereof) per share of Preferred Stock on such record date, less the
fair market value (as determined in good faith by the Board of Directors of the
Company, whose determination shall be described in a statement filed with the
Rights Agent and shall be binding on the Rights Agent and the holders of the
Rights) of the portion of the cash, assets or evidences of indebtedness so to be
distributed or of such subscription rights or warrants applicable to a share of
Preferred Stock and the denominator of which shall be such current market price
(as determined pursuant to Section 11(d) hereof) per share of Preferred Stock.
Such adjustments shall be made successively whenever such a record date is
fixed, and in the event that such distribution is not so made, the Purchase
Price shall be adjusted to be the Purchase Price which would have been in effect
if such record date had not been fixed.
(d) (i) For the purpose of any computation hereunder, other
than computations made pursuant to Section 11(a)(iii) hereof, the
"current market price" per share of Common Stock on any date
shall be deemed to be the average of the daily closing prices per
share of such Common Stock for the thirty (30) consecutive
Trading Days (as such term is hereinafter defined) immediately
prior to but not including such date, and for purposes of
computations made pursuant to Section 11(a)(iii) hereof, the
"current market price" per share of Common Stock on any date
shall be deemed to be the average of the daily closing prices per
share of such Common Stock for the ten (10) consecutive Trading
Days immediately following but not including such date; provided,
however, that in the event that the current market price per
share of the Common Stock is determined during a period following
the announcement by the issuer of such Common Stock of (A) a
dividend or distribution on such Common Stock payable in shares
of such Common Stock or securities convertible into shares of
such Common Stock (other than the Rights), or (B) any
subdivision, combination or reclassification of such Common
Stock, and the ex-dividend date for such dividend or
distribution, or the record date for such subdivision,
combination or reclassification shall not have occurred prior to
the commencement of the requisite thirty (30) Trading Day or ten
(10) Trading Day period, as set forth above, then, and in each
such case, the "current market price" shall be properly adjusted
to take into account any trading during the period prior to such
ex-dividend date or record date. The closing price for each day
shall be the last sale price, regular way, or, in case no such
sale takes place on such day, the average of the closing bid and
asked prices, regular way, in either case as reported in the
principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the New York Stock
Exchange or, if the shares of Common Stock are not listed or
admitted to trading on the New York Stock Exchange, as reported
in the principal consolidated transaction reporting system with
respect to securities listed on the principal national securities
exchange on which the shares of Common Stock are listed or
admitted to trading or, if the shares of Common Stock are not
listed or admitted to trading on any national securities
exchange, the last quoted price or, if not so quoted, the average
of the high bid and low asked prices in the over-the-counter
market, as reported by The Nasdaq Stock Market ("Nasdaq") or such
other quotation system then in use, or, if on any such date the
shares of Common Stock are not quoted by any such organization,
the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Common Stock
selected by the Board of Directors of the Company. If on any such
date no market maker is making a market in the Common Stock, the
fair value of such shares on such date as determined in good faith
by the Board of Directors of
15
<PAGE>
the Company shall be used. The term "Trading Day" shall mean a day on which
the principal national securities exchange on which the shares of Common
Stock are listed or admitted to trading is open for the transaction of
business or, if the shares of Common Stock are not listed or admitted to
trading on any national securities exchange, a Business Day. If the Common
Stock is not publicly held or not so listed or traded, "current market
price" per share shall mean the fair value per share as determined in good
faith by the Board of Directors of the Company, whose determination shall
be described in a statement filed with the Rights Agent and shall be
conclusive for all purposes.
(ii) For the purpose of any computation hereunder, the "current market
price" per share of Preferred Stock shall be determined in the same manner
as set forth above for the Common Stock in clause (i) of this Section 11(d)
(other than the last sentence thereof). If the current market price per
share of Preferred Stock cannot be determined in the manner provided above,
or if the Preferred Stock is not publicly held or listed or traded in a
manner described in clause (i) of this Section 11(d), the "current market
price" per share of Preferred Stock shall be conclusively deemed to be an
amount equal to 100 (as such number may be appropriately adjusted for such
events as stock splits, stock dividends and recapitalizations with respect
to the Common Stock occurring after the date of this Agreement) multiplied
by the current market price per share of the Common Stock. If neither the
Common Stock nor the Preferred Stock is publicly held or so listed or
traded, "current market price" per share of the Preferred Stock shall mean
the fair value per share as determined in good faith by the Board of
Directors of the Company, whose determination shall be described in a
statement filed with the Rights Agent and shall be binding on the Rights
Agent and the holders of the Rights. For all purposes of this Agreement,
the "current market price" of one one-hundredth of a share of Preferred
Stock shall be equal to the "current market price" of one share of
Preferred Stock divided by 100.
(e) Anything herein to the contrary notwithstanding, no adjustment in
the Purchase Price shall be required unless such adjustment would require an
increase or decrease of at least one percent (1%) in the Purchase Price;
provided, however, that any adjustments which by reason of this Section 11(e)
- -------- -------
are not required to be made shall be carried forward and taken into account in
any subsequent adjustment. All calculations under this Section 11 shall be made
to the nearest cent or to the nearest one ten-thousandth of a share of Common
Stock or other share or one one-millionth of a share of Preferred Stock, as the
case may be. Notwithstanding the first sentence of this Section 11(e), any
adjustment required by this Section 11 shall be made no later than the earlier
of (i) three (3) years from the date of the transaction which mandates such
adjustment, or (ii) the Expiration Date.
(f) If as a result of an adjustment made pursuant to Section 11(a)(ii)
or Section 13(a) hereof, the holder of any Right thereafter exercised shall
become entitled to receive any shares of capital stock other than Preferred
Stock, thereafter the number of such other shares so receivable upon exercise of
any Right and the Purchase Price thereof shall be subject to adjustment from
time to time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Preferred Stock contained in Sections 11(a), (b),
(c), (e), (g), (h), (i), (j), (k) and (m), and the provisions of Sections 7, 9,
10, 13 and 14 hereof with respect to the Preferred Stock shall apply on like
terms to any such other shares.
16
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(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of one one-hundredths of a
share of Preferred Stock purchasable from time to time hereunder upon exercise
of the Rights, all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as provided
in Section 11(i), upon each adjustment of the Purchase Price as a result of the
calculations made in Sections 11(b) and (c), each Right outstanding immediately
prior to the making of such adjustment shall thereafter evidence the right to
purchase, at the adjusted Purchase Price, that number of one-hundredths of a
share of Preferred Stock (calculated to the nearest one-millionth) obtained by
(i) multiplying (x) the number of one one-hundredths of a share covered by a
Right immediately prior to this adjustment, by (y) the Purchase Price in effect
immediately prior to such adjustment of the Purchase Price, and (ii) dividing
the product so obtained by the Purchase Price in effect immediately after such
adjustment of the Purchase Price.
(i) The Company may elect on or after the date of any adjustment of
the Purchase Price to adjust the number of Rights, in lieu of any adjustment in
the number of one one-hundredths of a share of Preferred Stock purchasable upon
the exercise of a Right. Each of the Rights outstanding after the adjustment in
the number of Rights shall be exercisable for the number of one one-hundredths
of a share of Preferred Stock for which a Right was exercisable immediately
prior to such adjustment. Each Right held of record prior to such adjustment of
the number of Rights shall become that number of Rights (calculated to the
nearest one-ten-thousandth) obtained by dividing the Purchase Price in effect
immediately prior to adjustment of the Purchase Price by the Purchase Price in
effect immediately after adjustment of the Purchase Price. The Company shall
make a public announcement of its election to adjust the number of Rights,
indicating the record date for the adjustment, and, if known at the time, the
amount of the adjustment to be made. This record date may be the date on which
the Purchase Price is adjusted or any day thereafter, but, if the Rights
Certificates have been issued, shall be at least ten (10) days later than the
date of the public announcement. If Rights Certificates have been issued, upon
each adjustment of the number of Rights pursuant to this Section 11(i), the
Company shall, as promptly as practicable, cause to be distributed to holders of
record of Rights Certificates on such record date Rights Certificates
evidencing, subject to Section 14 hereof, the additional Rights to which such
holders shall be entitled as a result of such adjustment, or, at the option of
the Company, shall cause to be distributed to such holders of record in
substitution and replacement for the Rights Certificates held by such holders
prior to the date of adjustment, and upon surrender thereof, if required by the
Company, new Rights Certificates evidencing all the Rights to which such holders
shall be entitled after such adjustment. Rights Certificates so to be
distributed shall be issued, executed and countersigned in the manner provided
for herein (and may bear, at the option of the Company, the adjusted Purchase
Price) and shall be registered in the names of the holders of record of Rights
Certificates on the record date specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price or
the number of one one-hundredths of a share of Preferred Stock issuable upon the
exercise of the Rights, the Rights Certificates theretofore and thereafter
issued may continue to express the Purchase Price per one one-hundredth of a
share and the number of one one-hundredths of a share which were expressed in
the initial Rights Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment reducing
the Purchase Price below the then stated value, if any, of the number of one
one-hundredths of a share of Preferred Stock issuable upon exercise of the
Rights, the Company shall take any corporate action which may,
17
<PAGE>
in the opinion of its counsel, be necessary in order that the Company may
validly and legally issue fully paid and nonassessable shares of Preferred Stock
at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuance to the holder of any Right exercised after such record date
the number of one one-hundredths of a share of Preferred Stock and other capital
stock or securities of the Company, if any, issuable upon such exercise over and
above the number of one one-hundredths of a share of Preferred Stock and other
capital stock or securities of the Company, if any, issuable upon such exercise
on the basis of the Purchase Price in effect prior to such adjustment; provided,
--------
however, that the Company shall deliver to such holder a due bill or other
- -------
appropriate instrument evidencing such holder's right to receive such additional
shares (fractional or otherwise) or securities upon the occurrence of the event
requiring such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that the Board of Directors of the Company, in its good faith
judgment, shall determine to be advisable in order that any (i) consolidation or
subdivision of the Preferred Stock, (ii) issuance wholly for cash of any shares
of Preferred Stock at less than the current market price, (iii) issuance wholly
for cash of shares of Preferred Stock or securities which by their terms are
convertible into or exchangeable for shares of Preferred Stock, (iv) stock
dividends or (v) issuance of rights, options or warrants referred to in this
Section 11, hereafter made by the Company to holders of its Preferred Stock
shall not be taxable to such stockholders.
(n) The Company covenants and agrees that it shall not, at any time
after the Distribution Date, (i) consolidate with any other Person (other than a
Subsidiary of the Company in a transaction which complies with Section 11(o)
hereof), (ii) merge with or into any other Person (other than a Subsidiary of
the Company in a transaction which complies with Section 11(o) hereof), or (iii)
sell or transfer (or permit any Subsidiary to sell or transfer), in one
transaction, or a series of related transactions, assets, cash flow or earning
power aggregating more than 50% of the assets or earning power of the Company
and its Subsidiaries (taken as a whole) to any other Person or Persons (other
than the Company and/or any of its Subsidiaries in one or more transactions each
of which complies with Section 11(o) hereof), if (x) at the time of or
immediately after such consolidation, merger, sale or transfer there are any
rights, warrants or other instruments or securities outstanding or agreements in
effect which would substantially diminish or otherwise eliminate the benefits
intended to be afforded by the Rights or (y) prior to, simultaneously with or
immediately after such consolidation, merger, sale or transfer, the stockholders
of the Person who constitutes, or would constitute, the "Principal Party" for
purposes of Section 13(a) hereof shall have received a distribution of Rights
previously owned by such Person or any of its Affiliates and Associates.
(o) The Company covenants and agrees that, after the Distribution
Date, it will not, except as permitted by Section 23, Section 24 or Section 27
hereof, take (or permit any Subsidiary to take) any action if at the time such
action is taken it is reasonably foreseeable that such action will diminish
substantially or otherwise eliminate the benefits intended to be afforded by the
Rights.
18
<PAGE>
(p) In the event that the Company shall at any time after the Rights
Dividend Declaration Date and prior to the Distribution Date (i) declare a
dividend on the outstanding shares of Common Stock payable in shares of Common
Stock, (ii) subdivide the outstanding shares of Common Stock, or (iii) combine
the outstanding shares of Common Stock into a smaller number of shares, the
number of Rights associated with each share of Common Stock then outstanding, or
issued or delivered thereafter but prior to the Distribution Date, shall be
proportionately adjusted so that the number of Rights thereafter associated with
each share of Common Stock following any such event shall equal the result
obtained by multiplying the number of Rights associated with each share of
Common Stock immediately prior to such event by a fraction the numerator of
which shall be the total number of shares of Common Stock outstanding
immediately prior to the occurrence of the event and the denominator of which
shall be the total number of shares of Common Stock outstanding immediately
following the occurrence of such event.
Section 12. Certificate of Adjusted Purchase Price or Number of
---------------------------------------------------
Shares.
- -------
Whenever an adjustment is made as provided in Section 11 or Section 13
hereof, the Company shall (a) promptly prepare a certificate setting forth such
adjustment and a brief statement of the facts and computations accounting for
such adjustment, (b) promptly file with the Rights Agent, and with each transfer
agent for the Preferred Stock and the Common Stock, a copy of such certificate,
and (c) mail a brief summary thereof to each holder of a Rights Certificate (or,
if prior to the Distribution Date, to each holder of a certificate representing
shares of Common Stock) in accordance with Section 26 hereof. The Rights Agent
shall be fully protected in relying on any such certificate and on any
adjustment therein contained and shall not be deemed to have knowledge of such
adjustment unless and until it shall have received such certificate.
Notwithstanding the foregoing sentence, the failure of the Company to make such
certificate or give such notice shall not affect the validity or the force or
effect of the requirement for such adjustment. Any adjustment to be made
pursuant to Section 11 or Section 13 shall be effective as of the date of the
event giving rise to such adjustment.
Section 13. Consolidation, Merger or Sale or Transfer of Assets,
----------------------------------------------------
Cash Flow or Earning Power.
- --------------------------
(a) In the event that, following the Stock Acquisition Date, directly
or indirectly, (x) the Company shall consolidate with, or merge with and into,
any other Person (other than a Subsidiary of the Company in a transaction which
complies with Section 11(o) hereof), and the Company shall not be the continuing
or surviving corporation of such consolidation or merger, or the Company shall
effect a statutory share exchange with the outstanding shares of Common Stock
being exchanged for stock or other securities of any Person, cash or property,
(y) any Person (other than a Subsidiary of the Company in a transaction which
complies with Section 11(o) hereof) shall consolidate with, or merge with or
into, the Company, and the Company shall be the continuing or surviving
corporation of such consolidation or merger and, in connection with such
consolidation or merger, all or part of the outstanding shares of Common Stock
shall be changed into or exchanged for stock or other securities of any other
Person or cash or any other property, or (z) the Company shall sell or otherwise
transfer (or one or more of its Subsidiaries shall sell or otherwise transfer),
in one transaction or a series of related transactions, assets, cash flow or
earning power aggregating more than 50% of the assets, cash flow or earning
power of the Company and its Subsidiaries (taken as a whole) to any Person or
Persons (other than the Company or any Subsidiary of the Company in one or more
transactions each of which complies with Section 11(o) hereof) (any event
described in clauses (x), (y) or (z) of this Section 13(a) following the Stock
Acquisition Date, a "Section 13 Event"), then, and in each such case, proper
provision shall be made so that: (i) each holder of a
19
<PAGE>
Right, except as provided in Section 7(e) hereof, shall thereafter have the
right to receive upon the exercise thereof at the then current Purchase Price in
accordance with the terms of this Agreement, in lieu of a number of one one-
hundredths of a share of Preferred Stock, such number of validly authorized and
issued, fully paid, nonassessable and freely tradeable shares of Common Stock of
the Principal Party (as such term is hereinafter defined), not subject to any
liens, encumbrances, rights of first refusal or other adverse claims, as shall
be equal to the result obtained by (l) multiplying the then current Purchase
Price by the number of one one-hundredths of a share of Preferred Stock for
which a Right is exercisable immediately prior to the first occurrence of a
Section 13 Event (or, if a Section 11(a)(ii) Event has occurred prior to the
first occurrence of a Section 13 Event, multiplying the number of such one one-
hundredths of a share of Preferred Stock for which a Right was exercisable
immediately prior to the first occurrence of a Section 11(a)(ii) Event by the
Purchase Price in effect immediately prior to such first occurrence), and
dividing that product (which, following the first occurrence of a Section 13
Event, shall be referred to as the "Purchase Price" for each Right and for all
purposes of this Agreement) by (2) 50% of the current market price (determined
pursuant to Section 11(d)(i) hereof) per share of the Common Stock of such
Principal Party on the date of consummation of such Section 13 Event; (ii) such
Principal Party shall thereafter be liable for, and shall assume, by virtue of
such Section 13 Event, all the obligations and duties of the Company pursuant to
this Agreement; (iii) the term "Company" shall thereafter be deemed to refer to
such Principal Party, it being specifically intended that the provisions of
Section 11 hereof shall apply only to such Principal Party following the first
occurrence of a Section 13 Event; (iv) such Principal Party shall take such
steps (including, but not limited to, the reservation of a sufficient number of
shares of its Common Stock) in connection with the consummation of any such
transaction as may be necessary to assure that the provisions hereof shall
thereafter be applicable, as nearly as reasonably may be, in relation to its
shares of Common Stock thereafter deliverable upon the exercise of the Rights;
and (v) the provisions of Section 11(a)(ii) hereof shall be of no effect
following the first occurrence of any Section 13 Event.
(b) "Principal Party" shall mean:
(i) in the case of any transaction described in clause (x)
or (y) of the first sentence of Section 13(a), the Person that is
the issuer of any securities into which shares of Common Stock of
the Company are converted in such merger, consolidation or share
exchange, and if no securities are so issued, the Person that is
the other party to such merger, consolidation or share exchange;
and
(ii) in the case of any transaction described in clause (z)
of the first sentence of Section 13(a), the Person that is the
party receiving the greatest portion of the assets, cash flow or
earning power transferred pursuant to such transaction or
transactions;
provided, however, that in any such case, (1) if the Common Stock of such Person
- -------- -------
is not at such time and has not been continuously over the preceding twelve (12)
month period registered under Section 12 of the Exchange Act, and such Person is
a direct or indirect Subsidiary of another Person the Common Stock of which is
and has been so registered, "Principal Party" shall refer to such other Person;
and (2) in case such Person is a Subsidiary, directly or indirectly, of more
than one Person, the Common Stock of two or more of which are and have been so
registered, "Principal Party" shall refer to whichever of such Persons is the
issuer of the Common Stock having the greatest aggregate market value.
20
<PAGE>
(c) The Company shall not consummate any such consolidation, merger,
exchange, sale or transfer unless the Principal Party shall have a sufficient
number of authorized shares of its Common Stock which have not been issued or
reserved for issuance to permit the exercise in full of the Rights in accordance
with this Section 13 and unless prior thereto the Company and such Principal
Party shall have executed and delivered to the Rights Agent a supplemental
agreement providing for the terms set forth in paragraphs (a) and (b) of this
Section 13 and further providing that, as soon as practicable after the date of
any consolidation, merger, exchange, sale or transfer of assets mentioned in
paragraph (a) of this Section 13, the Principal Party will:
(i) prepare and file a registration statement under the Act,
with respect to the Rights and the securities purchasable upon
exercise of the Rights on an appropriate form, and will use its
reasonable best efforts to cause such registration statement to
(A) become effective as soon as practicable after such filing and
(B) remain effective (with a prospectus at all times meeting the
requirements of the Act) until the Expiration Date;
(ii) deliver to holders of the Rights historical financial
statements for the Principal Party and each of its Affiliates
which comply in all respects with the requirements for
registration on Form 10 under the Exchange Act (whether or not
the Principal Party would otherwise be required to file such
Form);
(iii) use its reasonable best efforts, if the Common Stock
of the Principal Party shall be listed or admitted to trading on
the Nasdaq or on a national securities exchange, to list or admit
to trading the Rights and the securities purchasable upon
exercise of the Rights on the Nasdaq or such securities exchange;
and
(iv) obtain waivers of any rights of first refusal or
preemptive rights in respect of the Common Stock of the Principal
Party subject to purchase upon exercise of outstanding rights.
(d) The provisions of this Section 13 shall similarly apply to
successive mergers or consolidations or sales or other transfers. In the event
that a Section 13 Event shall occur at any time after the occurrence of a
Section 11(a)(ii) Event, the Rights which have not theretofore been exercised
shall thereafter become exercisable in the manner described in Section 13(a).
(e) In no event shall the Rights Agent have any liability in respect
of any such Principal Party transactions, including, without limitation, the
propriety thereof. The Rights Agent may rely and be fully protected in relying
upon a certificate of the Company stating that the provisions of this Section 13
have been fulfilled. The Rights Agent shall not be obligated to enter into any
supplemental agreement referenced in Section 13(c) if such supplemental
agreement would change or increase the duties, liabilities or obligations of the
Rights Agent hereunder.
Section 14. Fractional Rights and Fractional Shares.
---------------------------------------
(a) The Company shall not be required to issue fractions of Rights,
except prior to the Distribution Date as provided in Section 11(p) hereof, or to
distribute Rights Certificates which evidence fractional Rights. In lieu of
such fractional Rights, there shall be paid to the registered holders of the
Rights Certificates with regard to which such fractional Rights would otherwise
be issuable, an amount in cash equal to the same fraction of the current market
value of a whole Right. For purposes of this Section 14(a), the current market
value of a whole Right shall be the closing
21
<PAGE>
price of the Rights for the Trading Day immediately prior to the date on which
such fractional Rights would have been otherwise issuable. The closing price of
the Rights for any day shall be the last sale price, regular way, or, in case no
such sale takes place on such day, the average of the closing bid and asked
prices, regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if the Rights are not listed or
admitted to trading on the New York Stock Exchange, as reported to the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which the Rights are listed or
admitted to trading, or if the Rights are not listed or admitted to trading on
any national securities exchange, the last quoted price or, if not so quoted,
the average of the high bid and low asked prices in the over-the-counter market,
as reported by Nasdaq or such other system then in use or, if on any such date
the Rights are not quoted by any such organization, the average of the closing
bid and asked prices as furnished by a professional market maker making a market
in the Rights selected by the Board of Directors of the Company. If on any such
date no such market maker is making a market in the Rights the fair value of the
Rights on such date as determined in good faith by the Board of Directors of the
Company shall be used.
(b) The Company shall not be required to issue fractions of shares of
Preferred Stock (other than fractions which are integral multiples of one one-
hundredth of a share of Preferred Stock) upon exercise of the Rights or to
distribute certificates which evidence fractional shares of Preferred Stock
(other than fractions which are integral multiples of one one-hundredth of a
share of Preferred Stock). Fractions of shares of Preferred Stock in integral
multiples of one one-hundredth of a share may, at the election of the Company,
be evidenced by depositary receipts pursuant to an appropriate agreement between
the Company and a depositary selected by it; provided, however, that such
-------- -------
agreement shall provide that the holders of such depositary receipts shall have
all the rights, privileges and preferences to which they are entitled as
beneficial owners of the shares represented by such depositary receipts. In
lieu of fractional shares of Preferred Stock that are not integral multiples of
one one-hundredth of a share of Preferred Stock, the Company shall pay to the
registered holders of Rights Certificates at the time such Rights are exercised
as herein provided an amount in cash equal to the same fraction of the current
market value of one one-hundredth of a share of Preferred Stock. For purposes
of this Section 14(b), the current market value of one one-hundredth of a share
of Preferred Stock shall be one one-hundredth of the closing price of a share of
Preferred Stock (as determined pursuant to Section 11(d)(ii) hereof) for the
Trading Day immediately prior to the date of such exercise.
(c) Following the occurrence of a Triggering Event, the Company shall
not be required to issue fractions of shares of Common Stock upon exercise of
the Rights or to distribute certificates which evidence fractional shares of
Common Stock. In lieu of fractional shares of Common Stock, the Company shall
pay to the registered holders of Rights Certificates at the time such Rights are
exercised as herein provided an amount in cash equal to the same fraction of the
current market value of one share of Common Stock. For purposes of this Section
14(c), the current market value of one share of Common Stock shall be the
closing price of one share of Common Stock (as determined pursuant to Section
11(d)(i) hereof) for the Trading Day immediately prior to the date of such
exercise.
(d) The holder of a Right by the acceptance of the Rights expressly
waives such holder's right to receive any fractional Rights or any fractional
shares upon exercise of a Right, except as permitted by this Section 14.
22
<PAGE>
Section 15. Rights of Action.
----------------
All rights of action in respect of this Agreement, other than rights
of action vested in the Rights Agent pursuant to the terms of this Agreement,
are vested in the respective registered holders of the Rights Certificates (and,
prior to the Distribution Date, the registered holders of the Common Stock); and
any registered holder of any Rights Certificate (or, prior to the Distribution
Date, of the Common Stock), without the consent of the Rights Agent or of the
holder of any other Rights Certificate (or, prior to the Distribution Date, of
the Common Stock), may, in such holder's own behalf and for such holder's own
benefit, enforce, and may institute and maintain any suit, action or proceeding
against the Company to enforce, or otherwise act in respect of, such holder's
right to exercise the Rights evidenced by such Rights Certificate in the manner
provided in such Rights Certificate and in this Agreement. Without limiting the
foregoing or any remedies available to the holders of Rights, it is specifically
acknowledged that the holders of Rights would not have an adequate remedy at law
for any breach of this Agreement and shall be entitled to specific performance
of the obligations hereunder and injunctive relief against actual or threatened
violations of the obligations hereunder of any Person subject to this Agreement.
Section 16. Agreement of Rights Holders.
---------------------------
Every holder of a Right by accepting the same consents and agrees with
the Company and the Rights Agent and with every holder of a Right that:
(a) prior to the Distribution Date, the Rights will be
transferable only in connection with the transfer of Common
Stock;
(b) after the Distribution Date, the Rights Certificates
are transferable only on the registry books of the Rights Agent
if surrendered at the principal office or offices of the Rights
Agent designated for such purposes, duly endorsed or accompanied
by a proper instrument of transfer and with the appropriate forms
and certificates fully executed;
(c) subject to Section 6(a), Section 7(e) and Section 7(f)
hereof, the Company and the Rights Agent may deem and treat the
person in whose name a Rights Certificate (or, prior to the
Distribution Date, the associated Common Stock certificate) is
registered as the absolute owner thereof and of the Rights
evidenced thereby (notwithstanding any notations of ownership or
writing on the Rights Certificates or the associated Common Stock
certificates made by anyone other than the Company or the Rights
Agent) for all purposes whatsoever, and neither the Company nor
the Rights Agent shall be required to be affected by any notice
to the contrary; and
(d) notwithstanding anything in this Agreement to the
contrary, neither the Company nor the Rights Agent shall have any
liability to any holder of a Right or other Person as a result of
its inability to perform any of its obligations under this
Agreement by reason of any preliminary or permanent injunction or
other order, decree, judgment or ruling issued by a court of
competent jurisdiction or by a governmental, regulatory or
administrative agency or commission, or any statute, rule,
regulation or executive order promulgated or enacted by any
governmental authority, prohibiting or otherwise restraining
performance of such obligation;
23
<PAGE>
provided, however, the Company must use efforts to have any such
-------- -------
order, decree, judgment or ruling lifted or otherwise overturned
as soon as possible.
Section 17. Rights Certificate Holder Not Deemed a Stockholder.
--------------------------------------------------
No holder, as such, of any Rights Certificate shall be entitled to
vote, receive dividends or be deemed for any purpose to be the holder of the
number of one one-hundredths of a share of Preferred Stock or any other
securities of the Company which may at any time be issuable upon the exercise of
the Rights represented thereby, nor shall anything contained herein or in any
Rights Certificate be construed to confer upon the holder of any Rights
Certificate, as such, any of the rights of a stockholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in Section 25 hereof), or to receive dividends
or subscription rights, or otherwise, until the Right or Rights evidenced by
such Rights Certificate shall have been exercised in accordance with the
provisions hereof.
Section 18. Concerning the Rights Agent.
---------------------------
(a) The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to time,
on demand of the Rights Agent, its reasonable expenses and counsel fees and
disbursements and other disbursements incurred in the administration and
execution of this Agreement and the exercise and performance of its duties
hereunder.
(b) The Rights Agent shall be authorized and protected and shall
incur no liability for or in respect of any action taken, suffered or omitted by
it in connection with its acceptance and administration of this Agreement in
reliance upon any Rights Certificate or certificate for Common Stock or for
other securities of the Company, instrument of assignment or transfer, power of
attorney, endorsement, affidavit, letter, notice, instruction, direction,
consent, certificate, statement, or other paper or document believed by it to be
genuine and to be signed, and executed by the proper Person or Persons, or
otherwise upon the advice of counsel as set forth in Section 20.
Section 19. Merger or Consolidation or Change of Name of Rights
---------------------------------------------------
Agent.
- -----
(a) Any Person into which the Rights Agent or any successor Rights
Agent may be merged or with which it may be consolidated, or any Person
resulting from any merger or consolidation to which the Rights Agent or any
successor Rights Agent shall be a party, or any Person succeeding to all or
substantially all the stock transfer business of the Rights Agent or any
successor Rights Agent, shall be the successor to the Rights Agent under this
Agreement without the execution or filing of any paper or any further act on the
part of any of the parties hereto; provided, however, that such Person would be
-------- -------
eligible for appointment as a successor Rights Agent under the provisions of
Section 21 hereof. In case at the time such successor Rights Agent shall
succeed to the agency created by this Agreement, any of the Rights Certificates
shall have been countersigned but not delivered, any such successor Rights Agent
may adopt the countersignature of a predecessor Rights Agent and deliver such
Rights Certificates so countersigned; and in case at the time any of the Rights
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Rights Certificates either in the name of the predecessor or in
the name of the successor Rights Agent; and in all such cases such Rights
Certificates shall have the full force provided in the Rights Certificates and
in this Agreement.
24
<PAGE>
(b) In case at any time the name of the Rights Agent shall be
changed, and at such time any of the Rights Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the countersignature
under its prior name and deliver Rights Certificates so countersigned; and in
case, at that time, any of the Rights Certificates shall not have been
countersigned, the Rights Agent may countersign such Rights Certificates either
in its prior name or in its changed name; and in all such cases such Rights
Certificates shall have the full force provided in the Rights Certificates and
in this Agreement.
Section 20. Duties of Rights Agent.
----------------------
The Rights Agent undertakes only the duties and obligations imposed by
this Agreement upon the following terms and conditions, by all of which the
Company and the holders of Rights Certificates, by their acceptance thereof,
shall be bound:
(a) The Rights Agent may consult with legal counsel (who
may be legal counsel for the Company), and the opinion of such
counsel shall be full and complete authorization and protection
to the Rights Agent as to any action taken or omitted by it in
good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this
Agreement the Rights Agent shall deem it necessary or desirable
that any fact or matter (including, without limitation, the
identity of any Acquiring Person and the determination of
"current market price") be proved or established by the Company
prior to taking or suffering any action hereunder, such fact or
matter (unless other evidence in respect thereof be herein
specifically prescribed) may be deemed to be conclusively proved
and established by a certificate signed by the Chairman of the
Board, the Chief Executive Officer, the President, any Vice
President, the Treasurer, any Assistant Treasurer, the Secretary
or any Assistant Secretary of the Company and delivered to the
Rights Agent; and such certificate shall be full authorization to
the Rights Agent for any action taken or suffered in good faith
by it under the provisions of this Agreement in reliance upon
such certificate.
(c) The Rights Agent shall be liable hereunder only for its
own gross negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason
of any of the statements of fact or recitals contained in this
Agreement or in the Rights Certificates or be required to verify
the same (except as to its countersignature on such Rights
Certificates), but all such statements and recitals are and shall
be deemed to have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility
in respect of the validity of this Agreement or the execution and
delivery hereof (except the due execution hereof by the Rights
Agent) or in respect of the validity or execution of any Rights
Certificate (except its countersignature thereof); nor shall it
be responsible for any breach by the Company of any covenant or
condition contained in this Agreement or in any Rights
Certificate; nor shall it be responsible for any adjustment
required under the provisions of Section 11, Section 13 or
Section 24 hereof or responsible for the manner, method or amount
of any such adjustment or the ascertaining of the existence of
facts that would require any such adjustment (except
25
<PAGE>
with respect to the exercise of Rights evidenced by Rights
Certificates after the Rights Agent's receipt of actual notice of
any such adjustment); nor shall it by any act hereunder be deemed
to make any representation or warranty as to the authorization or
reservation of any shares of Common Stock or Preferred Stock to
be issued pursuant to this Agreement or any Rights Certificate or
as to whether any shares of Common Stock or Preferred Stock will,
when so issued, be validly authorized and issued, fully paid and
nonassessable.
(f) The Company agrees that it will perform, execute,
acknowledge and deliver or cause to be performed, executed,
acknowledged and delivered all such further and other acts,
instruments and assurances as may reasonably be required by the
Rights Agent for the carrying out or performing by the Rights
Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to
accept instructions with respect to the performance of its duties
hereunder from the Chairman of the Board, the Chief Executive
Officer, the President, any Vice President, the Secretary, any
Assistant Secretary, the Treasurer or any Assistant Treasurer of
the Company, and to apply to such officers for advice or
instructions in connection with its duties, and it shall incur no
liability for or in respect of any action taken, suffered or
omitted by it in good faith in accordance with instructions of
any such officer.
(h) The Rights Agent and any stockholder, director,
Affiliate, officer or employee of the Rights Agent may buy, sell
or deal in any of the Rights or other securities of the Company
or become pecuniarily interested in any transaction in which the
Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were
not Rights Agent under this Agreement. Nothing herein shall
preclude the Rights Agent from acting in any other capacity for
the Company or for any other Person.
(i) The Rights Agent may execute and exercise any of the
rights or powers hereby vested in it or perform any duty
hereunder either itself or by or through its attorneys or agents,
and the Rights Agent shall not be answerable or accountable for
any act, default, neglect or misconduct of any such attorneys or
agents or for any loss to the Company resulting from any such
act, default, neglect or misconduct; provided, however, that
-------- -------
reasonable care was exercised in the selection and the continued
employment thereof.
(j) No provision of this Agreement shall require the Rights
Agent to expend or risk its own funds or otherwise incur any
financial liability in the performance of any of its duties
hereunder or in the exercise of its rights if there shall be
reasonable grounds for believing that repayment of such funds or
adequate indemnification against such risk or liability is not
reasonably assured to it.
(k) If, with respect to any Rights Certificate surrendered
to the Rights Agent for exercise or transfer, the certificate
attached to the form of assignment or form of election to
purchase, as the case may be, has either not been completed or
indicates an affirmative response to clause 1 and/or 2 thereof,
the Rights Agent shall not take any further action with respect
to such requested exercise or transfer without first consulting
with the Company.
26
<PAGE>
Section 21. Change of Rights Agent.
----------------------
The Rights Agent or any successor Rights Agent may resign and be
discharged from its duties under this Agreement upon thirty (30) days' notice in
writing mailed to the Company by registered or certified mail. The Company may
remove the Rights Agent or any successor Rights Agent upon thirty (30) days'
notice in writing, mailed to the Rights Agent or successor Rights Agent, as the
case may be, by registered or certified mail. If the Rights Agent shall resign
or be removed or shall otherwise become incapable of acting, the Company shall
appoint a successor to the Rights Agent. If the Company shall fail to make such
appointment within a period of thirty (30) days after giving notice of such
removal or after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Rights Agent or by the holder of a
Rights Certificate (who shall, with such notice, submit such holder's Rights
Certificate for inspection by the Company), then the Rights Agent (at the
Company's expense) or any registered holder of any Rights Certificate may apply
to any court of competent jurisdiction for the appointment of a new Rights
Agent. Any successor Rights Agent, whether appointed by the Company or by such
a court, shall be (i) a Person organized and doing business under the laws of
the United States or of the State of Delaware or the State of New York (or of
any other state of the United States so long as such Person is authorized to do
business in the State of Delaware or the State of New York), in good standing,
having an office or agency in the State of New York or the State of Delaware,
which is authorized under such laws to exercise stock transfer powers and is
subject to supervision or examination by federal or state authority and which
has at the time of its appointment as Rights Agent a combined capital and
surplus of at least $50,000,000 or (ii) an Affiliate of such Person. After
appointment, the successor Rights Agent shall be vested with the same powers,
rights, duties and responsibilities as if it had been originally named as Rights
Agent without further act or deed; but the predecessor Rights Agent shall
deliver and transfer to the successor Rights Agent any property at the time held
by it hereunder, and execute and deliver any further reasonable assurance,
conveyance, act or deed necessary for the purpose. Not later than the effective
date of any such appointment, the Company shall file notice thereof in writing
with the predecessor Rights Agent and each transfer agent of the Common Stock
and the Preferred Stock, and mail a notice thereof in writing to the registered
holders of the Rights Certificates. Failure to give any notice provided for in
this Section 21 or any defect therein shall not affect the legality or validity
of the resignation or removal of the Rights Agent or the appointment of the
successor Rights Agent, as the case may be.
Section 22. Issuance of New Rights Certificates.
-----------------------------------
Notwithstanding any of the provisions of this Agreement or of the
Rights to the contrary, the Company may, at its option, issue new Rights
Certificates evidencing Rights in such form as may be approved by its Board of
Directors to reflect any adjustment or change in the Purchase Price and the
number or kind or class of shares or other securities or property purchasable
under the Rights Certificates made in accordance with the provisions of this
Agreement. In addition, in connection with the issuance or sale of shares of
Common Stock following the Distribution Date and prior to the redemption or
expiration of the Rights, the Company (a) shall, with respect to shares of
Common Stock so issued or sold pursuant to the exercise of stock options or
under any employee plan or arrangement, granted or awarded prior to the
Distribution Date, or upon the exercise, conversion or exchange of securities
hereinafter issued by the Company, and (b) may, in any other case, if deemed
necessary or appropriate by the Board of Directors of the Company, issue Rights
Certificates representing an appropriate number of Rights in connection with
such issuance or sale; provided, however, that (i) no such Rights Certificate
-------- -------
shall be issued if, and to the extent that, the Company shall be advised by
counsel that such issuance would create a significant risk of material adverse
tax consequences to the Company or the Person to whom such Rights Certificate
would be
27
<PAGE>
issued, and (ii) no such Rights Certificate shall be issued if, and to the
extent that, appropriate adjustment shall otherwise have been made in lieu of
the issuance thereof.
Section 23. Redemption and Termination.
--------------------------
(a) The Board of Directors of the Company may, at its option, at any
time prior to the earlier of (i) the Close of Business on the tenth day
following the Stock Acquisition Date (or, if the Stock Acquisition Date shall
have occurred prior to the Record Date, the Close of Business on the tenth day
following the Record Date), or (ii) the Final Expiration Date, redeem all but
not less than all of the then outstanding Rights at a redemption price of $.01
per Right, as such amount may be appropriately adjusted to reflect any stock
split, stock dividend or similar transaction occurring after the date hereof
(such redemption price being hereinafter referred to as the "Redemption Price").
Notwithstanding anything contained in this Agreement to the contrary, the Rights
shall not be exercisable after the first occurrence of a Section 11(a)(ii) Event
until such time as the Company's right of redemption hereunder has expired. The
Company may, at its option, pay the Redemption Price in cash, shares of Common
Stock (based on the "current market price", as defined in Section 11(d)(i)
hereof, of the Common Stock at the time of redemption) or any other form of
consideration deemed appropriate by the Board of Directors. The redemption of
the Rights by the Board of Directors may be made effective at such time, on such
basis and with such conditions as the Board of Directors in its sole discretion
may establish.
(b) Immediately upon the action of the Board of Directors of the
Company ordering the redemption of the Rights, evidence of which shall have been
filed with the Rights Agent and without any further action and without any
notice, the right to exercise the Rights will terminate and the only right
thereafter of the holders of Rights shall be to receive the Redemption Price for
each Right so held. Promptly after the action of the Board of Directors
ordering the redemption of the Rights, the Company shall give notice of such
redemption to the Rights Agent and the holders of the then outstanding Rights by
mailing such notice to all such holders at each holder's last address as it
appears upon the registry books of the Rights Agent or, prior to the
Distribution Date, on the registry books of the transfer agent for the Common
Stock. Any notice which is mailed in the manner herein provided shall be deemed
given, whether or not the holder receives the notice. The failure to give, or
any defect in, such notice shall not affect the validity of such redemption.
Each such notice of redemption will state the method by which the payment of the
Redemption Price will be made.
Section 24. Exchange.
--------
(a) The Board of Directors of the Company may, at its option, at any
time after any Person becomes an Acquiring Person, exchange all or part of the
then outstanding and exercisable Rights (which shall not include Rights that
have become null and void pursuant to the provisions of Section 7(e) hereof) for
shares of Common Stock at an exchange ratio of one share of Common Stock per
Right, appropriately adjusted to reflect any stock split, stock dividend or
similar transaction occurring after the date hereof (such exchange ratio being
hereinafter referred to as the "Exchange Ratio"). Notwithstanding the
foregoing, the Board of Directors of the Company shall not be empowered to
effect such exchange at any time after any Person (other than the Company, any
Subsidiary of the Company, any employee benefit plan of the Company or of any
Subsidiary of the Company, or any Person organized, appointed or established by
the Company for or pursuant to the terms of any such plan), together with all
Affiliates and Associates of such Person, becomes the Beneficial Owner of fifty
percent (50%) or more of the Common Stock then outstanding.
28
<PAGE>
(b) Immediately upon the action of the Board of Directors of the
Company ordering the exchange of any Rights pursuant to subsection (a) of this
Section 24 and without any further action and without any notice, the right to
exercise such Rights shall terminate and the only right thereafter of a holder
of any such Rights shall be to receive that number of shares of Common Stock
equal to the number of such Rights held by such holder multiplied by the
Exchange Ratio. The Company shall promptly give public notice of any exchange;
provided, however, that the failure to give, or any defect in, such notice shall
- -------- -------
not affect the validity of such exchange. The Company promptly shall mail a
notice of any such exchange to all of the holders of such Rights at their last
addresses as they appear upon the registry books of the Rights Agent. Any
notice which is mailed in the manner herein provided shall be deemed given,
whether or not the holder receives the notice. Each such notice of exchange
will state the method by which the exchange of the Common Stock for Rights will
be effected and, in the event of any partial exchange, the number of Rights
which will be exchanged. Any partial exchange will be effected pro rata based
on the number of Rights (other than Rights which have become null and void
pursuant to the provisions of Section 7(e) hereof) held by each holder of
Rights.
(c) In any exchange pursuant to this Section 24, the Company, at its
option, may substitute shares of Preferred Stock (or equivalent preferred stock,
as such term is defined in paragraph (b) of Section 11 hereof) for shares of
Common Stock exchangeable for Rights, at the initial rate of one one-hundredth
of a share of Preferred Stock (or equivalent preferred stock) for each share of
Common Stock, as appropriately adjusted to reflect adjustments in the voting
rights of the Preferred Stock pursuant to the terms thereof, so that the
fraction of a share of Preferred Stock delivered in lieu of each share of Common
Stock shall have the same voting rights as one share of Common Stock.
(d) In the event that there shall not be sufficient shares of Common
Stock issued but not outstanding or authorized but unissued to permit any
exchange of Rights as contemplated in accordance with this Section 24, the
Company shall take all such actions as may be necessary to authorize additional
shares of Common Stock for issuance upon exchange of the Rights.
(e) The Company shall not be required to issue fractions of shares of
Common Stock or to distribute certificates which evidence fractional shares of
Common Stock. In lieu of such fractional shares of Common Stock, there shall be
paid to the registered holders of the Rights Certificates with regard to which
such fractional shares of Common Stock would otherwise be issuable, an amount in
cash equal to the same fraction of the current market value of a whole share of
Common Stock. For the purposes of this subsection (e), the current market value
of a whole share of Common Stock shall be the closing price of a share of Common
Stock (as determined pursuant to the second sentence of Section 11(d)(i) hereof)
for the Trading Day immediately prior to the date of exchange pursuant to this
Section 24.
Section 25. Notice of Certain Events.
------------------------
(a) In case the Company shall propose, at any time after the
Distribution Date, (i) to pay any dividend payable in stock of any class to the
holders of Preferred Stock or to make any other distribution to the holders of
Preferred Stock (other than a regular periodic cash dividend out of the earnings
or retained earnings of the Company), or (ii) to offer to the holders of
Preferred Stock rights or warrants to subscribe for or to purchase any
additional shares of Preferred Stock or shares of stock of any class or any
other securities, rights or options, or (iii) to effect any reclassification of
its Preferred Stock (other than a reclassification involving only the
subdivision of outstanding shares of Preferred Stock), or (iv) to effect any
consolidation or merger into or with any other Person (other
29
<PAGE>
than a Subsidiary of the Company in a transaction which complies with Section
11(o) hereof), or to effect any sale or other transfer (or to permit one or more
of its Subsidiaries to effect any sale or other transfer), in one transaction or
a series of related transactions, of more than 50% of the assets, cash flow or
earning power of the Company and its Subsidiaries (taken as a whole) to any
other Person or Persons (other than the Company and/or any of its Subsidiaries
in one or more transactions each of which complies with Section 11(o) hereof),
or (v) to effect the liquidation, dissolution or winding up of the Company,
then, in each such case, the Company shall give to each holder of a Rights
Certificate and to the Rights Agent, to the extent feasible and in accordance
with Section 26 hereof, a notice of such proposed action, which shall specify
the record date for the purposes of such stock dividend, distribution of rights
or warrants, or the date on which such reclassification, consolidation, merger,
sale, transfer, liquidation, dissolution, or winding up is to take place and the
date of participation therein by the holders of the shares of Preferred Stock,
if any such date is to be fixed, and such notice shall be so given in the case
of any action covered by clause (i) or (ii) above at least twenty (20) days
prior to the record date for determining holders of the shares of Preferred
Stock for purposes of such action, and in the case of any such other action, at
least twenty (20) days prior to the date of the taking of such proposed action
or the date of participation therein by the holders of the shares of Preferred
Stock, whichever shall be the earlier.
(b) In case a Section 11(a)(ii) Event shall occur, then, in any such
case, (i) the Company shall as soon as practicable thereafter give to each
holder of a Rights Certificate and to the Rights Agent, to the extent feasible
and in accordance with Section 26 hereof, a notice of the occurrence of such
event, which shall specify the event and the consequences of the event to
holders of Rights under Section 11(a)(ii) hereof, and (ii) all references in the
preceding paragraph to Preferred Stock shall be deemed thereafter to refer to
Common Stock and/or, if appropriate, other securities.
Section 26. Notices.
-------
Notices or demands authorized by this Agreement to be given or made by
the Rights Agent or by the holder of any Rights Certificate to or on the Company
shall be sufficiently given or made if sent by first-class mail, postage
prepaid, addressed (until another address is filed in writing with the Rights
Agent) as follows:
Edwards Lifesciences Corporation
17221 Red Hill Avenue
Irvine, California 92614
Attention: General Counsel
Subject to the provisions of Section 21, any notice or demand authorized by this
Agreement to be given or made by the Company or by the holder of any Rights
Certificate to or on the Rights Agent shall be sufficiently given or made if
sent by first-class mail, postage prepaid, addressed (until another address is
filed in writing with the Company) as follows:
30
<PAGE>
First Chicago Trust Company of New York
______________________________
______________________________
______________________________
Attention: ___________________
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate (or, if
prior to the Distribution Date, to the holder of certificates representing
shares of Common Stock) shall be sufficiently given or made if sent by first-
class mail, postage prepaid, addressed to such holder at the address of such
holder as shown on the registry books of the Company.
Section 27. Supplements and Amendments.
--------------------------
Prior to the Distribution Date, the Company and the Rights Agent
shall, if the Company so directs, supplement or amend any provision of this
Agreement without the approval of any holders of certificates representing
shares of Common Stock. From and after the Distribution Date, the Company and
the Rights Agent shall, if the Company so directs, supplement or amend this
Agreement without the approval of any holders of Rights Certificates in order
(i) to cure any ambiguity, (ii) to correct or supplement any provision contained
herein which may be defective or inconsistent with any other provisions herein,
(iii) to shorten or lengthen any time period hereunder, or (iv) to change or
supplement the provisions hereunder in any manner which in the opinion of the
Company may deem necessary or desirable and which shall not adversely affect the
interests of the holders of Rights Certificates (other than an Acquiring Person
or an Affiliate or Associate of an Acquiring Person); provided, this Agreement
--------
may not be supplemented or amended to lengthen, pursuant to clause (iii) of this
sentence, (A) a time period relating to when the Rights may be redeemed at such
time as the Rights are not then redeemable, or (B) any other time period unless
such lengthening is for the purpose of protecting, enhancing or clarifying the
rights of, and/or the benefits to, the holders of Rights. Upon the delivery of
a certificate from an appropriate officer of the Company which states that the
proposed supplement or amendment is in compliance with the terms of this Section
27, the Rights Agent shall execute such supplement or amendment. Prior to the
Distribution Date, the interests of the holders of Rights shall be deemed
coincident with the interests of the holders of Common Stock.
Section 28. Successors.
----------
All the covenants and provisions of this Agreement by or for the
benefit of the Company or the Rights Agent shall bind and inure to the benefit
of their respective successors and assigns hereunder.
Section 29. Determination and Actions by the Board of Directors,
----------------------------------------------------
etc.
- ---
For all purposes of this Agreement, any calculation of the number of
shares of Common Stock outstanding at any particular time, including for
purposes of determining the particular percentage of such outstanding shares of
Common Stock of which any Person is the Beneficial Owner, shall be made in
accordance with the last sentence of Rule 13d-3(d)(l)(i) of the General Rules
and Regulations under the Exchange Act. The Board of Directors of the Company
shall have the exclusive power and authority to administer this Agreement and to
exercise all rights and powers specifically granted to the Board of Directors of
the Company or to the Company, or as may be necessary or advisable in the
administration of this Agreement, including, without limitation,
31
<PAGE>
the right and power to (i) interpret the provisions of this Agreement, and (ii)
make all determinations deemed necessary or advisable for the administration of
this Agreement (including, but not limited to, a determination to redeem or not
redeem the Rights or to amend this Agreement). All such actions, calculations,
interpretations and determinations (including, for purposes of clause (y) below,
all omissions with respect to the foregoing) which are done or made by the Board
of Directors of the Company in good faith shall (x) be final, conclusive and
binding on the Company, the Rights Agent, the holders of the Rights and all
other Persons, and (y) not subject the Board of Directors of the Company to any
liability to the holders of the Rights.
Section 30. Benefits of this Agreement.
--------------------------
Nothing in this Agreement shall be construed to give to any Person
other than the Company, the Rights Agent and the registered holders of the
Rights Certificates (and, prior to the Distribution Date, registered holders of
the Common Stock) any legal or equitable right, remedy or claim under this
Agreement; but this Agreement shall be for the sole and exclusive benefit of the
Company, the Rights Agent and the registered holders of the Rights Certificates
(and, prior to the Distribution Date, registered holders of the Common Stock).
Section 31. Severability.
------------
If any term, provision, covenant or restriction of this Agreement is
held by a court of competent jurisdiction or other authority to be invalid, void
or unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated; provided, however, that
-------- -------
notwithstanding anything in this Agreement to the contrary, if any such term,
provision, covenant or restriction is held by such court or authority to be
invalid, void or unenforceable and the Board of Directors of the Company
determines in its good faith judgment that severing the invalid language from
this Agreement would adversely affect the purpose or effect of this Agreement,
the right of redemption set forth in Section 23 hereof shall be reinstated and
shall not expire until the Close of Business on the tenth day following the date
of such determination by the Board of Directors of the Company.
Section 32. Governing Law.
-------------
This Agreement, each Right and each Rights Certificate issued
hereunder shall be deemed to be a contract made under the laws of the State of
Delaware and for all purposes shall be governed by and construed in accordance
with the laws of such State applicable to contracts made and to be performed
entirely within such State.
32
<PAGE>
Section 33. Counterparts.
-------------
This Agreement may be executed in any number of counterparts and each
of such counterparts shall for all purposes be deemed to be an original, and all
such counterparts shall together constitute but one and the same instrument.
Section 34. Descriptive Headings.
--------------------
Descriptive headings of the several Sections of this Agreement are
inserted for convenience only and shall not control or affect the meaning or
construction of any of the provisions hereof.
33
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
EDWARDS LIFESCIENCES CORPORATION
By: ______________________________________
Name:
Title:
FIRST CHICAGO TRUST COMPANY OF NEW YORK,
A DIVISION OF EQUISERVE
---------------------------------------
AS RIGHTS AGENT
By: ______________________________________
Name:
Title:
34
<PAGE>
Exhibit A
---------
FORM OF
CERTIFICATE OF DESIGNATIONS
OF
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
OF
EDWARDS LIFESCIENCES CORPORATION
Pursuant to Section 151 of the
Delaware General Corporation Act
RESOLVED, that pursuant to the authority vested in the board of
directors (the "Board of Directors") of Edwards Lifesciences Corporation, a
Delaware corporation (the "Corporation"), by the Amended and Restated
Certificate of Incorporation (the "Charter"), the Board of Directors does hereby
create, authorize and provide for the issue of a series of Preferred Stock, par
value $.01 per share, of the Corporation, to be designated "Series A Junior
Participating Preferred Stock" (hereinafter referred to as the "Series A
Preferred Stock"), initially consisting of 4,000,000] shares, and to the extent
that the designations, powers, preferences and relative and other special rights
and the qualifications, limitations or restrictions of the Series A Preferred
Stock are not stated and expressed in the Charter, does hereby fix and herein
state and express such designations, powers, preferences and relative and other
special rights and the qualifications, limitations and restrictions thereof, as
follows (all terms used herein which are defined in the Charter shall be deemed
to have the meanings provided therein):
Section 1. Designation and Amount. The shares of such series shall
----------------------
be designated as "Series A Junior Participating Preferred Stock" and the number
of shares constituting such series shall be 4,000,000]. Such number of shares
may be increased or decreased by resolution of the Board of Directors; provided,
--------
that no decrease shall reduce the number of shares of Series A Preferred Stock
to a number less than the number of shares then outstanding plus the number of
shares reserved for issuance upon the exercise of outstanding options, rights or
warrants or upon the conversion of any outstanding securities issued by the
Corporation convertible into shares of Series A Preferred Stock.
1
<PAGE>
Section 2. Dividends and Distributions.
---------------------------
(A) Subject to the prior and superior rights of the holders of any
shares of any series of Preferred Stock ranking prior and superior to the shares
of Series A Preferred Stock with respect to dividends, the holders of shares of
Series A Preferred Stock shall be entitled to receive, when, as and if declared
by the Board of Directors out of funds legally available for the purpose,
quarterly dividends payable in cash on the first business day of March, June,
September and December in each year (each such date being referred to herein as
a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend
Payment Date after the first issuance of a share or fraction of a share of
Series A Preferred Stock, in an amount per share (rounded to the nearest cent)
equal to the greater of (a) $.01 or (b) subject to the provision for adjustment
hereinafter set forth, 100 times the aggregate per share amount of all cash
dividends, and 100 times the aggregate per share amount (payable in kind) of all
non-cash dividends or other distributions other than a dividend payable in
shares of Common Stock or a subdivision of the outstanding shares of Common
Stock (by reclassification or otherwise), declared on the Common Stock, par
value $1.00 per share, of the Corporation (the "Common Stock") since the
immediately preceding Quarterly Dividend Payment Date, or, with respect to the
first Quarterly Dividend Payment Date, since the first issuance of any share or
fraction of a share of Series A Preferred Stock. In the event the Corporation
shall at any time after March __, 2000 (the "Rights Declaration Date") (i)
declare any dividend on Common Stock payable in shares of Common Stock, (ii)
subdivide the outstanding Common Stock, or (iii) combine the outstanding Common
Stock into a smaller number of shares, then in each case the amount to which
holders of shares of Series A Preferred Stock were entitled immediately prior to
such event under clause (b) of the preceding sentence shall be adjusted by
multiplying such amount by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution on the
Series A Preferred Stock as provided in paragraph (A) above immediately after it
declares a dividend or distribution on the Common Stock (other than a dividend
payable in shares of Common Stock); provided, however, that, in the event no
-------- -------
dividend or distribution shall have been declared on the Common Stock during the
period between any Quarterly Dividend Payment Date and the next subsequent
Quarterly Dividend Payment Date, subject to the prior and superior rights of the
holders of any shares of any series of Preferred Stock ranking prior to and
superior to the shares of Series A Preferred Stock with respect to dividends, a
dividend of $.01 per share on the Series A Preferred Stock shall nevertheless by
payable on such subsequent Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Preferred Stock from the Quarterly Dividend Payment Date next
preceding the date of issue of such shares of Series A Preferred Stock, unless
the date of issue of such shares is prior to the record date for the first
Quarterly Dividend Payment Date, in which case dividends on such shares shall
begin to accrue from the date of issue of such shares, or unless the date of
issue is a Quarterly Dividend Payment Date or is a date after the record date
for the determination of holders of shares of Series A Preferred Stock entitled
to receive a quarterly dividend and before such Quarterly Dividend Payment Date,
in either of which events such dividends shall begin to accrue and be cumulative
from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall
not bear interest. Dividends paid on the shares of Series A Preferred Stock in
an amount less than the total amount of such dividends at the time accrued and
payable on such shares shall be allocated pro rata on a share-by-share basis
among all such shares at the time outstanding. The Board of Directors may fix a
2
<PAGE>
record date for the determination of holders of shares of Series A Preferred
Stock entitled to receive payment of a dividend or distribution declared
thereon, which record date shall be no more than 60 days prior to the date fixed
for the payment thereof.
Section 3. Voting Rights.
-------------
The holders of shares of Series A Preferred Stock shall have the
following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth,
each share of Series A Preferred Stock shall entitle the holder thereof to 100
votes on all matters submitted to a vote of the stockholders of the Corporation.
In the event the Corporation shall at any time after the Rights Declaration Date
(i) declare any dividend on Common Stock payable in shares of Common Stock, (ii)
subdivide the outstanding Common Stock, or (iii) combine the outstanding Common
Stock into a smaller number of shares, then in each such case the number of
votes per share to which holders of shares of Series A Preferred Stock were
entitled immediately prior to such event shall be adjusted by multiplying such
number by a fraction the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately prior to
such event.
(B) Except as otherwise provided herein or by law, the holders of
shares of Series A Preferred Stock and the holders of shares of Common Stock
shall vote collectively as one class on all matters submitted to a vote of
stockholders of the Corporation.
(C) (i) If at any time dividends on any Series A Preferred Stock
shall be in arrears in an amount equal to six (6) quarterly dividends thereon,
the occurrence of such contingency shall mark the beginning of a period (herein
called a "default period") which shall extend until such time when all accrued
and unpaid dividends for all previous quarterly dividend periods and for the
current quarterly dividend period on all shares of Series A Preferred Stock then
outstanding shall have been declared and paid or set apart for payment. During
each default period, all holders of Preferred Stock (including holders of the
Series A Preferred Stock) with dividends in arrears in an amount equal to six
(6) quarterly dividends thereon, voting as a class, irrespective of series,
shall have the right to elect two (2) Directors.
(ii) During any default period, such voting right of the holders of
Series A Preferred Stock may be exercised initially at a special meeting
called pursuant to subparagraph (iii) of this Section 3(C) or at any annual
meeting of stockholders, and thereafter at annual meetings of stockholders,
provided that such voting right shall not be exercised unless the holders
of ten percent (10%) in number of shares of Preferred Stock outstanding
shall be present in person or by proxy. The absence of a quorum of the
holders of Common Stock shall not affect the exercise by the holders of
Preferred Stock of such voting rights. At any meeting at which the holders
of Preferred Stock shall exercise such voting right initially during an
existing default period, they shall have the right, voting as a class, to
elect Directors to fill such vacancies, if any, in the Board of Directors
as may then exist up to two (2) Directors or, if such right is exercised at
an annual meeting, to elect two (2) Directors. If the number which may be
so elected at any special meeting does not amount to the required number,
the holders of the Preferred Stock shall have the right to make such
increase in the number of Directors as shall be necessary to permit the
election by them of the required number. After the holders of the
Preferred Stock shall have exercised their right to elect Directors in any
3
<PAGE>
default period and during the continuance of such period, the number of
Directors shall not be increased or decreased except by vote of the holders
of Preferred Stock as herein provided or pursuant to the rights of any
equity securities ranking senior to or pari passu with the Series A
---- -----
Preferred Stock.
(iii) Unless the holders of Preferred Stock shall, during an existing
default period, have previously exercised their right to elect Directors,
the Board of Directors may order, or any stockholder or stockholders owning
in the aggregate not less than ten percent (10%) of the total number of
shares of Preferred Stock outstanding, irrespective of series, may request,
the calling of special meeting of the holders of Preferred Stock, which
meeting shall thereupon be called by the Chairman of the Board, the Chief
Executive Officer, the President, a Vice President or the Secretary of the
Corporation. Notice of such meeting and of any annual meeting at which
holders of Preferred Stock are entitled to vote pursuant to this paragraph
(C)(iii) shall be given to each holder of record of Preferred Stock by
mailing a copy of such notice to him or her at his or her last address as
the same appears on the books of the Corporation. Such meeting shall be
called for a time not earlier than 10 days and not later than 60 days after
such order or request, or in default of the calling of such meeting within
60 days after such order or request, such meeting may be called on similar
notice by any stockholder or stockholders owning in the aggregate not less
than ten percent (10%) of the total number of shares of Preferred Stock
outstanding. Notwithstanding the provisions of this paragraph (C)(iii), no
such special meeting shall be called during the period within 60 days
immediately preceding the date fixed for the next annual meeting of the
stockholders.
(iv) In any default period, the holders of Common Stock, and, if
applicable, other classes of capital stock of the Corporation, shall
continue to be entitled to elect the whole number of Directors until the
holders of Preferred Stock shall have exercised their right to elect two
(2) Directors voting as a class, after the exercise of which right (x) the
Directors so elected by the holders of Preferred Stock shall continue in
office until their successors shall have been elected by such holders or
until the expiration of the default period, and (y) any vacancy in the
Board of Directors may (except as provided in paragraph (C)(ii) of this
Section 3) be filled by vote of a majority of the remaining Directors
theretofore elected by the holders of the class of capital stock which
elected the Director whose office shall have become vacant. References in
this paragraph (C) to Directors elected by the holders of a particular
class of stock shall include Directors appointed by such Directors to fill
vacancies as provided in clause (y) of the foregoing sentence.
(v) Immediately upon the expiration of a default period, (x) the
right of the holders of Preferred Stock as a class to elect Directors shall
cease, (y) the term of any Directors elected by the holders of Preferred
Stock as a class shall terminate, and (z) the number of Directors shall be
such number as may be provided for in the articles of incorporation or by-
laws irrespective of any increase made pursuant to the provisions of
paragraph (C)(ii) of this Section 3 (such number being subject, however, to
change thereafter in any manner provided by law or in the articles of
incorporation or by-laws). Any vacancies in the Board of Directors
effected by the provisions of clauses (y) and (z) in the preceding sentence
may be filled by a majority of the remaining Directors.
(D) Except as set forth herein, holders of Series A Preferred Stock
shall have no special voting rights and their consent shall not be required
(except to the extent they are entitled to vote with holders of Common Stock as
set forth herein) for taking any corporate action.
4
<PAGE>
Section 4. Certain Restrictions.
--------------------
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Preferred Stock as provided in Section 2 are in arrears,
thereafter and until all accrued and unpaid dividends and distributions, whether
or not declared, on shares of Series A Preferred Stock outstanding shall have
been paid in full, the Corporation shall not:
(i) declare or pay dividends on, make any other distributions on,
or redeem or purchase or otherwise acquire for consideration any shares of
capital stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Preferred Stock;
(ii) declare or pay dividends on or make any other distributions on
any shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred Stock,
except dividends paid ratably on the Series A Preferred Stock and all such
parity stock on which dividends are payable or in arrears in proportion to
the total amounts to which the holders of all such shares are then
entitled;
(iii) redeem or purchase or otherwise acquire for consideration
shares of any capital stock ranking on a parity (either as to dividends or
upon liquidation, dissolution or winding up) with the Series A Preferred
Stock, provided that the Corporation may at any time redeem, purchase or
otherwise acquire shares of any such parity stock in exchange for shares of
any capital stock of the Corporation ranking junior (either as to dividends
or upon dissolution, liquidation or winding up) to the Series A Preferred
Stock; or
(iv) purchase or otherwise acquire for consideration any shares of
Series A Preferred Stock, or any shares of capital stock ranking on a
parity with the Series A Preferred Stock, except in accordance with a
purchase offer made in writing or by publication (as determined by the
Board of Directors) to all holders of such shares upon such terms as the
Board of Directors, after consideration of the respective annual dividend
rates and other relative rights and preferences of the respective series
and classes, shall determine in good faith will result in fair and
equitable treatment among the respective series or classes.
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of
stock of the Corporation unless the Corporation could, under paragraph (A) of
this Section 4, purchase or otherwise acquire such shares at such time and in
such manner.
Section 5. Reacquired Shares.
-----------------
Any shares of Series A Preferred Stock purchased or otherwise acquired
by the Corporation in any manner whatsoever shall be retired and cancelled
promptly after the acquisition thereof. All such shares shall upon their
cancellation become authorized but unissued shares of Preferred Stock and may be
reissued as part of a new series of Preferred Stock to be created by resolution
or resolutions of the Board of Directors, subject to the conditions and
restrictions on issuance set forth herein.
5
<PAGE>
Section 6. Liquidation, Dissolution or Winding Up.
--------------------------------------
(A) Upon any liquidation (voluntary or otherwise), dissolution or
winding up of the Corporation, no distribution shall be made to the holders of
shares of capital stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred Stock unless,
prior thereto, the holders of shares of Series A Preferred Stock shall have
received $100 per share, plus an amount equal to accrued and unpaid dividends
and distributions thereon, whether or not declared, to the date of such payment
(the "Series A Liquidation Preference"). Following the payment of the full
amount of the Series A Liquidation Preference, no additional distributions shall
be made to the holders of shares of Series A Preferred Stock unless, prior
thereto, the holders of shares of Common Stock shall have received an amount per
share (the "Common Adjustment") equal to the quotient obtained by dividing (i)
the Series A Liquidation Preference by (ii) 100 (as appropriately adjusted as
set forth in subparagraph (C) below to reflect such events as stock splits,
stock dividends and recapitalizations with respect to the Common Stock) (such
number in clause (ii), the "Adjustment Number"). Following the payment of the
full amount of the Series A Liquidation Preference and the Common Adjustment in
respect of all outstanding shares of Series A Preferred Stock and Common Stock,
respectively, and the payment of liquidation preferences of all other shares of
capital stock which rank prior to or on a parity with Series A Preferred Stock,
holders of Series A Preferred Stock and holders of shares of Common Stock shall
receive their ratable and proportionate share of the remaining assets to be
distributed in the ratio of the Adjustment Number to 1 with respect to such
Preferred Stock and Common Stock, on a per share basis, respectively.
(B) In the event, however, that there are not sufficient assets
available to permit payment in full of the Series A Liquidation Preference and
the liquidation preferences of all other series of Preferred Stock, if any,
which rank on a parity with the Series A Preferred Stock, then such remaining
assets shall be distributed ratably to the holders of such parity shares in
proportion to their respective liquidation preferences. In the event, however,
that there are not sufficient assets available to permit payment in full of the
Common Adjustment, then such remaining assets shall be distributed ratably to
the holders of Common Stock.
(C) In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the Adjustment Number in effect immediately prior to such event shall be
adjusted by multiplying such Adjustment Number by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
Section 7. Consolidation, Merger, etc.
--------------------------
In case the Corporation shall enter into any consolidation, merger,
combination or other transaction in which the shares of Common Stock are
exchanged for or changed into other stock or securities, cash and/or any other
property, then in any such case the shares of Series A Preferred Stock shall at
the same time be similarly exchanged or changed into an amount per share
(subject to the provision for adjustment hereinafter set forth) equal to 100
times the aggregate amount of capital stock, securities, cash and/or any other
property (payable in kind), as the case may be, for which or into which each
share of Common Stock is exchanged or changed. In the event the Corporation
shall at any time after the Rights Declaration Date (i) declare any dividend on
Common
6
<PAGE>
Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common
Stock, or (iii) combine the outstanding Common Stock into a smaller number of
shares, then in each such case the amount set forth in the preceding sentence
with respect to the exchange or change of shares of Series A Preferred Stock
shall be adjusted by multiplying such amount by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
Section 8. No Redemption.
-------------
The shares of Series A Preferred Stock shall not be redeemable.
Section 9. Ranking.
-------
The Series A Preferred Stock shall rank junior to all other series of
the Corporation's Preferred Stock as to the payment of dividends and the
distribution of assets, whether or not upon the dissolution, liquidation or
winding up of the Corporation, unless the terms of any such series shall provide
otherwise.
Section 10. Amendment.
---------
The Charter shall not be amended in any manner which would materially
alter or change the powers, preferences or special rights of the Series A
Preferred Stock so as to affect them adversely without the affirmative vote of
the holders of at least two-thirds of the outstanding shares of Series A
Preferred Stock, voting separately as a class.
Section 11. Fractional Shares.
-----------------
Series A Preferred Stock may be issued in fractions of a share which
shall entitle the holder, in proportion to such holder's fractional shares, to
exercise voting rights, receive dividends, participate in distributions and to
have the benefit of all other rights of holders of Series A Preferred Stock.
7
<PAGE>
Exhibit B
---------
[Form of Rights Certificate]
Certificate No. R- ________ Rights
NOT EXERCISABLE AFTER MARCH __, 2010 OR EARLIER IF REDEEMED OR EXCHANGED BY
THE COMPANY. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY,
AT $.01 PER RIGHT, AND TO EXCHANGE ON THE TERMS SET FORTH IN THE RIGHTS
AGREEMENT. UNDER CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN
ACQUIRING PERSON (AS SUCH TERM IS DEFINED IN THE RIGHTS AGREEMENT) AND ANY
SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID. [THE RIGHTS
REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A
PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN
ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT).
ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY
BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF SUCH
AGREEMENT.]/1/
___________________
/1/ The portion of the legend in brackets shall be inserted only if applicable
and shall replace the preceding sentence.
1
<PAGE>
RIGHTS CERTIFICATE
Edwards Lifesciences Corporation
This certifies that _______________, or registered assigns, is the
registered owner of the number of Rights set forth above, each of which entitles
the owner thereof, subject to the terms, provisions and conditions of the Rights
Agreement, dated as of ____________, 2000 (the "Rights Agreement"), between
Edwards Lifesciences Corporation, a Delaware corporation (the "Company"), and
First Chicago Trust Company of New York, a division of Equiserve (the "Rights
Agent"), to purchase from the Company at any time prior to 5:00 P.M. (New York
time) on March __, 2010 at the office or offices of the Rights Agent designated
for such purpose, or its successors as Rights Agent, one one-hundredth of a
fully paid, nonassessable share of Series A Junior Participating Preferred
Stock, par value $.01 per share (the "Preferred Stock"), of the Company, at a
purchase price of $__ per one one-hundredth of a share (the "Purchase Price"),
upon presentation and surrender of this Rights Certificate with the Form of
Election to Purchase and related Certificate duly executed. The number of Rights
evidenced by this Rights Certificate (and the number of shares which may be
purchased upon exercise thereof) set forth above, and the Purchase Price per
share set forth above, are the number and Purchase Price as of March __,
2000, based on the Preferred Stock as constituted at such date. The Company
reserves the right to require prior to the occurrence of a Triggering Event (as
such term is defined in the Rights Agreement) that, upon any exercise of Rights,
a number of Rights be exercised so that only whole shares of Preferred Stock
will be issued.
Upon the occurrence of a Section 11(a)(ii) Event (as such term is
defined in the Rights Agreement), if the Rights evidenced by this Rights
Certificate are beneficially owned by (i) an Acquiring Person or an Affiliate or
Associate of any such Acquiring Person (as such terms are defined in the Rights
Agreement), (ii) a transferee of any such Acquiring Person, Associate or
Affiliate, or (iii) under certain circumstances specified in the Rights
Agreement, a transferee of a person who, after such transfer, became an
Acquiring Person or an Affiliate or Associate of such Person, such Rights shall
become null and void and no holder hereof shall have any right with respect to
such Rights from and after the occurrence of such Section 11(a)(ii) Event.
As provided in the Rights Agreement, the Purchase Price and the number
and kind of shares of Preferred Stock or other securities which may be purchased
upon the exercise of the Rights evidenced by this Rights Certificate are subject
to modification and adjustment upon the happening of certain events, including
Triggering Events.
This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Rights Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under the specific circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are on file at the above-mentioned office of the
Rights Agent and are also available upon written request to the Company.
2
<PAGE>
This Rights Certificate, with or without other Rights Certificates,
upon surrender at the principal office or offices of the Rights Agent designated
for such purpose, may be exchanged for another Rights Certificate or Rights
Certificates of like tenor and date evidencing Rights entitling the holder to
purchase a like aggregate number of one one-hundredths of a share of Preferred
Stock as the Rights evidenced by the Rights Certificates surrendered shall have
entitled such holder to purchase. If this Rights Certificate shall be exercised
in part, the holder shall be entitled to receive upon surrender hereof another
Rights Certificate or Rights Certificates for the number of whole Rights not
exercised.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Certificate may, in each case at the option of the Company, be
(i) redeemed by the Company at its option at a redemption price of $.01 per
Right or (ii) exchanged in whole or in part for shares of Common Stock or other
securities of the Company. Immediately upon the action of the Board of
Directors of the Company authorizing redemption, the Rights will terminate and
the only right of the holders of Rights will be to receive the redemption price.
No fractional shares of Preferred Stock will be issued upon the
exercise of any Right or Rights evidenced hereby (other than fractions which are
integral multiples of one one-hundredth of a share of Preferred Stock, which
may, at the election of the Company, be evidenced by depositary receipts), but
in lieu thereof a cash payment will be made, as provided in the Rights
Agreement.
No holder of this Rights Certificate shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of shares of Preferred
Stock or of any other securities of the Company which may at any time be
issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action, or, to
receive notice of meetings or other actions affecting stockholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Rights
Certificate shall have been exercised as provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned manually by an authorized
signatory of the Rights Agent.
3
<PAGE>
WITNESS the facsimile signature of the proper officers of the Company
and its corporate seal.
Dated as of ________________, ____
ATTEST: EDWARDS LIFESCIENCES CORPORATION
____________________________ By: ___________________________
Secretary Name:
Title:
Countersigned:
Date:_______________________
FIRST CHICAGO TRUST COMPANY
OF NEW YORK, A DIVISION OF
EQUISERVE,
- ----------------------------
as Rights Agent
By: _______________________
Authorized Signatory
4
<PAGE>
[Form of Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Rights Certificate.)
FOR VALUE RECEIVED ___________________________________________________________
hereby sells, assigns and transfers unto ______________________________________
(Please print name and address of transferee)
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint __________ Attorney, to
transfer the within Rights Certificate on the books of the within-named Company,
with full power of substitution.
Dated: ___________________, ____
_______________________________________
Signature
Signature Guaranteed:
5
<PAGE>
Certificate
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) this Rights Certificate [_] is [_] is not being sold, assigned
and transferred by or on behalf of a Person who is or was an Acquiring
Person or an Affiliate or Associate of an Acquiring Person (as such terms
are defined pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned,
it [_] did [_] did not acquire the Rights evidenced by this Rights
Certificate from any Person who is, was or subsequently became an Acquiring
Person or an Affiliate or Associate of an Acquiring Person.
Dated: _______________, ____
_______________________________________
Signature
Signature Guaranteed:
6
<PAGE>
NOTICE
The signature to the foregoing Assignment and Certificate must
correspond to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise Rights represented by the Rights
Certificate.)
TO: EDWARDS LIFESCIENCES CORPORATION
The undersigned hereby irrevocably elects to exercise ______ Rights
represented by this Rights Certificate to purchase the shares of Preferred Stock
issuable upon the exercise of the Rights (or such other securities of the
Company or of any other person which may be issuable upon the exercise of the
Rights) and requests that certificates for such shares (or other securities) be
issued in the name of and delivered to:
Please insert social security
or other identifying number: ______________________
______________________________________________________________________________
(Please print name and address)
______________________________________________________________________________
If such number of Rights shall not be all the Rights evidenced by this
Rights Certificate, a new Rights Certificate for the balance of such Rights
shall be registered in the name of and delivered to:
Please insert social security
or other identifying number: ______________________
______________________________________________________________________________
(Please print name and address)
______________________________________________________________________________
Dated: _____________,
________________________________________
Signature
Signature Guaranteed:
7
<PAGE>
Certificate
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) the Rights evidenced by this Rights Certificate [_] are [_] are
not being exercised by or on behalf of a Person who is or was an Acquiring
Person or an Affiliate or Associate of an Acquiring Person (as such terms
are defined pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned,
it [_] did [_] did not acquire the Rights evidenced by this Rights
Certificate from any Person who is, was or became an Acquiring Person or an
Affiliate or Associate of an Acquiring Person.
Dated: ____________, ____
_______________________________________
Signature
Signature Guaranteed:
NOTICE
The signature to the foregoing Election to Purchase and Certificate
must correspond to the name as written upon the face of this Rights Certificate
in every particular, without alteration or enlargement or any change whatsoever.
8
<PAGE>
Exhibit C
---------
SUMMARY OF RIGHTS TO PURCHASE PREFERRED STOCK
On March __, 2000, the Board of Directors of Edwards Lifesciences
Corporation (the "Company") declared a dividend distribution of one Right for
each outstanding share of the Company's common stock, par value $1.00 per share
("Common Stock"), to stockholders of record at the Close of Business on
March __, 2000. Each Right entitles the registered holder to purchase from
the Company a unit consisting of one one-hundredth of a share (a "Unit") of
Series A Junior Participating Preferred Stock, par value $.01 per share (the
"Preferred Stock"), at a Purchase Price of $__ per Unit, subject to adjustment.
The following is a summary description of the Rights and is qualified in its
entirety by the Rights Agreement (the "Rights Agreement") dated as of
March __, 2000 between the Company and First Chicago Trust Company of New York,
a division of Equiserve, as Rights Agent.
Initially, the Rights will be attached to all Common Stock
certificates representing shares then outstanding, and no separate Rights
certificates will be distributed. The Rights will separate from the Common
Stock and the Distribution Date will occur upon the earlier of (i) 10 days
following a public announcement that a person or group of affiliated or
associated persons (an "Acquiring Person") has acquired, or obtained the right
to acquire, beneficial ownership of 15% or more of the outstanding shares of
Common Stock (the "Stock Acquisition Date") or (ii) 10 business days (or such
later date as may be determined by action of the Board of Directors prior to
such time as any person or group becomes an Acquiring Person) following the
commencement of a tender offer or exchange offer which, if consummated, would
result in a person or group beneficially owning 15% or more of the outstanding
shares of Common Stock.
Until the Distribution Date, (i) the Rights will be evidenced by the
Common Stock certificates and will be transferred with and only with such Common
Stock certificates, (ii) new Common Stock certificates issued after March __.,
2000, will contain a notation incorporating the Rights Agreement by reference
and (iii) the surrender for transfer of any certificates for Common Stock
outstanding will also constitute the transfer of the Rights associated with the
Common Stock represented by such certificate.
Pursuant to the Rights Agreement, the Company reserves the right to
require prior to the occurrence of a Triggering Event (as defined below) that,
upon any exercise of Rights, a number of Rights be exercised so that only whole
shares of Preferred Stock will be issued.
The Rights are not exercisable until the Distribution Date and will
expire at the Close of Business on March __, 2010, unless earlier redeemed by
the Company as described below.
As soon as practicable after the Distribution Date, Rights
certificates will be mailed to holders of record of the Common Stock as of the
Close of Business on the Distribution Date and, thereafter, the separate Rights
certificates alone will represent the Rights. Except as otherwise provided in
the Rights Agreement, only shares of Common Stock issued prior to the
Distribution Date will be issued with Rights.
In the event that, at any time following the Distribution Date, a
person or group becomes an Acquiring Person, each holder of a Right will
thereafter have the right to receive, upon
1
<PAGE>
exercise, Common Stock having a value equal to two times the exercise price of
the Right. If an insufficient number of shares of Common Stock is authorized for
issuance, then the Board would be required to substitute cash, property or other
securities of the Company for the Common Stock. Notwithstanding any of the
foregoing, following the occurrence of the event set forth in this paragraph,
all Rights that are, or (under certain circumstances specified in the Rights
Agreement) were, beneficially owned by any Acquiring Person will be null and
void. However, Rights are not exercisable following the occurrence of the event
set forth in this paragraph until such time as the Rights are no longer
redeemable by the Company as set forth below.
For example, at an exercise price of $__ per Right, each Right not
owned by an Acquiring Person (or by certain related parties) following an event
set forth in the preceding paragraph would entitle its holder to purchase $___
worth of Common Stock (or other consideration, as noted above) for $___.
Assuming that the Common Stock had a per share value of $____ at such time, the
holder of each valid Right would be entitled to purchase ____ shares of Common
Stock for $___.
In the event that, at any time following the Stock Acquisition Date,
(i) the Company is acquired in a merger or other business combination
transaction in which the Company is not the surviving corporation, (ii) the
Company is acquired in a merger or other business combination transaction in
which the Company is the surviving corporation and all or part of the Common
Stock is converted into securities of another entity, cash or other property, or
(iii) 50% or more of the Company's assets, cash flow or earning power is sold or
transferred, each holder of a Right (except Rights which previously have been
voided as set forth above) shall thereafter have the right to receive, upon
exercise, common stock of the acquiring company having a value equal to two
times the exercise price of the Right. The events set forth in this paragraph
and in the second preceding paragraph are referred to as the "Triggering
Events."
The purchase price payable, and the number of Units of Preferred Stock
or other securities or property issuable, upon exercise of the Rights are
subject to adjustment from time to time to prevent dilution (i) in the event of
a stock dividend on, or a subdivision, combination or reclassification of, the
Preferred Stock, (ii) if holders of the Preferred Stock are granted certain
rights, options or warrants to subscribe for Preferred Stock or convertible
securities at less than the current market price of the Preferred Stock, or
(iii) upon the distribution to holders of the Preferred Stock of evidences of
indebtedness or assets (excluding regular periodic cash dividends) or of
subscription rights or warrants (other than those referred to above).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments amount to at least 1% of the Purchase
Price. No fractional Units will be issued and, in lieu thereof, an adjustment
in cash will be made based on the market price of the Preferred Stock on the
last trading day prior to the date of exercise.
At any time after any person or group becomes an Acquiring Person and
prior to the acquisition by such person or group of 50% or more of the
outstanding shares of Common Stock, the Board of Directors of the Company may
exchange the Rights (other than Rights owned by such person or group which will
have become void), in whole or in part, at an exchange ratio of one share of
Common Stock, or one one-hundredth of a share of Preferred Stock (or of a share
of a class or series of the Company's preferred stock having equivalent rights,
preferences and privileges), per Right (subject to adjustment).
2
<PAGE>
In general, the Company may redeem the Rights in whole, but not in
part, at a price of $.01 per Right (subject to adjustment and payable in cash,
Common Stock or other consideration deemed appropriate by the Board of
Directors) at any time until ten days following the Stock Acquisition Date.
Immediately upon the action of the Board of Directors authorizing any
redemption, the Rights will terminate and the only right of the holders of
Rights will be to receive the redemption price.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends. While the distribution of the Rights will not
result in the recognition of taxable income by stockholders or the Company,
stockholders may, depending upon the circumstances, recognize taxable income
after a Triggering Event.
The terms of the Rights may be amended by the Board of Directors of
the Company without the consent of the holders of the Rights, except that from
and after such time as any person or group of affiliated or associated persons
becomes an Acquiring Person no such amendment may adversely affect the interests
of the holders of the Rights.
A copy of the Rights Agreement is available free of charge from the
Company. This description of the Rights does not purport to be complete and is
qualified in its entirety by reference to the Rights Agreement, which is
incorporated herein by reference.
3
<PAGE>
Exhibit 10.10
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH
SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
SERVICES AND DISTRIBUTION AGREEMENT
by and between
BAXTER HEALTHCARE CORPORATION
as Baxter
and
ALLEGIANCE HEALTHCARE CORPORATION
as Allegiance
<PAGE>
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH
SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
TABLE OF CONTENTS
Page
----
1. Definitions; Rules of Construction. 1
2. Grant of Distribution Rights. 6
3. Distributor Model and Kit Model. 6
4. Exclusivity. 7
5. Term. 10
6. Prices and Fees. 11
7. Invoicing and Payments. 14
8. Allegiance's Duties. 16
9. Baxter's Duties. 16
10. Standard of Care. 16
11. Transfer of Title and Risk of Loss. 16
12. Warranties. 17
13. Trademarks. 17
14. Termination. 18
15. Indemnity. 22
16. Insurance. 26
17. Compliance with Laws. 26
18. Force Majeure. 28
19. Confidentiality. 28
20. Limitation of Liability and Remedy. 30
21. Miscellaneous Provisions. 32
22. Dispute Resolution and Arbitration. 34
i
<PAGE>
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH
SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
23. Assignment. 35
ii
<PAGE>
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH
SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
LIST OF EXHIBITS
Exhibit A Products and Perfusion Services
Exhibit B Allegiance's Duties
Exhibit C Baxter's Duties
Exhibit D Price List for BCS Kit Components
iii
<PAGE>
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH
SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
SERVICES AND DISTRIBUTION AGREEMENT
This SERVICES AND DISTRIBUTION AGREEMENT (this "Agreement"), dated as
of October 1, 1996 (the "Effective Date"), by and between BAXTER HEALTHCARE
CORPORATION, a Delaware corporation with its principal offices at One Baxter
Parkway, Deerfield, Illinois 60015 (hereinafter called "Baxter") and ALLEGIANCE
HEALTHCARE CORPORATION, a Delaware corporation with its principal offices at
1430 Waukegan Road, McGaw Park, Illinois 60085 (hereinafter called
"Allegiance").
RECITALS
Baxter and its parent corporation, Baxter International Inc. ("Baxter
International"), have spun-off various businesses by transferring those
businesses toAllegiance Corporation ("Allegiance Corporation") (or its
subsidiaries) and distributing all of the stock of Allegiance Corporation to the
stockholders of Baxter International as a dividend. As a result of the
distribution of that dividend, Baxter International and Allegiance Corporation,
and their respective subsidiaries, are separate and independent corporations.
As a consequence of the foregoing actions, Allegiance will acquire,
inter alia, certain business units, including the U.S. Distribution business,
- ----------
that have previously provided various sales and distribution services to
business units owned by Baxter.
Baxter and Allegiance recognize that it is advisable for Allegiance to
continue providing physical distribution and sales support and related services
to Baxter.
AGREEMENT
In consideration of the mutual undertakings contained herein, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Baxter and Allegiance agree as follows:
1. Definitions; Rules of Construction.
1.1 Definitions. As used in this Agreement:
1.1.1 "Affiliate" shall mean any Person controlling,
1
<PAGE>
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH
SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
controlled by, or under direct or indirect common control with a party
hereto. For the purpose of this definition, the term "control" means the
power to direct the management of an entity, directly or indirectly,
whether solely through the ownership of voting securities (as in the case
of subsidiary), by contract, or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing. Allegiance
Corporation and Baxter International shall not be deemed to be Affiliates
of each other.
1.1.2 "Agreement" shall mean this Services and Distribution
Agreement dated as of October 1, 1996, including all Exhibits and Schedules
attached hereto.
1.1.3 "BCS Kit Components" shall mean the Products listed on
Exhibit D hereto.
1.1.4 "Competitor" shall mean (a) with respect to Baxter, any
Person (including an affiliate of such Person) that during the most recently
completed fiscal year has annual net revenues from sales of products competitive
with Products greater than 20% of the total annual net revenues of Baxter from
Products during the most recently completed fiscal year; and (b) with respect to
Allegiance, any Person (including an affiliate of such Person) that during the
most recently completed fiscal year has annual net revenues from the
distribution of medical, surgical and laboratory products greater than 20% of
the total annual net revenues of Allegiance during the most recently completed
fiscal year.
1.1.5 "Component Price" shall mean the price for each BCS Kit
Component (including components for BCS Kits that are included as part of PBDS
Kits) as set forth on Exhibit D, which shall be subject to annual adjustment by
mutual agreement of the parties. If, for any given calendar year, the parties
cannot agree to an adjustment by October 1st of the immediately preceding year,
the price for each BCS Kit Component shall be adjusted by the percentage change
in the Producer's Price Index for the prior year over the preceding calendar
year.
1.1.6 "Cost Management" shall mean the dedication of resources by
Allegiance or its Affiliates to deliver cost improvement services to customers.
Cost Management services shall be comprised of activities which reduce product
consumption, improve utilization of assets, improve logistics, and reduce or
eliminate operating costs. Cost Management transactions shall be those
transactions performed by Allegiance pursuant to any comprehensive Cost
Management contract which
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permits Allegiance to share with a customer the risk and reward of cost savings
generated by Cost Management. As part of such Cost Management transactions,
Allegiance may also provide some or all of the following services: (a) ValueLink
(as defined herein); (b) PBDS (as defined herein); (c) consulting services; (d)
on-site clinical resources; (e) contract materials management; and (f)
consolidated service centers. Cost Management transactions shall include sales
of PBDS Kits that include Products.
1.1.7 "Distributor List Price" shall mean the unit prices shown on
Exhibit A for each Product.
1.1.8 "Gross Profit" shall mean Baxter's standard gross profit as
shown on Baxter's internal management profit and loss statements, consistent
with Baxter's historical accounting policies and procedures and generally
accepted accounting principles. Should these policies and procedures materially
change, Baxter shall inform Allegiance and adjust the calculations accordingly.
1.1.9 "Gross Profit Growth" shall mean the percentage increase of
Gross Profit calculated by dividing year-to-date total Gross Profit by the total
Gross Profit of the immediately preceding entire calendar year for all Products
sold as part of Cost Management transactions except as provided in Section 6.3.
1.1.10 "Kit" shall mean an aggregation by Allegiance of Baxter,
Allegiance, and/or third-party products packaged together or repackaged for
specific uses and procedures including, without limitation, such aggregations
for programs known prior to the Effective Date as Baxter Custom Sterile ("BCS")
and Procedure-Based Delivery Systems ("PBDS").
1.1.11 "Line of Products" shall mean any specifically identified
group of related Products set forth in Exhibit A of this Agreement.
1.1.12 "List Price" shall mean the price for each Product as
specified in Baxter's published price list.
1.1.13 "Notice" shall mean notice given in accordance with Section
21.1.
1.1.14 "Perfusion Services" shall mean those perfusion services
described in Exhibit A hereto.
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1.1.15 "Person" shall mean an individual, corporation, partnership,
limited liability company, unincorporated syndicate, unincorporated
organization, trust, trustee, executor, administrator or other legal
representative, governmental authority or agency, or any group of Persons acting
in concert.
1.1.16 "Products" shall mean the products and accessories
manufactured by or on behalf of Baxter or its Affiliates and listed in Exhibit A
hereto and the parts and components necessary for the repair and replacement
thereof.
1.1.17 "Term" shall mean the period of time provided in Section 5
hereof, including any and all extensions thereof.
1.1.18 "Territory" shall mean the District of Columbia and the
fifty states comprising the United States of America.
1.1.19 "Transfer" shall mean any assignment, transfer, sale or
other disposition to a Person that is not an Affiliate of the Transferor,
including any Transfer by way of merger or consolidation or otherwise by
operation of law.
1.1.20 "ValueLink" shall mean the just-in-time inventory management
service known as ValueLink(R).
1.2 Other Terms. Terms defined in other Sections of this Agreement will
have the meanings therein provided.
1.3 Rules of Construction.
1.3.1 In this Agreement, unless a clear contrary intention
appears:
1.3.1.1 the singular number includes the plural number and vice
versa;
1.3.1.2 reference to any Person includes such Person's
successors and assigns but, if applicable, only if such successors and
assigns are permitted by this Agreement;
1.3.1.3 reference to any gender includes the other gender;
1.3.1.4 reference to any Section or Exhibit or Schedule means
such Section of this Agreement or such Exhibit or Schedule to this
Agreement, as the case may be, and references in any Section or definition
to any clause
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means such clause of such Section or definition;
1.3.1.5 "herein", "hereunder", "hereof", "hereto", and words of
similar import shall be deemed references to this Agreement as a whole and
not to any particular Section or other provision hereof or thereof;
1.3.1.6 "including" (and with correlative meaning "include")
means including without limiting the generality of any description
preceding such term;
1.3.1.7 "distribute" or "distribution" shall be used
interchangeably to refer to Allegiance's duties under either the
Distributor Model or the Kit Model and shall not alone imply a legal
distributor relationship;
1.3.1.8 relative to the determination of any period of time,
"from" means "from and including", "to" means "to but excluding" and
"through" means "through and including";
1.3.1.9 reference to any law (including statutes and
ordinances) means such law as amended, modified, codified or reenacted, in
whole or in part, and in effect from time to time, including rules and
regulations promulgated thereunder; and
1.3.1.10 accounting terms used herein shall have the meanings
historically attributed to them by Baxter and its subsidiaries based upon
Baxter's internal financial policies and procedures in effect prior to the
spin-off described in the recitals above.
1.3.1.11 in the event of any conflict between the provisions of
the body of this Agreement and the Exhibits or Schedules hereto, the
provisions of the body of this Agreement shall control; and
1.3.1.12 the headings contained in this Agreement have been
inserted for convenience of reference only, and are not to be used in
construing this Agreement.
1.3.2 This Agreement was negotiated by the parties with the
benefit of legal representation, and any rule of construction or interpretation
otherwise requiring this Agreement to be construed or interpreted against either
party shall not apply to any construction or interpretation hereof. Subject to
Section 21.5 hereof, this Agreement shall be interpreted and construed to the
maximum extent possible so as to uphold the
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enforceability of each of the terms and provisions hereof, it being understood
and acknowledged that this Agreement was entered into by the parties after
substantial and extended negotiations and with full awareness by the parties of
the terms and provisions hereof and the consequences thereof.
2. Grant of Distribution Rights.
2.1 Grant. With respect to sales of all Products and Perfusion Services,
Baxter hereby grants to Allegiance and Allegiance hereby accepts the right,
which shall be exclusive as set forth in Section 4, to provide sales, sales
support, customer service, and physical distribution services, as specified in
Section 8, to customers in the Territory under the Distributor Model and Kit
Model.
2.2 Exceptions and Limitations. Baxter reserves all rights not expressly
granted to Allegiance hereunder. Except as otherwise provided herein,
Allegiance shall not grant to any subagents or subdistributors any of its rights
or obligations hereunder.
2.3 Additional Product Referral. Any customer request related to heart
valves, vascular grafts or annuloplasty rings to be included in Cost Management
services will be forwarded by Allegiance to Baxter with a recommendation from
Allegiance to the customer that Baxter is Allegiance's preferred vendor. Where
appropriate, Baxter and Allegiance will work together to attempt to convert the
customer to Products and Allegiance services.
3. Distributor Model and Kit Model.
3.1. Distributor Model. Allegiance shall maintain the principal
contractual relationship with the customer for sales, sales support, accounts
receivable, and customer service in connection with the supply of the Products
and Perfusion Services in connection with the provision by Allegiance of Cost
Management, ValueLink and other services consolidated on an Allegiance invoice
for Products, Perfusion Services and Allegiance products (as required by the
customer). Baxter shall use reasonable efforts to cooperate with Allegiance and
to facilitate Allegiance's fulfillment of its obligations hereunder. Baxter
shall provide to Allegiance the Distributor List Price to be paid by Allegiance
to Baxter and a suggested direct sale price (the "Suggested Sales Price") in
connection with each Distributor Model transaction, provided, however, that
Allegiance shall have the sole right and responsibility for negotiating and
contracting with each customer the delivered price of the Products and
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Perfusion Services. If customer has a contract with Baxter for such Products
and/or Perfusion Services, or if customer had such a contract with Baxter that
expired in the 90 day period immediately preceding the applicable customer
order, the Suggested Sales Price shall be the contract price. If a customer does
not have a contract with Baxter or if the customer's contract expired more than
90 days prior to such customer's order, the List Price will be the Suggested
Sales Price. If Baxter has a contract with any customer for Baxter's provision
of Products and Perfusion Services to such customer, and such customer
subsequently requests Cost Management, ValueLink, and/or other services
consolidated on an Allegiance invoice for such Products and/or Perfusion
Services and, if applicable, Allegiance products, all such sales of Products
and/or Perfusion Services to such customer shall apply to any minimum purchase
commitments or quantity discounts contained in Baxter's contract with such
customer.
3.2. Kit Model. Allegiance shall maintain the principal contractual
relationship with the customer for sales, sales support, accounts receivable,
and customer service in connection with the provision by Allegiance of Kits.
Baxter shall provide to Allegiance the Component Price for each Product that
Allegiance orders from Baxter for use as a component for a Kit. Allegiance shall
have the sole right and responsibility for negotiating and contracting with each
customer the delivered price of the Kits. If Baxter has an agreement with any
customer for Baxter's provision of Products to such customer and such customer
subsequently requests Kits, all such Kit Model sales of Products to such
customer shall apply to any minimum purchase commitments or quantity discounts
contained in Baxter's agreement with such customer.
3.3. Transition to Consignment Model. At such time as a consignment model
becomes available and each party agrees that use of such consignment model would
be economically beneficial to both parties, the parties agree to use reasonable
business efforts to convert both Distributor Model and Kit Model transactions to
the consignment model. If Baxter and Allegiance are unable to reach agreement
regarding the consignment model, the existing terms of this Agreement shall
remain in effect.
4. Exclusivity.
4.1 Restrictions on Allegiance.
4.1.1 With respect to Cost Management transactions, Allegiance,
its Affiliates, and any other Person acting on its or
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their behalf, shall not, directly or indirectly, market or promote any product
or accept orders through agents or otherwise, to or from any customer or any
Affiliate of any customer for any product that competes in the Territory with
any Products or Perfusion Services. However, the taking and fulfillment by
Allegiance of orders for products that compete with Products in Cost Management
transactions under contracts in existence as of the Effective Date and for the
term of such contracts shall not be deemed to be a breach of this Section.
Without limiting the generality of the foregoing and at all times subject to
availability of the Products and Perfusion Services, Allegiance, its Affiliates,
and any other Person acting on its or their behalf, shall not, directly or
indirectly, market or promote any product that competes with any Product,
Products and/or Perfusion Services as Allegiance's (a) first-line substitute or
for competitive comparison, or (b) as a substitute for any other product
competitive with any Product, Products and/or Perfusion Services. This Section
shall not apply if the applicable Products or Perfusion Services are unavailable
and such unavailability is due substantially to Baxter's acts or omissions.
4.1.2 With respect to non-Cost Management transactions, Allegiance
may market, promote, distribute and sell products which compete with Products.
4.1.3 Allegiance, its Affiliates, and any other Person acting on
its or their behalf, shall not, directly or indirectly, develop or manufacture
any product that competes in the Territory with any Products and Perfusion
Services.
4.1.4 Allegiance, its Affiliates, and any other Person acting on
its or their behalf, shall not, directly or indirectly, market to or solicit
orders from, or distribute any Product through distributors, agents, or
otherwise, to or from any customer or any Affiliate of any customer located
outside of the Territory.
4.2 Restrictions on Baxter. With respect to Cost Management transactions,
Baxter, its Affiliates, and any other Person acting on its or their behalf,
shall not, directly or indirectly, provide or engage any Person other than
Allegiance to provide physical distribution services or to act as Baxter's agent
for distribution services in the Territory with respect to the Products and
Perfusion Services, provided that Baxter shall have the right to:
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4.2.1 distribute the Products and Perfusion Services in the
Territory directly to customers other than distributors, from Baxter
manufacturing facilities and/or Baxter's replenishment centers;
4.2.2 distribute the Products and Perfusion Services to Baxter's
Affiliates;
4.2.3 distribute Products and Perfusion Services to customers
within the Territory other than through Allegiance (and Baxter shall be relieved
of its obligation to pay fees pursuant to Section 6.2) if and to the extent
Allegiance is unable to so distribute the Products or Perfusion Services due to
(a) regulatory requirements; (b) Allegiance's material failure to meet agreed-
upon performance standards; or (c) Allegiance being otherwise prohibited or
prevented from selling and/or distributing the Products or Perfusion Services or
refusing or being unable to sell and/or distribute the Products and Perfusion
Services to any customer or class of customers other than by customer decision;
4.2.4 sell and distribute products which are not Products as
defined herein through relationships that do not include Allegiance; and
4.2.5 develop and implement a cardiovascular cost management
program through which the Products and Perfusion Services may be sold in the
Territory. The physical distribution of Products for such a cost management
program, which may include Perfusion Services, shall either be direct from
Baxter or through Allegiance.
This Agreement shall in no way limit the right of Baxter and its Affiliates to
market, sell, or otherwise distribute the Products and Perfusion Services
outside the Territory.
4.3 Exceptions.
4.3.1 Each party shall have the right to request exceptions to the
exclusivity restrictions for individual customers. Such exceptions shall
require written approval of Allegiance's Regional President or Baxter's (CVG)
Vice President of Sales, as applicable, but shall not be unreasonably withheld.
Exceptions shall not be permitted with respect to sales of Perfusion Services.
4.3.2 After the Effective Date, requests from customers for PBDS
Kits which include third-party products which compete with Products shall be
handled as follows: (a) Allegiance
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will suggest Products as the recommended substitutes for the competing products,
and Baxter will recommend Allegiance as the preferred PBDS service provider; and
(b) Allegiance and Baxter will use reasonable sales and marketing efforts
including working jointly with each party's sales representatives wherever
possible to convert the customer to Products and Allegiance services. If after
such efforts a customer continues to refuse to convert to Products or Allegiance
services, Allegiance and Baxter shall be released from the exclusivity
requirements imposed by Section 4.1 solely with respect to sales of PBDS Kits to
such customer.
4.4 Product Exclusivity. Baxter shall have the right, but not the
obligation to: (a) add Products to Exhibit A and this Agreement which are new
products developed by Baxter that are of the same type and have similar
distribution characteristics as the Products set forth in this Agreement; and
(b) delete from Exhibit A and this Agreement any Product, the manufacture and
sale of which has been generally discontinued by Baxter. Baxter and Allegiance
may agree to add to Exhibit A newly developed or acquired products that are not
of the same type or that do not have the same distribution characteristics as
the Products set forth in Exhibit A as of the Effective Date, but neither Baxter
nor Allegiance is under any obligation to do so. Upon such agreement, Exhibit A
shall be deemed to be amended to reflect any such Product additions and
deletions without any further act by any party hereto. Baxter shall use
commercially reasonable efforts to provide at least 30 days prior written notice
to Allegiance of each such addition or deletion. Exhibit A, as amended and
supplemented from time to time, is incorporated by reference herein and forms
part of this Agreement. Baxter may update Exhibit A effective January 1 of each
calendar year provided that Baxter gives Allegiance 90 days prior written notice
of such update.
5. Term. The initial Term of this Agreement shall begin on the Effective Date
and, except as otherwise provided in this Agreement, end at the end of the day
on December 31, 2001. The Term may be extended for successive additional
periods, subject to the parties agreeing upon the terms and conditions of such
an extension. Each party may in its absolute discretion determine whether or
not the terms of any such proposed extension are acceptable and may refuse to
agree to any such extension for any reason whatsoever. Commencing no later than
July 1, 1998, the parties shall negotiate in good faith regarding modifications
to the terms and conditions of this Agreement for the period commencing October
1, 1998, to provide additional benefits to both parties.
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6. Prices and Fees. Allegiance and Baxter will keep confidential all amounts
by either party to the other.
6.1 For all Products purchased by Allegiance except those Products ordered
as BCS Kit components, Allegiance shall pay to Baxter as the purchase price an
amount equal to the aggregate Distributor List Price in effect at the time of
the order placement of all such Products.
6.2 After Allegiance has sold Products to the customer (except those
Products sold as BCS Kit components), Baxter shall reimburse Allegiance for any
amount by which the Distributor List Price exceeds the Suggested Sales Price
("Vendor Rebate"), and Baxter shall also pay Allegiance the following fees:
6.2.1 For (a) all sales of Products other than through Cost
Management transactions and (b) the initial fee for sales of Products included
in PBDS Kits sold to customers not having a comprehensive Cost Management
agreement with Allegiance, the fee shall be * * * of the Suggested Sales Price.
Therefore, for all such sales, Baxter shall pay Allegiance the Vendor Rebate
plus * * * of the Suggested Sales Price.
6.2.2 The fee for sales of Products included as part of Cost
Management transactions (including Products included in PBDS Kits) shall be * *
* of the Suggested Sales Price, determined as follows:
(a) * * * if Gross Profit Growth is less than or equal to * * *;
(b) * * * if Gross Profit Growth is greater than * * * but less than
or equal to * * *; or
(c) * * * if Gross Profit Growth is greater than * * *.
If at any time during a calendar year, Gross Profit Growth exceeds * * * , and
the * * * or * * * fee * * * applies, such * * * will apply for all subsequent
sales made during such year and retroactively for all sales of PBDS Kits and to
all Cost Management transactions made to date for the year.
6.2.3 As additional fees for Products sold as part of PBDS Kits to
customers not under a comprehensive Cost Management agreement with Allegiance,
Baxter shall pay the difference between the fee calculated as if Section 6.2.2
applied, and the * * * fee paid pursuant to Section 6.2.1. Such additional fees
will be calculated at the end of each applicable quarter.
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6.2.4 If any calculation under this Section 6.2 results in a
negative amount, Allegiance shall pay Baxter such amount.
6.3 If a customer enters into a cardiovascular cost management program
with Baxter as permitted under Section 4.2.5, and at that time such customer is
a Cost Management customer of Allegiance, then, for any calculation of Gross
Profit Growth made thereafter, the year-to-date Gross Profit on sales by
Allegiance shall be subtracted from total year-to-date Gross Profit, and the
total Gross Profit on sales by Allegiance to such customer for the prior year
shall be subtracted from total Gross Profit for the preceding entire calendar
year.
6.4 If a customer who has been purchasing Product from Baxter or from
Allegiance other than through PBDS or a comprehensive Cost Management agreement
enters into a comprehensive Cost Management agreement with Allegiance or begins
purchasing PBDS Kits containing the Products, then:
6.4.1 for subsequent calculations of Gross Profit Growth, the year-
to-date Gross Profit will include Gross Profit on year-to-date sales made to
that customer (by Baxter or Allegiance) and the prior year Gross Profit will
include Gross Profit on sales made during the prior year to such customer (by
Baxter or Allegiance);
6.4.2 For each calendar quarter thereafter, Allegiance will refund
to Baxter the difference between (a) the fees calculated pursuant to Section
6.2.2 and 6.2.3, and (b) * * *, multiplied by the volume of Product sales made
to such customer by Baxter or Allegiance during the quarter preceding the
quarter in which the transition occurred.
6.5 If the parties' business information systems and/or data processing
systems are unable to accommodate the applicable percentages set forth in this
Section 6, the parties shall agree upon a procedure for monthly payment with a
quarterly adjustment to achieve the effects of the deal set forth herein.
6.6 BCS Kit Components. Allegiance shall pay to Baxter as the purchase
price of the Products purchased by Allegiance as components for BCS Kits an
amount equal to the aggregate Component Price.
6.7 Perfusion Services. For all sales of Perfusion Services (whether
invoiced by Allegiance or Baxter), Baxter shall
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pay Allegiance * * * of the sales growth of Perfusion Services (excluding the
effect of acquisitions and divestitures). For purposes of this Section, sales
growth shall be calculated as Perfusion Services net sales in any quarter less
----
Perfusion Services net sales in the corresponding quarter of 1996, provided,
that for calculating such growth for the fourth quarter of 1996, the Perfusion
Services net sales for the fourth quarter of 1995 shall be used. The method used
to exclude the effect of acquisitions and divestitures will be as follows; (a)
for acquisitions, the current quarter sales of the acquisition will be added to
the base sales of the corresponding quarter of 1996, and (b) for divestitures,
the current quarter sales of the divestiture will be subtracted from the base
sales of the corresponding quarter of 1996. This process will continue until a
full twelve months have elapsed since the acquisition or divestiture.
6.8 Field Corrective Action ("FCA") Fees and Expenses.
6.8.1 In addition to the other fees and charges set forth in this
Section 6, in 1997 and subsequent years Baxter will pay Allegiance an annual fee
equal to (a) * * * times (b) the total number of Product lines affected by FCAs
in such year in excess of * * *. For purposes of this Section, any FCAs caused
by Allegiance's negligence shall be excluded. In addition, for each catalog
number affected by an FCA, the total "lines" shall be an amount equal to the sum
of (a) the number of notification processing responses completed by Allegiance
facilities for that FCA, plus (b) the number of dispositions completed by
Allegiance facilities for that FCA. Baxter shall not owe Allegiance any FCA fee
under this Section, nor shall Baxter be entitled to any fee or credit from
Allegiance, if in 1997 or any subsequent year, the total number of lines
affected by FCAs does not exceed 1546. For 1996, the FCA fee will be computed
based on the excess of total Product lines affected by FCAs in the last three
months of 1996 over the average quarterly total of Product lines affected by
FCAs in calendar year 1995.
6.8.2 Additional FCA Services. Baxter shall pay Allegiance the
-----------------------
fees agreed upon for any additional FCA services requested and approved by
Baxter and provided by Allegiance pursuant to Section 1.6.2 of Exhibit B.
6.8.3 Third-Party Invoices. Pursuant to Section 1.6.2 of Exhibit
--------------------
B, Baxter shall reimburse Allegiance for all third-party invoices relating to
additional FCA services requested and approved by Baxter and actually paid by
Allegiance.
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6.9 Packaging Failure. Baxter shall reimburse Allegiance for Allegiance's
actual out-of-pocket expenses (including, without limitation, expenses for
repackaging and return of Product) incurred in respect of failure of shipping
cartons for Products, provided that such failure is not due to Allegiance's acts
or omissions. Such reimbursement shall be paid quarterly and shall be due
within 30 days after receipt of Allegiance's invoice therefor together with full
supporting documentation.
7. Invoicing and Payments.
7.1 General.
7.1.1 Baxter will invoice Allegiance on a daily basis according to
the terms of this Agreement. On or before the tenth day of each calendar month
during the Term, Baxter shall submit a report to Allegiance including its Gross
Profit and Gross Profit Growth, and sales growth of Perfusion Services.
7.1.2 For sales of Products to Allegiance, Baxter shall submit
invoices to Allegiance upon the shipment of Products to Allegiance. Allegiance
shall pay all such invoices net 60 days from the date of the invoice.
7.1.3 For all fees due under Sections 6.2.1 and 6.2.2, such fees
shall be paid net 15 days from the end of the applicable month.
7.1.4 For all fees and refunds due under Sections 6.2.3, 6.3 and
6.4, such fees and refunds shall be paid net 30 days from the end of the
applicable calendar quarter.
7.1.5 For sales of Perfusion Services, Baxter shall pay Allegiance
for any fees due hereunder on a quarterly basis net 30 days from the end of the
applicable calendar quarter. For sales of Perfusion Services invoiced by
Allegiance, Allegiance shall pay the full invoice amount to Baxter within 30
days of the invoice date.
7.1.6 For sales to Allegiance of BCS Kit Components, Baxter will
submit invoices daily to Allegiance upon shipment to Allegiance's BCS facility.
Allegiance shall pay all such invoices net 60 days from the date of the invoice.
7.1.7 Baxter will pay or cause its Affiliates to pay all amounts
due to Allegiance pursuant to this Agreement within 30 days after receipt of any
such invoice.
7.1.8 If any amounts due have not been received by
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the due date, such overdue amounts shall bear interest from the due date at the
rate of * * * per month, or portion thereof, until received. If payment is
delayed because a report required by Section 7.1.1 has not been received,
interest will not accrue until 30 days after receipt of such report.
7.1.9 Either party shall have the right to withhold any amounts
due hereunder if such party in good faith disputes the amount claimed by the
other party to be due hereunder and such party notifies the other party of such
dispute within 30 days after the due date of any such payment. The foregoing
right to withhold payment of disputed amounts shall be limited to amounts
disputed in good faith.
7.2 Reimbursable Expenses. Within 15 days of Baxter's receipt of any
invoice, Baxter shall reimburse Allegiance for Allegiance's actual out-of-pocket
expenses incurred for freight for Products (a) received by Allegiance at its
distribution centers from Baxter's replenishment centers; and (b) shipped by
Allegiance using special transportation requiring a premium charge paid by
Allegiance, billed by Baxter, and collected by Baxter from the customer.
7.3 Audit. Allegiance may audit Baxter's books and records and Baxter may
audit Allegiance's books and records for the purpose of determining compliance
with the terms of this Agreement. The party requesting the audit may use
independent auditors, who may participate fully in such audit. In the event
that an audit is proposed with respect to information which the party to be
audited wishes not to disclose to the other party ("Restricted Information"),
then on the written demand of the party to be audited the individuals conducting
the audit with respect to Restricted Information will be limited to the
independent auditors of the party requesting the audit. In such event, the
party to be audited shall pay the costs of the independent auditors conducting
such audit, but only with respect to that portion of the audit relating to the
Restricted Information. Such independent auditors shall enter into an agreement
with the parties hereto, on terms that are agreeable to both parties hereto,
under which such independent auditors shall agree to maintain the
confidentiality of the information obtained during the course of such audit and
establishing what information such auditors will be permitted to disclose to
report the results of any audit of Restricted Information to the party
requesting the audit. Any such audit shall be conducted during regular business
hours, in a manner that does not interfere unreasonably with the operations of
the party being audited. Such audits shall be conducted not more than once in
any one year period
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unless the next preceding audit disclosed a material failure to conform to the
terms of this Agreement. Subject to the foregoing limitations, any such audit
shall be conducted when requested by Notice given not less than 30 days prior to
the commencement of the audit.
8. Allegiance's Duties. During the Term, Allegiance shall maintain the
facilities and personnel necessary to provide the physical distribution services
and related services in connection with its appointment hereunder including,
without limitation, the facilities and personnel necessary to fulfill
Allegiance's duties as set forth in Exhibit B attached hereto and made a part
hereof.
9. Baxter's Duties. During the Term, Baxter shall maintain the facilities and
personnel necessary to manufacture and distribute the Products and Perfusion
Services as provided for hereunder including, without limitation, the facilities
and personnel necessary to fulfill Baxter's duties as set forth in Exhibit C
attached hereto and made a part hereof.
10. Standard of Care. Each party will use (and will cause its Affiliates to
use) commercially reasonable efforts in the performance of its obligations
hereunder and will do so with the same degree of care, skill and prudence
customarily exercised when engaged in similar activities for itself and its
Affiliates. Subject to the provisions of Section 20 hereof, if a party's
performance is inaccurate, incomplete, or untimely, such party shall, if
practical, promptly perform or reperform such obligations. In performing its
responsibilities hereunder, each party shall accord the other party and its
Affiliates the same priority as it provides itself and its Affiliates under
comparable circumstances. Without limiting the generality of the foregoing, in
the provision of services under comparable circumstances, a party will not
discriminate against the other party or any of its Affiliates solely because the
other party or one of its Affiliates is the recipient of such services. The
parties agree to consult with each other with respect to performance of their
obligations hereunder. Each party shall give due consideration to any
suggestion by the other to improve performance.
10.1 Uniform Commercial Code. The parties agree that the provisions of
Section 2-306(2) of the Uniform Commercial Code shall not apply to services or
any other activities or obligations of either of the parties hereunder.
11. Transfer of Title and Risk of Loss. Title and risk of loss for the
Products shall pass from Baxter to Allegiance upon
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receipt of Products by Allegiance.
12. Warranties.
12.1 Product Warranty. Baxter warrants to Allegiance that, at the time of
delivery to Allegiance: (a) the Products shall not be adulterated or misbranded
within the meaning of the Federal, Food, Drug and Cosmetic Act, as amended and
the regulations issued thereunder, or products that may not, under the provision
of Section 404, 505, 514 or 515 of said Act, be introduced into interstate
commerce, or banned devices under Section 516 of said Act; and (b) Baxter shall
have good and marketable title to all such Products free and clear of all liens
or encumbrances (other than any created by Allegiance).
12.2 Disclaimer. THE FOREGOING WARRANTY IS EXCLUSIVE AND IN LIEU OF ALL
OTHER WARRANTIES OF ANY KIND, WHETHER STATUTORY, WRITTEN, ORAL, EXPRESS OR
IMPLIED, INCLUDING ANY WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE AND
MERCHANTABILITY. IN NO EVENT, WHETHER AS A RESULT OF BREACH OF CONTRACT, TORT
LIABILITY (INCLUDING NEGLIGENCE) OR OTHERWISE, SHALL BAXTER BE LIABLE TO
ALLEGIANCE FOR ANY SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES.
12.3 Limitation of Liability. ANY LIABILITY OF BAXTER TO ALLEGIANCE UNDER
THE WARRANTY CONTAINED IN THIS SECTION 12.3 SHALL BE LIMITED TO THE TOTAL PRICE
PAID BY ALLEGIANCE FOR THE PRODUCTS WHICH ARE THE SUBJECT OF SUCH LIABILITY PLUS
ALL COSTS FOR TRANSPORTATION AND OTHER DIRECT EXPENSES INCURRED BY ALLEGIANCE
WITH RESPECT TO SUCH PRODUCTS.
13. Trademarks.
13.1 Ownership. Allegiance acknowledges that Baxter or its Affiliates are
the owners or licensees of the trademarks and trade names which Baxter and its
Affiliates use in the promotion and sale of the Products and Perfusion Services
hereunder, and that Allegiance has no right or interest in such trademarks or
trade names. Before commencing any use of the trademarks or trade names
connoting Baxter in connection with any catalog, promotional, packaging, or
other materials, which use has not been previously approved in writing by
Baxter, Allegiance agrees to provide Baxter with proposed specimens of use of
such trademarks or trade names and to obtain Baxter's written approval of such
proposed use.
13.2 Infringement. Allegiance shall notify Baxter promptly
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of any and all infringements or improper use by any third party of the
trademarks and trade names connoting Baxter should Allegiance discover
reasonable cause for believing that such infringement or improper use is taking
place and shall provide to Baxter all information which Allegiance has available
thereon. Baxter shall have sole discretion and control with regard to any
proceedings relating to infringement or improper use of its trademarks and trade
names. Allegiance may choose to be represented by its own counsel in any such
proceedings but such representation shall be solely at Allegiance's expense.
13.3 Equitable Remedies. Allegiance acknowledges that Baxter would not
have any adequate remedy at law for the breach by Allegiance of any one or more
of the covenants contained in this Section 13 and agrees that, in the event of
such breach, Baxter may, in addition to the other remedies which may be
available to it, file a suit in equity to enjoin Allegiance from any further
breach of any of the terms of this Section 13.
14. Termination.
14.1 Change in Control.
14.1.1 General. In the event of a Change in Control of either party
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hereto or any Affiliate thereof to which any of the rights or obligations
hereunder have been assigned as permitted by Section 23, the party (the
"Affected Party") with respect to which the Change in Control has occurred,
either directly or with respect to one of its Affiliates, shall give Notice to
the other party (the "Non-Affected Party") within 30 days of the occurrence of
such Change in Control. The Non-Affected Party may terminate this Agreement, in
whole but not in part, in the event of any such Change in Control with respect
to the Affected Party by giving Notice of such termination to the Affected Party
as provided below. In the event of a Change in Control of an Affiliate of the
Affected Party to which any of the rights or obligations hereunder have been
assigned as permitted by Section 23, the Non-Affected Party may terminate this
Agreement with respect to such Affiliate by giving Notice to the Affected Party
as provided below. The Non-Affected Party may exercise the rights of
termination described in the two preceding sentences by giving a Notice of
termination, specifying the date of termination, to the Affected Party at any
time prior to the end of the 60th day following the receipt by the Non-Affected
Party of the applicable Notice of Change in Control given by the Affected Party
pursuant to the first sentence of this Section 14.1.1. In the event that the
applicable Change in Control involves a Competitor of the Non-Affected Party,
the date of
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termination specified by the Non-Affected Party in the Notice of termination
shall be the last day of the calendar month which is not earlier than the sixth
full calendar month following the date of the Notice of termination and not
later than the twelfth full calendar month following the date of the Notice of
termination. In the event that the applicable Change in Control does not involve
a Competitor of the Non-Affected Party, the date of termination specified by the
Non-Affected Party in the Notice of termination shall be the later of (i) the
last day of the twelfth full calendar month following the date of the Notice of
termination and (ii) December 31, 1998.
14.1.2 Definitions. For purposes hereof, "Change in Control" shall
-----------
mean (i) the acquisition, directly or indirectly, by any Person or Persons of
more than 30% of the voting stock of either party to this Agreement or any
Affiliate thereof, (ii) any merger or consolidation involving the Affected Party
or any Affiliate of the Affected Party that requires a vote of the stockholders
of the Ultimate Parent of the Affected Party, (iii) the acquisition by the
Ultimate Parent of the Affected Party or any Affiliate of the Ultimate Parent of
the Affected Party of any Person that (a) is a Rival of the Ultimate Parent of
the Non-Affected Party and (b) after such acquisition, constitutes a
"significant subsidiary" of the Affected Party within the meaning of Rule 1-
02(w) of Regulation S-X of the Regulations of the Securities and Exchange
Commission, substituting 50 percent for 10 percent in the tests used therein to
determine significant subsidiary, and (iv) only in the case of an Affiliate of
the Affected Party, the Transfer of all or substantially all of the business and
assets of such Affiliate. For the purposes hereof, "Rival" shall mean (a) with
respect to Baxter, any Person (including an Affiliate of such Person) that
during its most recently completed fiscal year has annual net revenues greater
than 20 percent of the total annual consolidated net revenues of Baxter
International during its most recently completed fiscal year; and (b) with
respect to Allegiance, any Person (including an Affiliate of such Person) that
during its most recently completed fiscal year has annual net revenues greater
than 20 percent of the total annual consolidated net revenues of Allegiance
Corporation during the most recently completed fiscal year. For the purposes
hereof, "Ultimate Parent" means Baxter International in the case of Baxter and
Allegiance Corporation in the case of Allegiance.
14.1.3 Transfers by Baxter. In the event that Baxter or any of its
-------------------
Affiliates shall Transfer all or substantially all of the business and assets
relating to any Line of Products as permitted by Section 23, Allegiance may
terminate this Agreement
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with respect to such Line of Products in the same manner as provided in Section
14.1.1. In the event that Baxter or any of its Affiliates shall Transfer all or
substantially all of the business and assets relating to the Products as
permitted by Section 25, Allegiance may terminate this Agreement in its entirety
in the same manner as provided in Section 14.1.1.
14.1.4 Transfers by Allegiance. In the event that Allegiance or any
-----------------------
of its Affiliates shall Transfer any portion of its business and assets relating
to Allegiance's distribution network as permitted by Section 23, which portion
accounted for net sales during the most recently completed fiscal year in excess
of $250 million, Baxter may terminate this Agreement with respect to the
Transferred portion of the distribution network in the same manner as provided
in Section 14.1.1.
14.1.5 Obligation to Negotiate. If demanded in writing by the Non-
-----------------------
Affected Party, the Affected Party shall be obligated, during the period
following a Notice of termination from the Non-Affected Party, to negotiate in
good faith to establish terms and conditions that are acceptable to the Non-
Affected Party for an extension of the Term beyond the date of termination
specified in the Notice of termination in light of the Change in Control,
provided, however, the Non-Affected Party may in its absolute discretion
determine whether any proposed terms and conditions are acceptable and may
refuse to agree to any such terms and conditions for any reason whatsoever.
14.1.6 Confidential Information During the period commencing with
------------------------
any such Change in Control and continuing through the end of the Term (and
thereafter, if appropriate), the Affected Party shall take any and all action
reasonably requested by the Non-Affected Party to protect any confidential
information of the Non-Affected Party from disclosure to or use by any Affiliate
of the Affected Party other than a Person that, immediately prior to the
occurrence of the Change in Control, was an Affiliate of the Affected Party that
regularly accessed such confidential information for a reasonable business
purpose.
14.2 Other Terminations. Each Party shall have the right to terminate this
Agreement effective upon delivery of Notice to the other party if the other
party: (a) makes an assignment for the benefit of creditors, or becomes
bankrupt or insolvent, or is petitioned into bankruptcy, or takes advantage of
any state, federal or foreign bankruptcy or insolvency act, or if a receiver or
receiver/manager is appointed for all or any substantial part of its property
and business and such receiver or receiver/manager remains undischarged for a
period of 30 days,
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(b) has its corporate existence terminated by voluntary or involuntary
dissolution; or (c) materially defaults in the performance of any of its
covenants or obligations contained in this Agreement and such default is not
remedied to the nondefaulting party's reasonable satisfaction within 30 days
after Notice to the defaulting party of such default, or if such default is not
capable of rectification within 30 days, if the defaulting party has not
promptly commenced to rectify the default within such 30 day period and is not
proceeding diligently to rectify the default.
14.3 Procedures on Termination. In the event of any termination of this
Agreement and if and when requested by Allegiance, Baxter will promptly remove
all inventory of Products owned by Baxter from facilities of Allegiance or any
of its Affiliates. Such removal will be effected during normal business hours
after reasonable advance Notice to Allegiance and will be done in a manner that
will not unreasonably disrupt the normal business operations of Allegiance or
Baxter.
Except as otherwise required pursuant to Sections 19 and 21.9, each party
shall destroy or return to the other party all records made or obtained in the
course of performance hereunder containing information regarding the other party
or its customers that is protected from disclosure under Section 19. In the
event that any party shall elect to destroy any records as permitted above, such
party shall provide the other party with written confirmation of any such
destruction.
14.4 Continued Service. In the event that this Agreement is terminated
pursuant to this Section 14, Baxter and Allegiance shall comply fully with this
Agreement and use reasonable efforts to service adequately existing customers of
the Products until such termination becomes effective.
14.5 Pending Orders. On the expiration or termination of this Agreement
for any reason, Allegiance shall continue to honor customer's orders for
Products placed up to the date of expiration or termination, and Baxter shall
pay the fees due to Allegiance on the terms and conditions set forth in this
Agreement. Any consideration due hereunder that is calculated based upon a
specified time period shall be prorated for any partial period of time between
the end of the last such period and the date of expiration or termination. In
the event that Allegiance has elected to terminate this Agreement because of the
failure of Baxter to pay amounts due hereunder, Allegiance shall be obligated to
perform under the first sentence of this Section 14.5 only after Baxter shall
have paid all amounts due and owing
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to Allegiance hereunder.
14.6 Sell-Off. Notwithstanding any provision of this Agreement or any
other agreement between Baxter, Allegiance, and/or their respective Affiliates,
the parties acknowledge that Allegiance and its Affiliates shall be entitled to
continue to sell or otherwise dispose of the Products within the Territory from
and after the effective date of the expiration or termination of this Agreement
if such Products were owned by Allegiance on the date of termination.
14.7 True-Up. No later than 12 months after expiration or termination of
this Agreement, Baxter shall report to Allegiance all discounts and bonuses
accrued but not earned and/or earned but not accrued on sales made hereunder,
and Baxter shall submit either a payment or an invoice for the net of such
amounts.
15. Indemnity.
15.1 Baxter's Obligation. Baxter agrees to indemnify and hold Allegiance
and the Allegiance Indemnified Parties harmless from and against, and in respect
of, any and all claims by, and liabilities to, third parties ("Third-Party
Claims") asserted against or incurred by, and any and all expenses (including
all fees and expenses of counsel, travel costs and other out-of-pocket costs) in
connection with pending or threatened litigation or other proceedings regarding
such Third-Party Claims ("Expenses") incurred by, Allegiance or any of the
Allegiance Indemnified Parties (as hereinafter defined) which arise out of or
relate to:
15.1.1 any actual or alleged patent, copyright or trademark
infringement, or violation of any other proprietary right, arising out of the
purchase, sale or use of Products pursuant to this Agreement;
15.1.2 any tort claim, including claims for personal injury, wrongful
death or property damage, to the extent such claims are based upon any wrongful
or negligent act or omission by Baxter (or its employees or agents) in the
course of its performance of this Agreement;
15.1.3 defects in Products;
15.1.4 any actual or alleged breach of warranty or obligation, if
any, accompanying the Product or Products, subject to the limitations in Section
12 to the extent provided therein; and
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15.1.5 any claim for personal injury, wrongful death or property
damage arising out of the use of a Product;
provided that this Section 15.1 shall not apply to any Third-Party Claim or
- --------
Expense to the extent that the parties agree, or it is finally determined
pursuant to Section 15.4 that the Third-Party Claim or Expense is within the
scope of Allegiance's indemnity obligation set forth in Sections 15.2.1 and
15.2.2 below.
The Allegiance Indemnified Parties shall mean and include (A) Allegiance's
Affiliates (B) the respective directors, officers, agents and employees of and
counsel to Allegiance and its Affiliates, (C) each other person, if any,
controlling Allegiance or any of its Affiliates, and (D) the successors,
assigns, heirs and personal representatives of any of the foregoing. Expenses
shall be reimbursed or advanced when and as incurred promptly upon submission by
Allegiance or any Allegiance Indemnified Party of statements to Baxter.
15.2 Allegiance's Obligation. Allegiance agrees to indemnify and hold
Baxter and the Baxter Indemnified Parties harmless from and against, and in
respect of, any and all Third-Party Claims asserted against or incurred by, and
any and all Expenses incurred by, Baxter or any of the Baxter Indemnified
Parties (as hereinafter defined) which arise out of or relate to:
15.2.1 any tort claim, including claims for personal injury, wrongful
death or property damage, to the extent such claims are based upon any wrongful
or negligent act or omission by Allegiance (or its employees or other agents) in
the course of its performance of this Agreement including, but not limited to,
any Third-Party Claims or Expenses caused by any such wrongful or negligent act
or omission constituting a representation concerning the characteristics or
method of usage of Products, or relating to the storage, handling, or delivery
of Products or selection of Products for inclusion in Kits; and
15.2.2 any actual or alleged patent, copyright or trademark
infringement, or violation of any other proprietary right, arising out of any
act or omission of Allegiance or any of its Affiliates in connection with the
sale of Kits or relating to any intellectual property owned by Allegiance or any
of its Affiliates and used in connection with the sale of Kits.
The Baxter Indemnified Parties shall mean and include (A) Baxter's Affiliates,
(B) the respective directors, officers,
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agents and employees of and counsel to Baxter and its Affiliates, (C) each other
person, if any, controlling Baxter or any of its Affiliates, and (D) the
successors, assigns, heirs and personal representatives of any of the foregoing.
Expenses shall be reimbursed or advanced when and as incurred promptly upon
submission by Baxter or any Baxter Indemnified Party of statements to
Allegiance.
15.3 Third-Party Claims. If any third party shall make any claim or
commence any arbitration proceeding or suit against any one or more of the
Baxter Indemnified Parties or the Allegiance Indemnified Parties (hereafter,
"Indemnified Persons") with respect to which an Indemnified Person intends to
make any claim for indemnification against Allegiance under Section 15.2 or
against Baxter under Section 15.1 (as the case may be, the "Indemnifying
Party"), such Indemnified Persons shall promptly give written notice to the
Indemnifying Party of such third party claim, arbitration proceeding or suit and
the following provisions shall apply.
15.4 Control of Proceedings.
15.4.1 The Indemnifying Party shall have 20 business days after
receipt of the notice referred to in Section 15.3 to notify the Indemnified
Party that it elects to conduct and control the defense of such claim,
proceeding or suit. If the Indemnifying Party does not give the foregoing
notice, the Indemnified Party shall have the right to defend, contest, settle or
compromise such claim, proceeding or suit in the exercise of its exclusive
discretion subject to the provisions of Section 15.5, and the Indemnifying Party
shall, upon request from any of the Indemnified Persons, promptly pay to such
Indemnified Persons in accordance with the other terms of this Section the
amount of any Third-Party Claim resulting from their liability to the third
party claimant and all related Expense.
15.4.2 If the Indemnifying Party gives the foregoing notice, the
Indemnifying Party shall have the right to undertake, conduct and control,
through counsel reasonably acceptable to the Indemnified Party, and at its sole
expense, the conduct and settlement of such claim, proceeding or suit, and the
Indemnified Party shall cooperate with the Indemnifying Party in connection
therewith, provided that (i) the Indemnifying Party shall not thereby permit any
lien, encumbrance or other adverse charge to thereafter attach to any asset of
any Indemnified Person; (ii) the Indemnifying Party shall not thereby permit any
injunction against any Indemnified Person; (iii) the Indemnifying Party shall
permit the Indemnified Person and counsel chosen by the
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Indemnified Person and reasonably acceptable to the Indemnifying Party to
monitor such conduct or settlement and shall provide the Indemnified Person and
such counsel with such information regarding such claim, proceeding or suit as
either of them may reasonably request (which request may be general or
specific), but the fees and expenses of such counsel shall be borne by the
Indemnified Person unless (1) the Indemnifying Party and the Indemnified Person
shall have mutually agreed to the retention of such counsel or (2) the named
parties to any such claim, proceeding or suit include the Indemnified Person and
the Indemnifying Party and in the reasonable opinion of counsel to the
Indemnified Person representation of both parties by the same counsel would be
inappropriate due to actual or likely conflicts of interest between them, in
either of which cases the reasonable fees and disbursements of counsel for such
Indemnified Person shall be reimbursed by the Indemnifying Party to the
Indemnified Person; and (iv) the Indemnifying Party shall agree promptly to
reimburse to the extent required under this Section the Indemnified Person for
the full amount of any Third-Party Claim resulting from such claim, proceeding
or suit and all related Expense incurred by the Indemnified Person.
15.4.3 In no event shall the Indemnifying Party without the prior
written consent of the Indemnified Person, settle or comprise any claim or
consent to the entry of any judgment that does not include as an unconditional
term thereof the giving by the claimant or the plaintiff to the Indemnified
Person a release from all liability in respect of such claim.
15.4.4 If the Indemnifying Party shall not have undertaken the
conduct and control of the defense of any claim, suit or proceeding as provided
above, the Indemnifying Party shall nevertheless be entitled through counsel
chosen by the Indemnifying Party and reasonably acceptable to the Indemnified
Person to monitor the conduct or settlement of such claim by the Indemnified
Person, and the Indemnified Person shall provide the Indemnifying Party and such
counsel with such information regarding such action or suit as either of them
may reasonably request (which request may be general or specific), but all costs
and expenses incurred in connection with such monitoring shall be borne by the
Indemnifying Party.
15.5 Settlement of Third-Party Claims by the Indemnified Person. So long
as the Indemnifying Party is contesting any such claim, suit or proceeding in
good faith, the Indemnified Person shall not pay or settle any such claim,
proceeding or suit. Notwithstanding the foregoing, the Indemnified Person shall
have the right to pay or settle any such claim, proceeding or suit,
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SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH
SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
provided that in such event the Indemnified Person shall waive any right to
indemnity therefor by the Indemnifying Party, and no amount in respect thereof
shall be claimed as Third-Party Claim or Expense under this Section 15.
If the Indemnifying Party shall not have undertaken the conduct and control
of the defense of any claim, suit or proceeding as provided above, the
Indemnified Person, on not less than 30 days' prior written Notice to the
Indemnifying Party, may make settlement (including payment in full) of such
claim and such settlement shall be binding upon the parties hereto for the
purposes hereof, unless within said 30-day period the Indemnifying Party shall
have requested the Indemnified Person to contest such claim at the expense of
the Indemnifying Party. In such event, the Indemnified Person shall promptly
comply with such request and the Indemnifying Party shall have the right to
direct the defense of such claim or any litigation based thereon subject to all
of the conditions of Section 15.4. Anything in this Section 15 to the contrary
notwithstanding, if the Indemnified Person advises the Indemnifying Party that
it has determined to make settlement of a claim, the Indemnified Person shall
have the right to do so at its own cost and expense, without any requirement to
contest such claim at the request of the Indemnifying Party, but without any
right under the provisions of this Section 15 for indemnification by the
Indemnifying Party.
16. Insurance. Each party is responsible for carrying any insurance desired by
it in its sole discretion, including comprehensive general liability insurance,
insurance to cover its facilities, products liability insurance and business
interruption insurance.
17. Compliance with Laws.
17.1 Allegiance Compliance. Allegiance shall, to the extent material to
Allegiance and its Affiliates taken as a whole, comply (or cause compliance)
with all existing and future federal, state and other laws and regulations in
the Territory applicable to the conduct of Allegiance's business, the provision
of Perfusion Services or the possession of Products pursuant to this Agreement
including, without limitation, the following:
17.1.1 giving prompt written notice to Baxter if Allegiance should
become aware of any actual defect or condition which may alter the quality of
the Products and Perfusion Services in any material respect or may render any of
the Products and Perfusion Services in violation of any applicable
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SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH
SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
law or regulation of the Territory including, without limitation, any violation
which could require any alteration of the specifications of any Product, affect
the sale of any Product, cause revocation of any regulatory approval with
respect to any Product or its sale hereunder, or give rise to a claim against
Baxter by any person, and Allegiance shall promptly notify Baxter upon becoming
aware of any changes in any laws or regulations in the Territory applicable to
the manufacture, sale, packaging, labeling, possession or use of the Products;
17.1.2 keeping appropriate records of all lot coded and serial
numbered Products shipped to customers; and
17.1.3 making prompt return of any and all Products affected by
holds or recalls if so requested by Baxter.
To the extent applicable to the subject matter of this Agreement, and
pursuant to the requirements of 42 CFR 420.300 et. seq., Allegiance hereby
agrees to make available to the Secretary of Health and Human Services ("HHS"),
the Comptroller of the General Accounting Office ("GAO"), or their authorized
representatives, all contracts, books, documents and records relating to the
nature and extent of costs hereunder for a period of four (4) years after the
furnishing of services hereunder. In addition, if any part of any Product is to
be provided by subcontract, Allegiance hereby agrees to require by contract that
such subcontractor make available to the HHS and GAO, or their authorized
representatives, all contracts, books, documents and records relating to the
nature and costs thereunder for a period of four (4) years after the furnishing
of services thereunder.
17.2 Baxter Compliance. Baxter shall, to the extent material to Baxter and
its Affiliates take as a whole, comply (or cause compliance) with all existing
and future laws and regulations in the Territory applicable to the conduct of
Baxter's business or the manufacture, packaging, labeling and sale to Allegiance
of Products pursuant to this Agreement, including, without limitation, the
following:
17.2.1 giving prompt written notice to Allegiance if Baxter should
become aware of any actual defect or condition which may alter the quality of
the Products or Perfusion Services in any material respect or may render any of
the Products or Perfusion Services in violation of any applicable law or
regulation of the Territory, including, without limitation, any violation which
could require any alteration of the specifications of any Product, affect the
sale of any Product, cause revocation of any federal, state or other regulatory
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SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH
SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
approval with respect to any Product or its sale hereunder or give rise to a
claim against Allegiance by any person; and
17.2.2 giving prompt written notice to Allegiance of any and all
Products affected by holds or recalls and, if Baxter requests Allegiance to
return any of such Products to Baxter, promptly reimburse Allegiance for the
price of such returned Products paid by Allegiance under this Agreement and the
direct cost of returning such Products to Baxter.
The Products and Perfusion Services provided hereunder will not be provided
in violation of any applicable Equal Employment Opportunity requirements
including those set forth in Section 202 of Executive Order 11246, as amended.
18. Force Majeure. The obligations of either party to perform under this
Agreement shall be excused during each period of delay caused by matters (not
including lack of funds or other financial causes) such as strikes, supplier
delays, shortages of raw materials, government orders or acts of God, which are
reasonably beyond the control of the party obligated to perform; provided that
nothing contained in this Agreement shall affect either party's ability or
discretion with respect to any strike or other employee dispute or disturbance
and all such strikes, disputes or disturbances shall be deemed to be beyond the
control of such party. A condition of force majeure shall be deemed to continue
only so long as the affected party shall be taking all reasonable actions
necessary to overcome such condition. In the event that either party hereto
shall be affected by a condition of force majeure, such party shall give the
other party prompt Notice thereof, which Notice shall contain the affected
party's estimate of the duration of such condition and a description of the
steps being taken or proposed to be taken to overcome such condition of force
majeure. Any delay occasioned by any such cause shall not constitute a default
under this Agreement, and the obligations of the parties shall be suspended
during the period of delay so occasioned. During any period of force majeure,
the party that is not directly affected by such condition of force majeure shall
be entitled to take any reasonable action necessary to mitigate the effects of
such condition of force majeure, and the provisions of Section 4 shall be
suspended to the extent necessary to permit any such action.
19. Confidentiality.
19.1 Allegiance Information. Baxter agrees to hold, and to use reasonable
efforts to cause its employees and representatives to hold, in confidence all
marketing and pricing information of a
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SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
confidential nature pertaining to the Territory received by Baxter from
Allegiance after the Effective Date or obtained from Allegiance in the course of
an audit pursuant to Section
7.3, in a manner consistent with Baxter's treatment of its own confidential
information. Baxter shall not use such information for any purpose other than
as contemplated under this Agreement or verifying compliance with this
Agreement, without Allegiance's prior written consent.
19.2 Baxter Information. Allegiance agrees to hold, and to use reasonable
efforts to cause its employees and representatives to hold, in confidence all
information concerning Baxter, furnished to or obtained by Allegiance after the
Effective Date all marketing and pricing information of a confidential nature
pertaining to the Territory received by Allegiance, in a manner consistent with
Allegiance's treatment of its own confidential information. Allegiance shall
not use such information for any purpose other than as contemplated under this
Agreement, without Baxter's prior written consent.
19.3 General. The obligations of confidentiality and non-disclosure imposed
under this Section 19 shall not apply to data and information that the recipient
can demonstrate:
19.3.1 is published or is or otherwise becomes available to the
general public as part of the public domain without breach of this Agreement;
19.3.2 has been furnished or made known to the recipient without
any obligation to keep it confidential by a third party under circumstances
which are not known to the recipient to involve a breach of the third party's
obligations to a party hereto;
19.3.3 was developed independently of information furnished to the
recipient under this Agreement; or
19.3.4 was known to the recipient at the time of receipt thereof
from the other party, is not otherwise subject to (a) the confidentiality
restrictions contained in the Reorganization Agreement dated as of September 30,
1996 between Baxter International and Allegiance Corporation, or (b) any other
obligation to keep it confidential and was obtained from a third party under
circumstances which were known to the recipient to involve a breach of the third
party's obligations to a party
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SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH
SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
hereto.
19.4 Equitable Relief. Each party (the "first party") acknowledges that
the other party would not have an adequate remedy at law for the breach by the
first party of any one or more of the covenants contained in this Section 19 and
agrees that, in the event of such breach, the other party may, in addition to
the other remedies which may be available to it, apply to a court for an
injunction to prevent breach of this Section 19 and to enforce specifically the
terms and provisions of this Section.
19.5 Required Disclosures. The provisions of this Section shall not
preclude disclosures required by law; provided, however, that each party will
use reasonable efforts to notify the other, prior to making any such disclosure,
and permit the other to take such steps as it deems appropriate, including
obtaining a protective order, consistent with applicable law, to minimize any
loss of confidentiality.
19.6 Security. Each party shall be responsible for preventing unauthorized
remote access by such party's own agents and employees to data transferred to or
otherwise made available to the other party under this Agreement.
20. Limitation of Liability and Remedy.
20.1 Damages. In no event, whether based on contract, indemnity, warranty,
tort (including negligence), strict liability or otherwise, shall either party
or any of its directors, officers, employees or agents, be liable for special,
exemplary, or punitive damages. The foregoing limitation and disclaimer shall
apply irrespective of whether the possibility of such special, exemplary, or
punitive damages had been disclosed in advance or could have reasonably been
foreseen.
The limitations and disclaimers of obligations and liabilities contained in
this Section 20 are intended to apply to the fullest extent permitted by law;
provided that such limitations and disclaimers shall not limit amounts payable
with respect to any express indemnity provided for in this Agreement.
20.2 Exclusive Remedies.
20.2.1 Baxter's Exclusive Remedies. Except in the case of the gross
---------------------------
negligence or willful misconduct of Allegiance or its Affiliates, Baxter's
exclusive remedies against Allegiance for any breach of, or other act or
omission arising out of or relating to, this Agreement shall be:
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SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH
SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
20.2.1.1 the right to receive payment of amounts owed under
Sections 6 and 7 hereof;
20.2.1.2 the right to require reperformance of any service to
the extent required pursuant to Section 9;
20.2.1.3 the right to indemnification as provided in Section 15;
20.2.1.4 the right to injunction, specific performance or other
equitable non-monetary relief when available under applicable law;
20.2.1.5 the right to terminate this Agreement for material
breach as set forth in Section 14; and
20.2.1.6 the right to actual damages for breach of Section 19.
20.2.2 Allegiance's Exclusive Remedies. Except in the case of the
-------------------------------
gross negligence or willful misconduct of Baxter or its Affiliates, Allegiance's
exclusive remedies against Baxter for any breach of, or other act or omission
arising out of or relating to, this Agreement shall be:
20.2.2.1 the right to receive payment of amounts owed under
Sections 6 and 7 hereof;
20.2.2.2 with respect to Distributor Model transactions only,
the right to require Baxter to repair or replace (at Baxter's option and
expense) any Product that proves not to be in conformity with applicable
labeling or specifications, and Baxter shall pay the transportation and
other costs incurred by Allegiance with respect to any Products returned to
Baxter for repair or replacement under this Section 20.2.2.2, or at
Baxter's option, reimburse Allegiance for any such costs;
20.2.2.3 the right to indemnification as provided in Section 15;
20.2.2.4 the right to injunction, specific performance or other
equitable non-monetary relief when available under applicable law;
20.2.2.5 the right to terminate this Agreement for material
breach as set forth in Section 14; and
20.2.2.6 the right to actual damages for
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SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
breach of Section 19.
21. Miscellaneous Provisions.
21.1 Notices. All notices and other communications required under this
Agreement shall be in writing and shall be deemed to have been given if
delivered by hand, or sent by courier or facsimile transmission (provided that
in the case of facsimile transmission, a confirmation copy of the notice shall
be delivered by hand or sent by courier within 2 days of transmission),
addressed:
To Baxter:
Baxter Healthcare Corporation
CardioVascular Group
17221 Red Hill Avenue
Irvine, California 92714
Attention: General Counsel
with copies to:
Baxter Healthcare Corporation
One Baxter Parkway
Deerfield, Illinois 60015
Attention: General Counsel
if to Allegiance to:
Allegiance Healthcare Corporation
McGaw Park Building
1430 Waukegan Road
Waukegan, Illinois 60085
Attention: General Counsel
with a copy to:
Allegiance Healthcare Corporation
McGaw Park Building
1430 Waukegan Road
Waukegan, Illinois 60085
Attention: President--Distribution
until notice of a change in address or addressee is given as provided in this
Section 21.1. All notices given in accordance with this Section 21.1 shall be
effective, if delivered by hand or by courier, at the time of delivery, and, if
communicated by facsimile transmission, at the time of transmission.
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SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
21.2 Entire Agreement. This Agreement is the entire agreement between
the parties hereto with respect to the subject matter hereof, there being no
prior written or oral promises or representations not incorporated herein.
21.3 Choice of Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Illinois and the
federal laws of the United States of America applicable therein, as though all
acts and omissions related hereto occurred in Illinois. Any lawsuit arising from
or related to this Agreement shall only be brought in the United States District
Court for the Northern District of Illinois or the Circuit Court of Lake County,
Illinois. To the extent permissible by law, the parties hereby consent to the
jurisdiction and venue of such courts. Each party hereby waives, releases and
agrees not to assert, and agrees to cause its Affiliates to waive, release and
not assert, any rights such party or its Affiliates may have under any foreign
law or regulation that would be inconsistent with the terms of this Agreement as
governed by Illinois law.
21.4 Amendment; Waiver. No amendment or modification of the terms of
this Agreement shall be binding on either party unless reduced to writing and
signed by an authorized representative of the party to be bound. The waiver by
either party of any particular default by the other party shall not affect or
impair the rights of the party so waiving with respect to any subsequent default
of the same or a different kind; nor shall any delay or omission by either party
to exercise any right arising from any default by the other affect or impair any
rights which the nondefaulting party may have with respect to the same or any
future default.
21.5 Severability. In the event that any of the provisions of this
Agreement is held to be invalid, illegal, void or otherwise unenforceable in any
jurisdiction by reason of any rule of law, administrative decision, judicial
decision, public policy or otherwise, such provision shall be ineffective in
such jurisdiction to the extent of such invalidity, illegality, voidness or
unenforceability without affecting, impairing or invalidating the remaining
provisions, if any, of this Agreement. Any such invalid, illegal, void or
otherwise unenforceable provisions shall be replaced by valid and enforceable
substitute provisions which are as similar as possible to such invalid, illegal,
void or otherwise unenforceable provisions in terms of economic and other
commercial effect upon the parties, which substitute provisions shall be
established pursuant to the dispute resolution procedure set forth in Section
22.2.
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SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH
SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
21.6 Relationship of the Parties. By virtue of this Agreement, neither
party constitutes the other as its agent (except as otherwise expressly
provided), partner, joint venturer, or legal representative and neither party
has express or implied authority to bind the other in any manner whatsoever.
21.7 Survival. The rights and obligations of the parties under Sections
7.3, 12, 14.5, 14.6, 15, 19, 20, and 22, as well as all rights and obligations
with respect to any amounts that remain unpaid under Sections 6 or 7 hereof as
of the date of termination, shall survive any termination of this Agreement.
21.8 Counterparts. For convenience of the parties hereto, this Agreement
may be executed in one or more counterparts, each of which shall be deemed an
original for all purposes.
21.9 Records Retention. Each party will retain all information obtained
or created in the course of performance hereunder in accordance with the records
retention guidelines of the other party existing from time to time. Each party
has advised the other of its respective guidelines as in effect on the Effective
Date and will advise the other party of any subsequent changes therein.
21.10 Beneficiaries. Except for the provisions of Section 15 hereof,
which are also for the benefit of the other Persons indemnified, this Agreement
is solely for the benefit of the parties hereto and their respective Affiliates,
successors and permitted assigns and shall not confer upon any other Person any
remedy, claim, liability, reimbursement or other right in excess of those
existing without reference to this Agreement.
22. Dispute Resolution and Arbitration.
22.1 Escalation. The parties agree that they will attempt to settle any
claim or controversy arising out of this Agreement through good faith
negotiations in the spirit of mutual cooperation between business executives
with authority to resolve the controversy. Prior to taking action as provided
in Section 22.2, the parties shall first submit such claim or controversy to the
appropriate Divisional Presidents of each party for resolution, and if such
Divisional Presidents are unable to resolve such claim or controversy, either
party may request that their respective chief executive officers, or their
respective delegees, attempt to resolve the dispute. The officers or delegees
to whom any such claim or controversy is submitted as provided above shall
attempt to resolve the dispute through good faith negotiations over a reasonable
period, not to exceed 30
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SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
days in the aggregate unless otherwise agreed. Such 30 day period shall be
deemed to commence on the date of a Notice from either party describing the
particular claim or controversy.
22.2 Arbitration. Any dispute, claim or controversy arising out of or
relating to this Agreement, or the breach or validity hereof, whether at common
law or pursuant to any statute, regulation, rule or policy, that is not resolved
by good faith negotiations in the spirit of mutual cooperation pursuant to
Section 22.1 will, upon the written request of either party, be resolved by
binding arbitration conducted in accordance with the Rules of the CPR Institute
for Dispute Resolution by a sole arbitrator who is a member of the National
Health Lawyers Association or another mutually agreeable individual. Such
arbitrator shall set a schedule for determination of such dispute that is
reasonable under the circumstances. Such arbitrator shall determine the dispute
in accordance with this Agreement and the substantive rules of law (but not the
rules of procedure) that would be applied by a federal court sitting in
Illinois. The arbitration shall take place in Lake County, Illinois. The
arbitration will be governed by the United States Arbitration Act, 9 U.S.C.
(S)(S) 1-16 and the Patent Arbitration Act, 35 U.S.C. (S) 294. Judgment upon
the award rendered by the arbitrator may be entered by any court having
jurisdiction. Where this Agreement provides for future agreement by the
parties, failure to reach such agreement shall not constitute a dispute subject
to the provisions of this Section 22 except as expressly provided otherwise.
22.3. Injunctive Relief. Nothing contained in this Section 22 shall
prevent either party from resorting to judicial process if injunctive or other
equitable relief from a court is necessary to prevent serious and irreparable
injury to one Party or to others. The use of arbitration procedures will not be
construed under the doctrine of laches, waiver or estoppel to affect adversely
either party's right to assert any claim or defense.
23. Assignment.
23.1. General. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns, provided, however, that, except as provided below, neither party may
Transfer its interest in the Agreement, including Transfers by operation of law
such as by way of merger or consolidation, without the prior written consent of
the other party, which consent may not be unreasonably withheld.
Notwithstanding the foregoing sentence, either party may Transfer
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SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH
SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
its rights and obligations under this Agreement to any corporation or other
entity that shall acquire all or substantially all of such party's business and
assets and assume in writing all of such party's obligations hereunder and
deliver a signed copy of such assumption instrument to the other party; and,
upon the other party's receipt of such assumption instrument, the assigning
party shall be fully released and discharged from its obligations under this
Agreement. In the event of such a Transfer, the Non-Affected Party shall have
the right to terminate this Agreement as provided in Section 14.
23.2. Certain Other Transfers by Baxter. Notwithstanding the foregoing
provisions of this Section 23, to the extent that (a) any Person that is not a
Competitor of Allegiance shall acquire all or substantially all of Baxter's
business and assets relating to any Line of Products, or (b) any Person shall
acquire all or substantially all of Baxter's business and assets relating to the
Products; then Baxter may Transfer the portion of its rights hereunder relating
to such Line of Products or all of its rights hereunder, respectively, to such
acquiring Person, provided that any such acquiring Person shall assume in
writing all of Baxter's obligations hereunder which correspond to the portion of
rights Transferred, and shall deliver a signed copy of such assumption
instrument to Allegiance. Baxter shall remain liable for all of the obligations
under this Agreement notwithstanding any such Transfer. In the event of any
Transfer described in this paragraph, Allegiance shall have the right to
terminate the portion of this Agreement relating to such Line of Products as
provided in Section 14.
23.3. Certain Other Transfers by Allegiance. Notwithstanding the foregoing
provisions of this Section 23, to the extent that any Person shall acquire all
or any portion of Allegiance's business and assets relating to the Allegiance's
distribution network, Allegiance may Transfer the portion of its rights
hereunder relating to such portion of its distribution network to such acquiring
Person, provided that any such acquiring Person shall assume in writing the
portion of Allegiance's obligations hereunder relating to the portion of the
distribution network so Transferred, and shall deliver a signed copy of such
assumption instrument to Baxter. Allegiance shall remain liable for all of the
obligations under this Agreement notwithstanding any such Transfer. In the event
of any Transfer described in this paragraph, Baxter shall have the right to
terminate this Agreement as provided in Section 14.
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SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
* * * * * *
IN WITNESS WHEREOF, the parties have by their duly authorized officers
executed this Agreement as of the date first above written.
BAXTER: ALLEGIANCE:
- ------ ----------
BAXTER HEALTHCARE CORPORATION ALLEGIANCE HEALTHCARE
CORPORATION
By: /s/ Michael A. Mussallem By: /s/ William L. Feather
------------------------- -------------------------
Name: Michael A. Mussallem Name: William L. Feather
Title: Group Vice President-- Title: Senior Vice President
CardioVascular and General Counsel
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SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
EXHIBIT A - Products
<TABLE>
<CAPTION>
13-Aug-96
===============================================================================================
DIV MODEL SIZE DESCRIPTION PRICE/UOM UOM QPC
===============================================================================================
<S> <C> <C> <C> <C> <C>
BEN CUSTOM/BOSPACS SEE SCHEDULE 1 N/A
BEN DURAPAC100 DURAFLO II TREATED MEMBRANE * * * EA 1
BEN DPAC200 INCLUDES DURAPAC100, SPIRALGLD * * * EA 1
BEN SPRGHSRG SPIRALGOLD MEMBRANE OXYGENATOR * * * EA 1
BEN SPRLGD SPIRALGOLD MEMBRANE OXYGENATOR * * * CS 4
BEN SPRLGDIC SPIRALGOLD MEMBRANE OXYGENATOR * * * EA 1
BEN SPRLGHSR SPIRALGOLD MEMBRANE OXYGENATOR * * * EA 1
BEN BMR1500 RESERVOIR, HARD SHELL VENOUS * * * CS 4
BEN HSR4000 RESERVOIR, HSR4000 * * * CS 4
BEN HSR4000G RESERVOIR, HSR4000 GOLD * * * CS 4
BEN SPRLIC SPIRAL OXY IC RESERVOIR * * * EA 1
BEN BMR1900GOLD DURAFLO II TREATED BMR1900 STE * * * CS 4
BEN BMR800GOLD VENOUS RESERVOIR WITH DURAFLO * * * CS 4
BEN BEN10PLS OXYGENATOR, ADULT BUBBLE/FILM * * * CS 4
BEN BEN5 OXYGENATOR, PEDIATRIC BUBBLE * * * CS 4
BEN BI02 OXYGENATOR INFANT BUBBLE * * * CS 4
BEN BCR2500 CARDIOTOMY RESERVOIR W/FILTER * * * CS 6
BEN BCR3500 CARDIOTOMY RESERVOIR W/FILTER * * * CS 6
BEN BCR2000 CARDIOTOMY RESERVOIR, 2 LITER * * * CS 6
BEN BCR3000 CARDIOTOMY RESERVOIR 3 LITER * * * CS 6
BEN BCR3538 CARDIOTOMY/AUTOTRANSFUSION * * * CS 6
BEN CATR3500 CARDIOTOMY AUTOTRANSFUSION * * * CS 6
BEN CATRDELUX DELUX PACK ASSY * * * CS 6
BEN CELL3000 AUTOTRANSFUSION SUCTION * * * CS 6
BEN CELL3000F AUTOTRANSFUSION SUCTION * * * CS 6
BEN HSRPAC HSR PAC * * * CS 4
BEN BCR3500GOLD DURAFLO II HEPARIN TREATED * * * CS 6
BEN CAS6 CARDIOPLEGIA, * * * CS 12
BEN CCASOC CARDIOPLEGIA, ADMINISTRATION * * * CS 2
</TABLE>
1 OF 49
<PAGE>
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH
SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
EXHIBIT A - Products
<TABLE>
<CAPTION>
13-Aug-96
===============================================================================================
DIV MODEL SIZE DESCRIPTION PRICE/UOM UOM QPC
===============================================================================================
<S> <C> <C> <C> <C> <C>
BEN HE30GOLD BLOOD CARDIOPLEGIA HEAT * * * CS 4
BEN CCASB CARDIOPLEGIA, COOLING AND * * * CS 4
BEN CCASH HOLDER FOR CCASR AND MAGNETIC * * * EA 1
BEN HE30H HE-30 CARDIOPLEGIA * * * EA 1
BEN HE30HL HE-30 CARDIOPLEGIA * * * EA 1
BEN CASBLG BLOOD CARDIOPLEGIA TABLE LINE * * * CS 6
BEN SM0200 SATURATION METER * * * EA 1
BEN SMBC0240 SATURATION BTRY CHGR (120V) * * * EA 1
BEN SMBC0242 SATURATION BTRY CHGR (22OV) * * * EA 1
BEN SMBC0243 SATURATION BTRY CHGR (100V) * * * EA 1
BEN SMBP0230 SATURATION BATTERY PAC * * * EA 1
BEN SMH0220 SATURATION HOLDER * * * EA 1
BEN SMP0210 SATURATION PROBE * * * EA 1
BEN OTC0250 OPTICAL TRANSMISSION CELLS * * * CS 12
BEN OTC0380 OPTICAL TRANSMISSION CELLS * * * CS 12
BEN OTC0500 OPTICAL TRANSMISSION CELLS * * * CS 12
BEN OTC0250G OPTICAL TRANSMISSION CELLS * * * CS 12
BEN OTC0380G OPTICAL TRANSMISSION CELLS * * * CS 12
BEN OTC0500G OPTICAL TRANSSUSSION CELLS * * * CS 12
BEN AF1040 FILTER, ARTERIAL ADULT 40M * * * CS 6
BEN AF540 FILTER, ARTERIAL 40MICRON * * * CS 6
BEN AF1025D FILTER, ARTERIAL ADULT 25M * * * CS 6
BEN AF1040D FILTER, ARTERIAL ADULT 40M * * * CS 6
BEN AF540D FILTER, ARTERIAL 40MICRON * * * CS 6
BEN 4C7700 FILTER-TRANSFUSION * * * CS 24
BEN 4C7704 FILTER TRANSFUSION-SET * * * CS 12
BEN GF10 FILTER, GAS LINE * * * CS 48
BEN RF10 FILTER, RECIRCULATION * * * CS 24
BEN PDS200 PLEURAL DRAINAGE SYSTEM * * * CS 6
</TABLE>
2 OF 49
<PAGE>
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH
SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
EXHIBIT A - Products
<TABLE>
<CAPTION>
13-Aug-96
===============================================================================================
DIV MODEL SIZE DESCRIPTION PRICE/UOM UOM QPC
===============================================================================================
<S> <C> <C> <C> <C> <C>
BEN CBP7000 BLOOD HAEMOCONCENTRATOR SYSTEM * * * CS 2
BEN HQ7000 QUICK-PRIME HEMOCONCENTRATOR * * * CS 10
BEN HQ7005 HQ7005 HAEMOCENTRATOR * * * CS 6
BEN HQ7005L HAEMOCONCENTRATOR WITH LEUR * * * CS 6
BEN HQH1 HEMOCONCENTRATOR HOLDER FOR * * * EA 1
BEN C110B CONNECTOR, NON-STERILE * * * CS 20
BEN C110S CONNECTOR, STERILE * * * CS 12
BEN C115B CONNECTOR, NON-STERILE * * * EA 1
BEN C115S CONNECTOR, STERILE * * * CS 12
BEN C120B CONNECTOR, NON-STERILE * * * CS 20
BEN C120S CONNECTOR, STERILE * * * CS 12
BEN C125B CONNECTOR, NON-STERILE * * * CS 20
BEN C125S CONNECTOR, STERILE * * * CS 12
BEN C130B CONNECTOR, NON-STERILE * * * CS 20
BEN C130S CONNECTOR, STERILE * * * CS 12
BEN C135B CONNECTOR, NON-STERILE * * * CS 20
BEN C1355 CONNECTOR, STERILE * * * CS 12
BEN C140B CONNECTOR, NON-STERILE * * * CS 20
BEN C140S CONNECTOR, STERILE * * * CS 12
BEN C145B CONNECTOR, NON-STERILE * * * CS 20
BEN C145S CONNECTOR, STERILE * * * CS 12
BEN C220B CONNECTOR, NON-STERILE * * * CS 20
BEN C220S CONNECTOR, STERILE * * * CS 12
BEN C225B CONNECTOR, NON-STERILE * * * CS 20
BEN C225S CONNECTOR, STERILE * * * CS 12
BEN C230B CONNECTOR, NON-STERILE * * * CS 20
BEN C230S CONNECTOR, STERILE * * * CS 12
BEN C235B CONNECTOR, NON-STERILE * * * CS 20
BEN C235S CONNECTOR, STERILE * * * CS 12
</TABLE>
3 OF 49
<PAGE>
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH
SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
EXHIBIT A - Products
<TABLE>
<CAPTION>
13-Aug-96
=================================================================================================
DIV MODEL SIZE DESCRIPTION PRICE/UOM UOM QPC
=================================================================================================
<S> <C> <C> <C> <C> <C>
BEN C240B CONNECTOR, NON-STERILE * * * CS 20
BEN C240S CONNECTOR, STERILE * * * CS 12
BEN C245B CONNECTOR, NON-STERILE * * * CS 20
BEN C245S CONNECTOR, STERILE * * * CS 12
BEN C250B CONNECTOR, NON-STERILE * * * EA 1
BEN C260B CONNECTOR, NON-STERILE * * * CS 20
BEN C260S CONNECTOR, STERILE * * * CS 12
BEN C310B CONNECTOR, NON-STERILE * * * CS 20
BEN C310S CONNECTOR, STERILE * * * CS 12
BEN C320B CONNECTOR, NON-STERILE * * * CS 20
BEN C320S CONNECTOR, STERILE * * * CS 12
BEN C325B CONNECTOR, NON-STERILE * * * CS 20
BEN C325S CONNECTOR, STERILE * * * CS 12
BEN C330B CONNECTOR, NON-STERILE * * * CS 20
BEN C330S CONNECTOR, STERILE * * * CS 12
BEN C335B CONNECTOR, NON-STERILE * * * CS 20
BEN C335S CONNECTOR, STERILE * * * CS 12
BEN C340B CONNECTOR, NON-STERILE * * * CS 20
BEN C340S CONNECTOR, STERILE * * * CS 12
BEN C345B CONNECTOR, NON-STERILE * * * CS 20
BEN C345S CONNECTOR, STERILE * * * CS 12
BEN C420B CONNECTOR, NON-STERILE * * * CS 20
BEN C420S CONNECTOR, STERILE * * * CS 12
BEN C425B CONNECTOR, NON-STERILE * * * CS 20
BEN C425S CONNECTOR, STERILE * * * CS 12
BEN C430B CONNECTOR, NON-STERILE * * * CS 20
BEN C430S CONNECTOR, STERILE * * * CS 12
BEN C435B CONNECTOR, NON-STERILE * * * CS 20
BEN C435S CONNECTOR, STERILE * * * CS 12
</TABLE>
4 OF 49
<PAGE>
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH
SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
EXHIBIT A - Products
<TABLE>
<CAPTION>
13-Aug-96
===============================================================================================
DIV MODEL SIZE DESCRIPTION PRICE/UOM UOM QPC
===============================================================================================
<S> <C> <C> <C> <C> <C>
BEN C440B CONNECTOR, NON-STERILE * * * CS 20
BEN C440S CONNECTOR, STERILE * * * CS 12
BEN C445S CONNECTOR, STERILE * * * CS 12
BEN C460B CONNECTOR, NON-STERILE * * * CS 20
BEN C460S CONNECTOR, STERILE * * * CS 12
BEN C465B CONNECTOR, NON-STERILE * * * EA 1
BEN C465S CONNECTOR, STERILE * * * CS 12
BEN C470B CONNECTOR, NON-STERILE * * * CS 20
BEN C470S CONNECTOR, STERILE * * * CS 12
BEN C475B CONNECTOR, NON-STERILE * * * CS 20
BEN C475S CONNECTOR, STERILE * * * CS 12
BEN C480B CONNECTOR, NON-STERILE * * * CS 20
BEN C480S CONNECTOR, STERILE * * * CS 12
BEN C485S CONNECTOR, STERILE * * * CS 12
BEN C490B CONNECTOR, NON-STERILE * * * CS 20
BEN C490S CONNECTOR, STERILE * * * CS 12
BEN SMTC0250 OXYSAT TEST CELL 1/4 X 1/4 * * * EA 1
BEN GC12 1/2 STRAIGHT CONNECTOR * * * CS 12
BEN GC1238 1/2 X 3/8 REDUCING CONNECTOR * * * CS 12
BEN GC123838 1/2 X 3/8 X 3/8 REDUCING Y * * * CS 12
BEN GC123838L 1/2 X 3/8 X 3/8 REDUCING Y * * * CS 12
BEN GC1238L 1/2 X 3/8 REDUCING CONNECTOR * * * CS 12
BEN GC12L 1/2 STRAIGHT CONNECTOR W/LUER * * * CS 12
BEN GC14 1/4 STRAIGHT CONNECTOR * * * CS 12
BEN GC14L 1/4 STRAIGHT CONNECTOR W/LUER * * * CS 12
BEN GC14Y 1/4 EQUAL Y CONNECTOR * * * CS 12
BEN GC14YL 1/4 EQUAL Y CONNECTOR W/LUER * * * CS 12
BEN GC316 3/16 STRAIGHT CONN * * * CS 12
BEN GC316L 3/16 STRAIGHT CONN W/LUER * * * CS 12
</TABLE>
5 OF 49
<PAGE>
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH
SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
EXHIBIT A - Products
<TABLE>
<CAPTION>
13-Aug-96
===============================================================================================
DIV MODEL SIZE DESCRIPTION PRICE/UOM UOM QPC
===============================================================================================
<S> <C> <C> <C> <C> <C>
BEN GC38 3/16 STRAIGHT CONNECTOR * * * CS 12
BEN GC3814 3/8 X 1/4 REDUCING CONNECTOR * * * CS 12
BEN GC3814L 3/8 X 1/4 REDUCING CONNECTOR * * * CS 12
BEN GC38L 3/8 STRAIGHT CONN W/LUER * * * CS 12
BEN GC38Y 3/8 EQUAL Y CONNECTOR * * * CS 12
BEN GC38YL 3/8 EQUAL Y CONNECTOR W/LUER * * * CS 12
BEN C521B DISPOSABLE LOCKNUTS * * * CS 20
BEN C521S DISPOSABLE LOCKNUTS * * * CS 12
BEN C531B DISPOSABLE LOCKNUTS * * * CS 20
BEN C531S DISPOSABLE LOCKNUTS * * * CS 12
BEN C532B DISPOSABLE LOCKNUTS * * * CS 20
BEN C532S DISPOSABLE LOCKNUTS * * * CS 12
BEN BCD65 CONNECTOR DISPENSER * * * EA 1
BEN BPL12 QUICK PRIME LINE * * * CS 12
BEN BPL48 QUICK PRIME LINE * * * CS 12
BEN BPL48Y QUICK PRIME LINE * * * CS 12
BEN TF1438 1/4 TO 3/8 VENT SUCKER * * * CS 5
BEN TF3812 3/8 TO 1/2 ARTERIAL PUMPHEAD * * * CS 5
BEN PL33 PURGE LINE * * * CS 6
BEN SCB02 TUBING, STERILE * * * CS 5
BEN SCB06 TUBING, STERILE * * * CS 5
BEN SDB02 TUBING, STER 1/4 X 1/16 X 2 * * * CS 5
BEN SDB04 TUBING, STER 1/4 X 1/16 X 4 * * * CS 5
BEN SDB06 TUBING, STERILE * * * CS 5
BEN SDB08 TUBING, STER 1/4 X 1/16 X 8 * * * CS 5
BEN SDB10 TUBING, STER 1/4 X 1/16 X 10 * * * CS 5
BEN SDB12 TUBING, STER 1/4 X 1/16 X 12 * * * CS 5
BEN SDC04 TUBING, STER 1/4 X 3/32 X 4 * * * CS 5
BEN SDC06 TUBING, STER 1/4 X 3/32 X 6 * * * CS 5
</TABLE>
6 OF 49
<PAGE>
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH
SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
EXHIBIT A - Products
<TABLE>
<CAPTION>
13-Aug-96
===============================================================================================
DIV MODEL SIZE DESCRIPTION PRICE/UOM UOM QPC
===============================================================================================
<S> <C> <C> <C> <C> <C>
BEN SDC08 TUBING, STER 1/4 X 3/32 X 8 * * * CS 5
BEN SDC10 TUBING, STER 1/4 X 3/32 X 10 * * * CS 5
BEN SDC12 TUBING, STER 1/4 X 3/32 X 12 * * * CS 5
BEN SFB02 TUBING, STER 3/8 X 1/16 X 2 * * * CS 5
BEN SFB04 TUBING, STER 3/8 X 1/16 X 4 * * * CS 5
BEN SFB06 TUBING, STER 3/8 X 1/16 X 6 * * * CS 5
BEN SFB08 TUBING, STER 3/8 X 1/16 X 8 * * * CS 5
BEN SFB10 TUBING, STER 3/8 X 1/16 X 10 * * * CS 5
BEN SFB12 TUBING, STERILE TUBING * * * CS 5
BEN SFC02 TUBING, STERILE * * * CS 5
BEN SFC04 TUBING, STERILE * * * CS 5
BEN SFC06 TUBING, STERILE * * * CS 5
BEN SFC08 TUBING, STERILE * * * CS 5
BEN SFC10 TUBING, STERILE * * * CS 5
BEN SFC12 TUBING, STERILE TUBING * * * CS 5
BEN SHC02 TUBING, STER 1/2 X 3/32 X 2 * * * CS 5
BEN SHC04 TUBING, STER 1/2 X 3/32 X 4 * * * CS 5
BEN SHC06 TUBING, STER 1/2 X 3/32 X 6 * * * CS 5
BEN SHC08 TUBING, STER 1/2 X 3/32 X 8 * * * CS 5
BEN SHC10 TUBING, STERILE TUBING * * * CS 5
BEN GT123365L 1/2 X 3/32 BYPASS 65 GOLD * * * CS 5
BEN GT123370L 1/2 X 3/32 BYPASS 70 GOLD * * * CS 5
BEN GT141665L 1/4 X 1/16 BYPASS 65 GOLD * * * CS 5
BEN GT141670L 114 X 1/16 BYPASS 70 GOLD * * * CS 5
BEN GT383365L 3/8 X 3/32 BYPASS 65 GOLD * * * CS 5
BEN GT393370L 3/8 X 3/32 (9.5 X 2.4) TUBING * * * CS 5
BEN RBA02 TUBING, PACK 1/3 X 1/32 X 100 * * * EA 1
BEN RCB02 TUBING PACK 3/16 X 1/16 X 100 * * * EA 1
BEN RDB02 TUBING, PACK 1/4 X 1/16 X 100 * * * EA 1
</TABLE>
7 OF 49
<PAGE>
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH
SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
EXHIBIT A - Products
<TABLE>
<CAPTION>
13-Aug-96
===============================================================================================
DIV MODEL SIZE DESCRIPTION PRICE/UOM UOM QPC
===============================================================================================
<S> <C> <C> <C> <C> <C>
BEN RDC02 TUBING, PACK 1/4 X 3/32 X 100 * * * EA 1
BEN RFB02 TUBING, PACK 3/8 X 1/16 X 100 * * * EA 1
BEN RFCO2 TUBING, PACK 3/2 X 3/32 X 100 * * * EA 1
BEN RHB02 TUBING, PACK 1/2 X 1/16 X 100 * * * EA 1
BEN RHC02 TUBING, PACK 1/2 X 3/32 X 100 * * * EA 1
BEN AFH HOLDER, FILTER * * * EA 1
BEN AFHE EXTENSION ARTL FILTER HOLDER * * * EA 1
BEN BCMHL HOLDER, BCM OXYGENATOR * * * EA 1
BEN BOS2H HOLDER. INFANT OXYGENATOR * * * EA 1
BEN BOSCMSL SAMPLE LINE ARTERIAL/VENOUS * * * CS 12
BEN HQD90 RIGHT ANGLE HANSEN QUICK * * * CS 2
BEN UNIVOXHL HOLDER FOR UNIVOX MEMBRANE * * * EA 1
BEN UNIVOXHLA HOLDER ADAPTOR FOR UNIVOX * * * EA 1
BEN UNIVOXHLB BACK PLATE HOLDER FOR UNIVOX * * * EA 1
BEN UPA3814G PERFUSION ADAPTER W/ DURAFLO * * * CS 12
BEN VOXHLB HOLDER VOXHLB * * * EA 1
BEN 3500HL GAS MIXER * * * EA 1
BEN CARDH HOLDER FOR CARDIOTOMY * * * EA 1
BEN CATRCP CONVERSION/DRAINAGE PAC FOR * * * CS 6
BEN CATRPAC PACCONVERSION * * * CS 6
BEN CATRDS DRAINAGE SET, AUTOTRANSFUSION * * * CS 6
BEN CATRFM CATR 3500 DISPOSABLE FLOW * * * CS 12
BEN CATRH HOLDER, FOR CARDIOTOMY * * * EA 1
BEN CATRICU CATR-3500 ICU CONVERSION SET * * * CS 6
BEN BAGW MEDICAL WASTE BAG * * * CS 50
BEN HAMPER MEDI WASTE HAMPER * * * EA 1
BEN HSRA HOLDER, ADAPTER * * * EA 1
BEN HSRH HOLDER, HSR4000 POST-OP * * * EA 1
BEN S099 SUCTION WAND-RMI * * * CS 10
</TABLE>
8 OF 49
<PAGE>
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH
SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
EXHIBIT A - Products
<TABLE>
<CAPTION>
13-Aug-96
===============================================================================================
DIV MODEL SIZE DESCRIPTION PRICE/UOM UOM QPC
===============================================================================================
<S> <C> <C> <C> <C> <C>
BEN S100 YANKAUER SUCTION HANDLE * * * CS 2
BEN THERMA THERMISTOR PROBE * * * EA 1
BEN TIEGUN STA STRAP GUN * * * EA 1
BEN 40TEDDYS BEAR, BABYVOX/BENTLEY * * * EA 1
BEN MANH MANIFOLD HOLDER * * * EA 1
BEN RS1200CS POLE SET * * * EA 1
BEN CELL3243 COMPLETE CELL SAVER PAC * * * CS 4
BEN CELL3243F ONE CSP243, ONE CSP208, AND * * * CS 4
BEN CELL3263 1 CSP263, 1 CSP208, 1 CELL3000 * * * CS 4
BEN CELL3263F ONE CSP263, ONE SCP208 * * * CS 4
BEN CELL4241 CELL SAVER KIT WITH 241/208 * * * CS 4
BEN CELL4261 ONE CSP261. ONE CSP208 * * * CS 4
BEN CELL4261F ONE CSP261, ONE CSP208 * * * CS 4
BEN CSP3000 COMPLETE CELL SAVER PAC * * * CS 4
BEN CSP3043 1 CSP243, CSP208 & BCR.3000 * * * CS 4
BEN CSP3063 ONE CSP263, ONE CSP208, * * * CS 4
BEN CSP3500 COMPLETE CELL SAVER PAC * * * CS 4
BEN CSP3343 1 BCR3500/1 CSP243/1 CSP208 * * * CS 4
BEN CSP3563 1 CSP263, 1 CSP208. 1 BCR5S00 * * * CS 4
BEN CSP3573 CSP173, CSP208, BCR3500 * * * CS 4
BEN CSP4543 CSP4543 * * * CS 4
BEN CSP4561 ONE CSP261, ONE CSP208, * * * CS 4
BEN CSP160 HAEMO LITE 2 FAST PACK (100ML) * * * CS 2
BEN CSP162 HAEMO-LITE 2 FAST PACK * * * CS 2
BEN CSP170 HAEMOLITE 2 PLUS 100 ML BOWL * * * CS 2
BEN CSP172 HAEMOLITE 2 PLUS 200ML BOWL * * * CS 2
BEN CSP172F HAEMOLITE 2 PLUS 200ML BOWL * * * CS 2
BEN CSP180 HAEMOLITE 3 FAST PACK 125ML * * * CS 4
BEN CSP192FJ HAEMOLITE 3 FAST PACK 125 ML * * * CS 4
</TABLE>
9 OF 49
<PAGE>
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH
SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
EXHIBIT A - Products
<TABLE>
<CAPTION>
13-Aug-96
==================================================================================================
DIV MODEL SIZE DESCRIPTION PRICE/UOM UOM QPC
==================================================================================================
<S> <C> <C> <C> <C> <C>
BEN CSP250 CELL SAVER FAST PACK * * * CS 2
BEN CSP250 CELL SAVER FAST BACK * * * CS 2
BEN CSP255 CELL SAVER LOW VOLUME FAST * * * CS 2
BEN CSP260 CELL SAVER 5 FAST PACK 225ML * * * CS 4
BEN CSPZ60F CELL SAVER 5 FAST PACK 225ML * * * CS 4
BEN CSP265 HIGH SPEED, LOW VOLUME CELL * * * CS 4
BEN CSP265F HIGH SPEED, LOW VOLUME CELL * * * CS 4
BEN CSP125 PEDIATRIC CELL SAVER PAC * * * CS 8
BEN CSP161 HAEMO LITE 2 BOWL SET (100ML) * * * CS 20
BEN CSP163 CELL SAVER HAEMO-LITE 2 BOWL * * * CS 20
BEN CSP173 HAEMOLITE 2 PLUS 200ML BOWL * * * CS 20
BEN CSPl8l HAEMOLITE 3 125ML BOWL SET * * * CS 8
BEN CSP182 HAEMOLITE 3 225ML FAST PACK * * * CS 4
BEN CSP182F HAEMOLITE 3 FAST PAC * * * CS 4
BEN CSP183 HAEMOLITE 3 225ML BOWL SET * * * CS 8
BEN CSP225 CELL SAVER PAC * * * CS 8
BEN CSP231 PED OH PAC W/ BOSS BOWL * * * CS 8
BEN CSP233 OH PACK, WITH BOSS BOWL * * * CS 8
BEN CSP241 HAEMONETICS CSP 241 * * * CS 8
BEN CSP243 CELL SAVER BASIC HIGH SPEED PA * * * CS 8
BEN CSP243A CELL SAVER HI-SPD PK/MODIFIED * * * CS 8
BEN CSP243B HIGH SPEED CELL SAVER PACK * * * CS 8
BEN CSP261 CELL SAVER5 LOW VOLUME BOWL SE * * * CS 8
BEN CSP263 CELL SAVER5 HGH SPEED BOWL SE * * * CS 8
BEN CSP217 1 EA CSP210 1 EA CSP208 * * * CS 10
BEN CSP500 PLASMA SAVER SET * * * CS 16
BEN CSP183J HAEMOLITE 3 225ML BOWL SET * * * CS 8
BEN CSP20 CELL SAVER SUCTION ASSEMBLY * * * CS 20
</TABLE>
10 OF 49
<PAGE>
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH
SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
EXHIBIT A - Products
<TABLE>
<CAPTION>
13-Aug-96
==================================================================================================
DIV MODEL SIZE DESCRIPTION PRICE/UOM UOM QPC
==================================================================================================
<S> <C> <C> <C> <C> <C> <C>
BEN CSP208 ASSEMBLY, BASIC A&A * * * CS 20
BEN CSP207 CELL SAVER COLLECTION * * * CS 4
BEN CSP220 20 UM MICROFILTER RESERVOIR * * * CS 4
BEN CSP1O PLASMA PAC SEQUESTERING * * * CS 8
BEN CSP15600 STEP DOWN ADAPTER * * * CS 20
BEN CSP16401 1/8" WOUND DRAINAGE LINES * * * CS 20
BEN CSP16402 1/4" WOUND DRAINAGE LINES * * * CS 20
BEN CSP165 HAEMO-LITE 2 REINFUSION BAG * * * CS 40
BEN CSP167 Y CONNECTOR WITH CHECKVALVE * * * CS 20
BEN CSP168 Y CONNECTOR WITH 5 FT A&A LINE * * * CS 20
BEN CSP210 LINER AUTOTRANSFUSION * * * CS 16
BEN CSP221 COLLECT FIRSTKIT W/20M RESERVO * * * CS 8
BEN CSP240 HAEMONETICS CSP-240 * * * CS 8
BEN CSP244 CELL SAVER BASIC HIGH SPEED PA * * * CS 8
BEN CSP245 RENFUSION BAG HIGH SPEED * * * CS 40
BEN CSP246 WASTE BAG HIGH SPEED * * * CS 20
BEN CSP247 CELL SAVER BASIC HIGH SPEED PA * * * CS 12
BEN CSP400 R.I.S DISPOSABLE SET * * * EA 1
BEN CSP5606 BAGS, WASTE * * * CS 50
BEN CSP7204 ANTICOAGULANT CONCENTRATE * * * CS 50
BEN CSP166 HAEMO-LITE 25-LITER WASTE * * * CS 20
BEN CSP200 CELL SAVER COLLECTION * * * CS 4
BEN CSP120 1.2 LT COLLECTION RESERVOIR * * * CS 6
BEN CSP140 1.2 LT COLLECTION RESERVOIR * * * CS 6
BEN CSP205 3.0 LT COLLECTION RESERVOIR * * * CS 4
BEN BENCHR PERFUSION CHAIR * * * EA 1
BEN Divsion Total Models 314
</TABLE>
11 OF 49
<PAGE>
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH
SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
EXHIBIT A - Products
<TABLE>
<CAPTION>
13-Aug-96
================================================================================================
DIV MODEL SIZE DESCRIPTION PRICE/UOM UOM QPC
================================================================================================
<S> <C> <C> <C> <C> <C> <C>
CC 782HF75 SWAN GANZ VIP OXIMETRY CATHETER * * * EA 1
CC 93A-741H-7.5F OXIMETER T.D. SAT-2 CATHETER * * * EA 1
CC 93A-750H-7.5F SWAN GANZ EFV/OTD 21 CM * * * EA 1
CC 93A-754H-7.5F SWAN GANZ EFV/OTD 24CM * * * EA 1
CC 93A-780H-7.5F OXIMETER P.P. SAT 2 CATHETER * * * EA 1
CC 93A-783H-7.5F QE3/ABBOTT COMPATABLE * * * EA 1
CC 93A-431H-7.5F NEW SWAN-GANZ EJECTION FRACTION * * * EA 1
CC 93A-434H-7.5F THERMODILUTION EJECTION * * * EA 1
CC 93A-439H-7.5F EJECTION FRACTION VOLUMETRIC * * * EA 1
CC 93A-759-7.5F EFV/OX TD ELECTRODE FREE * * * EA 1
CC 93A-759H-7.5F SWAN GANZ EFV/OX TD N * * * EA 1
CC 93A-794H-8F BB SWAN GANZ HEPARIN COATED * * * EA 1
CC 139H-7.5F SWAN GANZ CONTINUOUS CARDIAC * * * EA 1
CC JP7140019 PID REF JAPANESE * * * EA 1
CC 70216H 7F DOUBLE LUMEN, 16CM HEPARIN * * * CS 5
CC 70216HK 7F DOUBLE LUMEN, 16CM HEPARIN * * * CS 5
CC 70216HK1 7 FR DOUBLE LUMEN W/ INTERLINK * * * CS 5
CC 70216HS 7F DOUBLE LUMEN, 16CM HEPARIN * * * CS 5
CC 70216HS1 7 FR DOUBLE LUMEN W/ INTERLINK * * * CS 5
CC 70220H 7F DOUBLE LUMEN, 20CM HEPARIN * * * CS 5
CC 70220HK 7F DOUBLE LUMEN, 20CM HEPARIN * * * CS 5
CC 70220HK1 7 FR DOUBLE LUMEN W/INTER LINK * * * CS 5
CC 70220HS 7F DOUBLE LUMEN, 20CM HEPARIN * * * CS 5
CC 70316H 7F TRIPLE LUMEN, 16CM HEPARIN * * * CS 5
CC 70316HK 7F TRIPLE LUMEN, 16CM HEPARIN * * * CS 5
CC 70316HKI 7 FR TRI LUMEN W/ INTERLINK * * * CS 5
CC 70316HS 7F TRIPLE LUMEN, 16CM HEPARIN * * * CS 5
CC 70316HS1 7 FR TRI LUMEN W/ INTERLINK * * * CS 5
CC 70320H 7F TRIPLE LUMEN, 20CM HEPARIN * * * CS 5
</TABLE>
12 0F 49
<PAGE>
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH
SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
EXHIBIT A - Products
<TABLE>
<CAPTION>
13-Aug-96
================================================================================================
DIV MODEL SIZE DESCRIPTION PRICE/UOM UOM QPC
================================================================================================
<S> <C> <C> <C> <C> <C> <C>
CC 70320HI 7F TRI LUMEN, W/ INTERLINK * * * CS 5
CC 70320HK 7F TRIPLE LUMEN, 20CM HEPARIN * * * CS 5
CC 70320HK1 7 FR. TRI LUMEN W/ INTERLINK * * * CS 5
CC 70320H 7F TRIPLE LUMEN, 20CM HEPARIN * * * CS 5
CC 70320HS1 7 FR TRI LUMEN W/ INTERLINK * * * CS 5
CC 70320K 7FR TRIPLE LUMEN, 20 CM KIT * * * CS 5
CC 711-08-16G CENTRAL VENOUS CATHETER * * * CS 40
CC 711-1K05-20G CVC EXPENDED KIT * * * CS 10
CC 711-1K08-16G CENTRAL VENOUS CATHETER * * * CS 10
CC 711-1K12-16G POLYURETHANE, 12 IN, 16GA * * * CS 10
CC 711-K08-16G CENTRAL VENOUS CATH BASIC KIT * * * CS 10
CC M11420K 7F SINGLE LUMEN 14GA/20CM KIT * * * CS 5
CC M11620HK 7F SINGLE LUMEN 16GA/20CM KIT * * * CS 5
CC M11620HKI 7F SINGLE LUMEN 16GA/20CM KIT * * * CS 5
CC M11620K 7F SINGLE LUMEN 16GA/20CM KIT * * * CS 5
CC M27716HS 7FR,DBL LUM,16CM HEPARIN SET * * * CS 5
CC M3716HS 7FR,TRPL LUM,16CM HEPARIN SET * * * CS 5
CC 217026 SLIDE MODULE ON THEORY * * * EA 1
CC 217029 WAVEFORM ANALYSIS-SLIDE * * * EA 1
CC 217032 CARDIOPULMONARY PROFILE * * * EA 1
CC 217051 SLIDE MODULE ON CONTINUOUS * * * EA 1
CC 93-130-5F SWAN-GANZ PEDIATRlC * * * EA 1
CC 93A-19OH-8F PULMONARY ANG CATHETER * * * EA 1
CC 93A-191-7F PULMONARY ANGIOGRAPHY * * * EA 1
CC 93A-191-8F PULMONARY ANGIOGRAPHY * * * EA 1
CC 93A-191H-7F PULMONARY ANG CATHETER * * * EA 1
CC 93A-191H-8F PULMONARY ANG CATHETER * * * EA 1
CC 93-132-5F SWAN-GANZ PEDIATRIC 75CM LNGTH * * * EA 1
CC 93A-991H-8F 8F S-G A/V PACEPORT TD CATH * * * EA 1
</TABLE>
13 OF 49
<PAGE>
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH
SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
EXHIBIT A - Products
<TABLE>
<CAPTION>
13-Aug-96
==================================================================================================
DIV MODEL SIZE DESCRIPTION PRICE/UOM UOM QPC
==================================================================================================
<S> <C> <C> <C> <C> <C> <C>
CC 94-030-2.5F EDSLAB BALLOONLESS 2.5F TD * * * EA 1
CC C145HF6 SWAN GANZ TRUE SIZE C-TIP * * * EA 1
CC T173H-6F 6F SWAN GANZ HC * * * EA 1
CC 97-K140H-5F SWAN GANZ VIP BIPOLAR PACING * * * EA 1
CC 98-100 CHANDLER TRANS V-PACING PROBE * * * EA 1
CC 98-100H CHANDLER TRANSL.V-PACrNG PROBE * * * EA 1
CC 98-500 RANSLUMNAL A-PACING PROBE * * * EA 1
CC 98-500H TRANSLUMINAL A-PACING PROBE * * * EA 1
CC 93-116-4F SWAN-GANZ FLOW DIRECTED * * * EA 1
CC 111F7 SG DBL LUMEN MONITOR CATH 7FR * * * EA 1
CC 114F7 SG TRIPLE LUM MONITORING CATH * * * EA 1
CC 115F7 SWAN-GANZ TRIPLE LUMEN * * * EA 1
CC 123F6 SWAN-GANZ FLOW DIRECTED * * * EA 1
CC 123GF6 SWAN GANZ FLOW DIRECTED * * * EA 1
CC 93-110.5F SWAN-GANZ FLOW DIRECTED * * * EA 1
CC 93-117.5F SWAN-GANZ FLOW DIRECTED * * * EA 1
CC S111F7 SWAN-GANZ S-TIP FLOW DIRECTED * * * EA 1
CC T111F7 SG DBL LUM MONITOR CATH/TORQUE * * * EA 1
CC T123F6 HI TORQUE SG FLOW DIRECTED * * * EA 1
CC 131-7F SWAN GANZ TD CATHETER * * * EA 1
CC 131F7 SWAN GANZ TD CATHETER * * * CS 5
CC 131H-7F SWAN-GANZ TD CATHETERS W/ * * * EA 2
CC 131HF7 SWAN-GANZ TD CATHETERS W/ * * * CS 5
CC 131HVF7 TD CATH W/CONTAMINATION SHIELD * * * EA 1
CC 132F5 SWAN-GANZ PEDIATRIC 75CM LNGTH * * * EA 1
CC 141H-7F HI-SHORE TD WITH AMC THROMBO- * * * EA 1
CC 831F75 SWAN-GANZ TD VIP CATHETER * * * CS 5
CC 831HF75 SWAN-GANZ TD VIP CATHETER * * * CS 5
CC 831HVF75 VIP CATH W/CONTAMINATION SHIEL * * * EA 1
</TABLE>
14 0F 49
<PAGE>
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH
SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
EXHIBIT A - Products
<TABLE>
<CAPTION>
13-Aug-96
==================================================================================================
DIV MODEL SIZE DESCRIPTION PRICE/UOM UOM QPC
==================================================================================================
<S> <C> <C> <C> <C> <C> <C>
CC 93-200-7F SWAN-GANZ PACING TD CATHETER * * * EA 1
CC 93-200H-7F PACING TD WITH 2 VENTRICULAR * * * EA 1
CC 93-205H-7F HEPARIN NORMAL HEART * * * EA 1
CC 93A-141-7F SWAN-GANZ TD CATHETER * * * EA 1
CC 93A-741-7.5F OXIMETER T.D. SAT-2 CATH * * * EA 1
CC 93A-831-7.5F SWAN-GANZ TD VIP CATHETER * * * EA 1
CC 93A-831H-7.5F SWAN-GANZ TD VIP CATHETER * * * EA 1
CC 93A-834H-7.5F SWAN GANZ THERMODILUTION * * * EA 1
CC 93A-931H-7.5F TD PACEPORT WITH AMC THROMBO- * * * EA 1
CC C144-7F SWAN GANZ TRU SIZE C-TIP * * * EA 1
CC C144H-7F SWAN GANZ TRU SIZE C-TIP * * * EA 1
CC PCHBLK 100 EA PACEPORT SWAN GANZ * * * CS 100
CC S144-7F SWAN GANZ TRU SIZE S-TIP * * * EA 1
CC S144H-7F SWANGANZ S-TIP CONTROLCATH TD * * * EA 1
CC 096F6 SWAN GANZ T.D. CATHETER * * * EA 1
CC 151-7F SWAN-GANZ TD CATHETER W/S-TIP * * * EA 1
CC 151H-7F SWAN-GANZ TD CATHETER W/S-TIP * * * EA 1
CC 93A-143HT-7F PKG ASSY 93A-143H-7F * * * EA 1
CC 93A-143T-7F SWAN GANZ CARDIOCATH * * * EA 1
CC 97-120-5F SWAN GANZ BIPOLAR * * * EA 1
CC 97-130-5F SWAN-GANZ BIPOLAR * * * EA 1
CC 97-K12-5F SIPOLAR PACING CATHETER KIT, * * * EA 1
CC 97-K13-5F BIPOLAR PACING CATHETER * * * EA 1
CC 744H-7.5F CCO/SVO2 SWAN GANZ CATHETER * * * EA 1
CC 7468F SWAN GANZ CCO/SV02/VIP * * * EA 1
CC 746H-8F SWAN GANZ CCO/SV02/VIP * * * EA 1
CC 93-505 FLOW THROUGH HOUSING * * * CS 8
CC 93-520 CO-SET:BUCKET * * * CS 6
CC 93-521 CO-SET:BRACKET * * * EA 1
</TABLE>
15 OF 49
<PAGE>
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH
SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
EXHIBIT A - Products
<TABLE>
<CAPTION>
13-Aug-96
==================================================================================================
DIV MODEL SIZE DESCRIPTION PRICE/UOM UOM QPC
==================================================================================================
<S> <C> <C> <C> <C> <C> <C>
CC 93-650 CO-SET SYRINGE * * * CS 5
CC 702-741H-7.5F SO EDSLAB CVP 02 SAT CATH * * * EA 1
CC 792019F5 5F EDSLAB DOUBLE LUMEN * * * EA 1
CC 793013A 5F EDSLAB HYTREL URETHANE TD * * * EA 1
CC 793043 4F SWAN GANZ THERMODILUTION * * * EA 1
CC 793046 5F SWAN GANZ TD CATH * * * EA 1
CC 794013 7.5F VIP THERMODILUTION 10CM * * * EA 1
CC 796018 RIGHT EJECTION FRACTION GUIDE * * * EA 1
CC 797005 5F SWAN-GANZ THERMODILUTION * * * EA 1
CC 93-134-7F EDSLAB TD CATHETER * * * EA 1
CC 93-167-7F 7F SWAN GANZ PULMONARY * * * EA 1
CC 93-631-5.5F BB SWAN GANZ OXIMETRY TD CATH * * * EA 1
CC 93-631H-5.5F BB SWAN GANZ OXIMETRY TD CATH * * * EA 1
CC 93A-095-7F SWAN GANZ T.D. CATHETER * * * EA 1
CC 93A-100-5F SWAN GANZ T.D. CATHETER * * * EA 1
CC 93A-105-5F SWAN GANZ TD CATHETER * * * EA 1
CC 93A-124-5F SWAN GANZ THERMODILUTION CATH * * * EA 1
CC 93A-140H-7F 7F THERMODILUTION CATHETER * * * EA 1
CC 93A-161H-7F SWAN GANZ HEPARIN HI-SHORE * * * EA 1
CC 93A1451H-7.5F BB SWAN GANZ ELECTRODE FREE * * * EA 1
CC 93A-780-7.5F OXIMETER P.P. SAT 2 CATH * * * EA 1
CC 93A-794-8F SWAN GANZ REF/OX PACEPORT CATH * * * EA 1
CC 93A-821H-7.5F BB SWAN GANZ GUIDEWIRE TD CATH * * * EA 1
CC 93A-834-7.5F SWAN GANZ THERMODILUTION * * * EA 1
CC 93A-841-7.5F HI SHORE VIP TD W/8014 BALLOON * * * EA 1
CC 93A-931-7.5F TD PACEPORT * * * EA 1
CC 93A-991-8F 8F SWAN GANZ A-V PACEPORT * * * EA 1
CC 94-010-4F EDSLAB SURGICAL TD CATHETER * * * EA 1
CC 94-011-3F EDSLAB 3F TD PROBE AND 3.5F * * * EA 1
</TABLE>
16 OF 49
<PAGE>
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH
SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
EXHIBIT A - Products
<TABLE>
<CAPTION>
13-Aug-96
==================================================================================================
DIV MODEL SIZE DESCRIPTION PRICE/UOM UOM QPC
==================================================================================================
<S> <C> <C> <C> <C> <C> <C>
CC 94-012-4F EDSLAB 4F TD PROBE * * * EA 1
CC TF002A-7F 7F SWAN GANZ TRUE SIZE * * * EA 1
CC TOE135H-7.5F 7.5F SWAN GANZ PACING TD 02 * * * EA 1
CC TS05H-7F SWAN GANZ HEPARIN COATED * * * CS 5
CC TS060H-6F SWAN GANZ HEPARIN TRUE SIZE * * * EA 1
CC TS064-5F 5F SWAN GANZ TRUE SIZE * * * EA 1
CC TS088H-6F 6F SWAN GANZ TRUE SIZE TD * * * EA 1
CC TS094H-3F 3F SWAN GANZ * * * EA 1
CC TS105-5F 5F SWAN GANZ TRUE SIZE TD * * * EA 1
CC TS110H-7.5F 7.5F SWAN GANZ TD CATH * * * EA 1
CC TS112H-8F 8F SWAN GANZ TD W/LARGE DISTAL * * * EA 1
CC TV024-5F SWAN GANZ TRUE SIZE VIP TD, * * * EA 1
CC TV046H-7.5F SWAN GANZ HEPARIN VIP TD * * * EA 1
CC TV049H-7.5F SWAN GANZ VIP HEPARIN TD CATH * * * EA 1
CC TV106H-7.5F 7.5F SWAN GANZ HI-SHORE VIP TD * * * EA 1
CC 93A-113-7F SWAN-GANZ TD * * * EA 1
CC 93A-301-7F SWAN-GANZ TD CATHETER, IL COC * * * EA 1
CC 790022 7F S.G. DL CATH WTTli * * * EA 1
CC 791031 4F SWAN GANZ MONITORING CATH * * * EA 1
CC 702741H7.5F MOD 7.5F EDSLAB TD OXIMETRY CATH * * * EA 1
CC 794009 4F EDSLAB TRIPLE LUMEN 02 SAT * * * EA 1
CC 795007 4F SWAN GANZ TRIPLE LUMEN * * * EA 1
CC 93-164-4F SWAN GANZ PEDIATRIC * * * EA 1
CC 93-166-6F SWAN GANZ PEDIATRIC * * * EA 1
CC 94-015-4F SO EDSLAB DOUBLE LUMEN 02 SAT * * * EA 1
CC 94-015H-4F SO EDSLAB DOUBLE LUMEN 02 SAT * * * EA 1
CC 94-040-4F SP EDSLAB DOUBLE LUMEN 02 SAT * * * EA 1
CC 94-040H-4F SP EDSLAB DOUBLE LUMEN 02 SAT * * * EA 1
CC MW054-5F SWAN GANZ TRUE SIZE MONITORING * * * EA 1
</TABLE>
17 OF 49
<PAGE>
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH
SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
EXHIBIT A - Products
<TABLE>
<CAPTION>
13-Aug-96
==================================================================================================
DIV MODEL SIZE DESCRIPTION PRICE/UOM UOM QPC
==================================================================================================
<S> <C> <C> <C> <C> <C> <C>
CC MW171-6F EDSLAB MONITORING CATHETER * * * EA 1
CC OW050H-4F EDSLAB HEPARIN COATED DL 02 * * * EA 1
CC OW052H-7F EDSLAB TRUE SLZE OXIMETRY CATH * * * EA 1
CC OW081H-5F 5F EDSLAB DL 02 * * * EA 1
CC OW082H-4F 4F EDSLAB OX CATH WITH DISTAL * * * EA 1
CC OW173H-4F 4F OXIMETRY CATHETER WITH * * * EA 1
CC 0W174H-5F 5F EDSLAB DOUBLE LUMEN 0 (2) * * * EA 1
CC OX153H-2.5F 2.5F OXIMETER PROBE W/AMC(TM) * * * EA 1
CC PE074-5F 5F SG BIPOLAR PACING FEMORAL * * * EA 1
CC PE075-5F 5F SG BIPOLAR PACING SVC INS * * * EA 1
CC PO144H-7.5F 7.5F EDSLAB 0(2) CATH * * * EA 1
CC TF002CH-7F 7F SWAN GANZ TRUE SIZE TD * * * EA 1
CC TF002H-7F SWAN GANZ TRUE SIZE HI SHORE * * * EA 1
CC TF009H-6F SWAN GANZ TRUE SIZE HI SHORE * * * EA 1
CC TF026H-7.5F SWAN GANZ HEPARlN COATED * * * EA 1
CC TF045H-7.5F SWAN GANZ HEPARIN COATED DUAL * * * EA 1
CC TF093H.7.5F 7.5F SWAN GANZ HI SHORE REF TD * * * EA 1
CC TFN023H-7.5F HI SHORE HEPARIN REF/TD * * * EA 1
CC TN178H-7F 7F SWAN GANZ THER.MODILUTION * * * EA 1
CC TO017H-7.5F SWAN GANZ HEPARIN COATED * * * EA 1
CC TOF068H-7.5F 7.5F SWAN GANZ REF/OX * * * EA 1
CC TON179H-7.5F 7.5F CCO/SV02/VIP THERMO- * * * EA 1
CC TP157H-7.5F 7.5F SWAN-GANZ FLOW DIRECTED * * * EA 1
CC TS158H-7.5F 7.5F SWAN-GANZ TD CATHETER * * * EA 1
CC TS160H-7F 7F SWAN-GANZ HI-SHORE * * * EA 1
CC TS172H-6F 6F EDWARDS SWAN-GANZ TRUE SIZE * * * EA 1
CC TV167H-8F SWAN GANZ VIP THERMODILUTION * * * EA 1
CC 798008 140CM LENGTH 24CM PORT RIGHT- * * * EA 1
CC 174H-7F 7F SWAN GANZ TORQUE SUPPORT * * * EA 1
</TABLE>
18 OF 49
<PAGE>
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH
SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
EXHIBIT A - Products
<TABLE>
<CAPTION>
13-Aug-96
==================================================================================================
DIV MODEL SIZE DESCRIPTION PRICE/UOM UOM QPC
==================================================================================================
<S> <C> <C> <C> <C> <C> <C>
CC 791023A 7F SWAN GANZ PULMONARY * * * EA 1
CC SCC-31CV0001 CENTRAL VENOUS KIT-SPECIAL ORD * * * CS 10
CC SCC-59CV0001 CENTRAL VENOUS SPEC ORDER * * * CS 8
CC 793011 4F SWAN GANZ THERMODILUTION * * * EA 1
CC SCC-26PA0003 INTRODUCER SPECIAL ORDER KIT * * * CS 6
CC SCC-32PA0002 INTRODUCER SPECIAL ORDER KIT * * * CS 10
CC SCC-59PA0017 INTRODUCER SPECIAL ORDER KIT * * * CS 6
CC A3501BF85 BAXTER CANADA * * * CS 10
CC S5012F85 8.5F INTRO CDP KIT FOR MCALLEN * * * CS 10
CC SCC-653B-8.5F HOLLAND- INTRODUCER SPECIAL * * * CS 10
CC SCC-A452B-8.5F TB VALVE INTRODUCER KIT 8.5F * * * CS 10
CC SCC-A652B-8.5F TB VALVE INTRODUCER KIT 8.5F * * * CS 10
CC 791014 7F DOUBLE BALLON CATHETER * * * EA 1
CC 793049 7.5F SWAN GANZ WITH 8/14 * * * EA 1
CC 796 SP/OR CUSTOMS * * * EA 1
CC 798 SP/OR CUSTOMS * * * EA 1
CC 799 SP/OR CUSTOMS * * * EA 1
CC 93-600 CO-SET:DELIVERY SYSTEM FOR * * * CS 10
CC 93-610 CO-SET:DELIVERY SYSTEM FOR * * * CS 10
CC 93-611 CO-SET SPECIAL ORDER * * * CS 8
CC 9520A-L DEMO/LOANER REPAIR FLEET * * * EA 1
CC COM-2 SYS A PRINTER COM-2 SYSTEM A WITH A PRINTER * * * EA 1
CC COM-2 SYSA/I 100v COM-2 SYSTEM INTERNATIONAL * * * EA 1
CC COM-2 SYSA/I 115V COM 2 SYS AC-ONLY INT * * * EA 1
CC COM-2 SYSA/I 220V COM 2 SYS AC-ONLY INT * * * EA 1
CC COM-2 SYSB/I 220V COM-2 SYS AC/DC INTERNATIONAL * * * EA 1
CC COM-2P COM-2 WITH PRINTER AC/DC UNIT * * * EA 1
CC COM-2P-115 COM-2P 115 * * * EA 1
CC COM-2P-II5-R REFURBISHED * * * EA 1
</TABLE>
19 0F 49
<PAGE>
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH
SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
EXHIBIT A - Products
<TABLE>
<CAPTION>
13-Aug-96
==================================================================================================
DIV MODEL SIZE DESCRIPTION PRICE/UOM UOM QPC
==================================================================================================
<S> <C> <C> <C> <C> <C> <C>
CC COM-2P-R 220V ASSY, CARDIAC OUTPUT COMPUTER, * * * EA 1
CC 9515A 9515-A SIMULATER * * * EA 1
CC COM-2-AD 115v ASSY, AC ADAPTER 115V * * * EA 1
CC COM-2-PC COM-2 POWER CORD * * * EA 1
CC COM-2CC PKG ASSY CONN CABLE, COM-2 * * * EA 1
CC COM-2FS PKG ASSY FOOT SWITCH, COM-2 * * * EA 1
CC COM-20P OPS, MANUAL COM-2 * * * EA 1
CC COM-2PP PKG ASSY PRINTER PAPER COM-2 * * * EA 1
CC SAT-2R 115V SAT-2 115V UNIT REFURBISHED * * * EA 1
CC SAT-2R 220V SAT-2 220V UNIT * * * EA 1
CC OM-2 OPTICAL MODULE II * * * EA 1
CC OM-2R OPTICAL MODULE II * * * EA 1
CC 40-OP1 REF OP MANUAL * * * EA 1
CC 40-PLC PATIENT LEAD CABLE * * * EA 1
CC 60-EXT SENSOR EXTENSION CABLE * * * EA 1
CC DS-100A ADULT DIGIT OXYGEN TRANSDUCER * * * EA 1
CC 30-AD-115V AC ADAPTER, 115V * * * EA 1
CC 30-AD-115V-R REFURB AC ADAPTER COM-1 * * * EA 1
CC 30-AD-220V AC ADAPTER, 220V * * * EA 1
CC 30-BY COM-1 BATTERY * * * EA 1
CC 30-CC COM-1 CONNECTING CABLE * * * EA 1
CC 30-FS COM-1 FOOTSWITCH * * * EA 1
CC 30-MM COM-1 MAINTENANCE MANUAL * * * EA 1
CC 30-OP OPERATIONS MANUAL * * * EA 1
CC 59-PTS PRESSURE TRANSDUCER SIMULATOR * * * EA 1
CC 59-PTSA ADAPTOR CABLE - SUMMIT * * * EA 1
CC 59-UCAL UTAH UNIFLOW TESTER * * * EA 1
CC 9460A CONNECTING CABLE FOR CATHETER * * * EA 1
CC 9511A COC FIELD TESTER * * * EA 1
</TABLE>
20 OF 49
<PAGE>
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH
SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
EXHIBIT A - Products
<TABLE>
<CAPTION>
13-Aug-96
===============================================================================================
DIV MODEL SIZE DESCRIPTION PRICE/UOM UOM QPC
===============================================================================================
<S> <C> <C> <C> <C> <C> <C>
CC 9520A-MM 9520A MAINTENANCE MANUAL * * * EA 1
CC 9526 A C ADAPTER, 110V FOR * * * EA 1
CC 9527 A C ADAPTER, 220V FOR * * * EA 1
CC 9528 RECHARGEABLE BATTERY FOR * * * EA 1
CC 9850A INJECTATE PROBE, FOR * * * EA 1
CC 9870 REMOTE FOOTSTART SWITCH * * * EA 1
CC 40-CCI REF INTERFACE CABLE * * * EA 1
CC REF-1 SYS/I 220V REF-1 SYSTEM INTERNATIONAL * * * EA 1
CC REF-1 SYSA/I 100V REF-1 SYSTEM INTERNATIONAL * * * EA 1
CC R.EF-1-R 220V REFURBISHED REF-1 UNIT 220V * * * EA 1
CC 40-SCR SYS SIEKO PRINTER SYS * * * EA 1
CC 9515R REF/CARDIAC OUTPUT SIMULATOR * * * EA 1
CC 44-1800 893425-001 CABLE ASSY, UNIFLOW * * * EA 1
CC 44-1800 893211-001 ASSY, UNIFLOW CABLE * * * EA 1
CC 44-1800 893419-001 CABLE ASSY, UNIFLOW * * * EA 1
CC 44-1800 893217-001 CABLE, UNIFLOW * * * EA 1
CC 44-1800 893225-001 ASSY, UNIFLOW CABLE * * * EA 1
CC 44-1800 893403-001 CABLE * * * EA 1
CC 44-1800 893488-002 ASSY, UNIFLOW CABLE * * * EA 1
CC 44-1800 893203-001 ASSY, UNIFLOW CABLE * * * EA 1
CC 44-1800 893427-001 ASSY-UNIFLOW CABLE * * * EA 1
CC 44-1800 893428-001 INTERFACE CABLE FOR USE WITH * * * EA 1
CC 44-1800 893492-001 ASSY, UNIFLOW CABLE * * * EA 1
CC 44-1800 893483-002 ASSY, UNIFLOW CABLE * * * EA 1
CC 44-1800 893204-001 ASSY, UNIFLOW CABLE * * * EA 1
CC 44-1800 893222-001 CABLE * * * EA 1
CC 44-1800 893208-001 CABLE, UNIFLOW * * * EA 1
CC 44-1800 893495-001 UNIFLOW DPT INTERFACE CABLE * * * EA 1
CC 44-1800 893132-001 INTERFACE CABLE FOR 43 SERIES * * * EA 1
</TABLE>
21 OF 49
<PAGE>
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH
SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
EXHIBIT A - Products
<TABLE>
<CAPTION>
13-Aug-96
===============================================================================================
DIV MODEL SIZE DESCRIPTION PRICE/UOM UOM QPC
===============================================================================================
<S> <C> <C> <C> <C> <C> <C>
CC 44-1800 893201-001 ASSY, UNIFLOW CABLE * * * EA 1
CC 44-1800 893206-001 ASSY, UNIFLOW CABLE * * * EA 1
CC 44-1800 893205-001 CABLE, UNIFLOW * * * EA 1
CC 44-1800 193474-001 CABLE ASSY, UNIFLOW * * * EA 1
CC 33-1800 895031-001 CABLE INTERFACE FOR USE WITH * * * EA 1
CC 33-1800 195033-001 CABLE INTERFACE FOR SUMMIT * * * EA 1
CC 33-1800 895508-001 SUMMIT CABLE INTERFACE FOR * * * EA 1
CC 33-1800 895507-001 INTERFACE FOR USE WITH SUMMIT * * * EA 1
CC 33-1800 895142-002 SUMMIT INTERFACE CABLE FOR * * * EA 1
CC 33-1800 895106-001 CABLE ASSY, SIMPLE * * * EA 1
CC 33-1800 895083-001 SUMMIT INTERFACE CABLE FOR * * * EA 1
CC 33-1800 895056-001 SUMMIT INTERFACE CABLE FOR * * * EA 1
CC 33-1800 895034-001 CABLE INTERFACE FOR SUMMIT * * * EA 1
CC 33-1800 895003-001 SUMMIT CABLE INTERFACE FOR * * * EA 1
CC 33-1800 895021-001 CABLE ASSY, SIMPLE INTERFACE * * * EA 1
CC 33-1800 895020-001 SUMMIT INTERFACE CABLE FOR * * * EA 1
CC 33-1800 895019-001 SUMMIT CABLE INTERFACE FOR * * * EA 1
CC 33-1800 895018-001 INTERFACE CABLE FOR USE WITH * * * EA 1
CC 33-1800 895017-001 SUMMIT INTERFACE CABLE FOR * * * EA 1
CC 33-1800 895012-001 SUMMIT CABLE INTERFACE FOR * * * EA 1
CC 33-1800 895004-001 SUMMIT INTERFACE CABLE FOR * * * EA 1
CC 33-1800 895O38-001 CABLE INTERFACE FOR SUMMIT * * * EA 1
CC 33-1800 895025-001 SUMMIT CABLE INTERFACE FOR * * * EA 1
CC 93-522 CO-SET:INJECTATE PROBE CABLE * * * EA 1
CC 93-523 HP TEMPERATURE PROBE * * * EA 1
CC 93-524 MARQUETTE-PROBE * * * EA 1
CC 93-526 CO-SET PROBE FOR SIEMENS * * * EA 1
CC 93-527 PROBE-TEMP,INJECTATE MARQUETTE * * * EA 1
CC 93-528 CO-SET PROBE FOR * * * EA 1
</TABLE>
22 OF 49
<PAGE>
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH
SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
EXHIBIT A - Products
<TABLE>
<CAPTION>
13-Aug-96
===============================================================================================
DIV MODEL SIZE DESCRIPTION PRICE/UOM UOM QPC
===============================================================================================
<S> <C> <C> <C> <C> <C> <C>
CC 93-529 CO-SET:INJECTATE PROBE CABLE * * * EA 1
CC 93-530 CO-SET:INJECTATE PROBE CABLE * * * EA 1
CC 93-531 CO-SET PROBE FUKUDA-DENSHI * * * EA 1
CC 93-533 2" HEWLETT PACKARD CO-SET * * * EA 1
CC 64-EKBB EKG SLAVE FOR SPACLAB PCI AND * * * EA 1
CC 64-EKH EKG SLAVE FOR HP MERLIN AND * * * EA 1
CC 64-EKHH 64-EKH WITH Y CONNECTOR * * * EA 1
CC EXP-N SYS B 220V OXIMETER (SV02)/VOLUMET/RIC * * * EA 1
CC EXP-N SYS B 100V OXIMETER (SV02)/VOLUMET/RIC * * * EA 1
CC EXP-N-R 115V REFURBISH EXPLORER 115V * * * EA 1
CC 70-AN ANALOG SLAVE CABLE/UNTERMNATED * * * EA 1
CC 70-ANH ANALOG SLAVE CABLE WO/Y CONN * * * EA 1
CC 70-ANHH ANALOG SLAVE CABLE, Y CONNECTOR * * * EA 1
CC 70-ANS ANALOG SLAVE CABLE * * * EA 1
CC 70-ANSS ANALOG SLAVE CABLE W/Y CONN * * * EA 1
CC 70-CC CATHETER INTERFACE CABLE * * * EA 1
CC 70-CC1 CATHETER INTERFACE CABLE * * * EA 1
CC 70-PRTCR CARTRIDGE FOR HP THINKJET * * * EA 1
CC 70-RS-CN CANON PRINTER CABLE * * * EA 1
CC 70CC1E ASSY PATIENT CABLE:70-CC1E * * * EA 1
CC 70CC2 CATHETER INTERFACE CABLE * * * EA 1
CC 70PRTCN CANON PRINTER FOR USE WITH VGS * * * EA 1
CC OM2E ASSY-OPTICAL MODULE INTL VERS * * * EA 1
CC OM2ER ASSY-OPTICAL MODULE INTL VERS * * * EA 1
CC VGS MONITOR-VIGILANCE CCO/SVO2 * * * EA 1
CC VGS-OM OPERATIONS MANUAL: CCO/SVO2 * * * EA 1
CC VGS-R VIGILANCE - REFURBISHED * * * EA 1
CC VGS1SYS VIGILANCE SYS CCO/SVO2 * * * EA 1
CC VGS2SYS VIGILANCE SYS CCO/SVO2 VGS2 * * * EA 1
</TABLE>
23 OF 49
<PAGE>
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH
SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
EXHIBIT A - Products
<TABLE>
<CAPTION>
13-Aug-96
===============================================================================================
DIV MODEL SIZE DESCRIPTION PRICE/UOM UOM QPC
===============================================================================================
<S> <C> <C> <C> <C> <C> <C>
CC VGSFCR VIGILANCE - REFURBISHED * * * EA 1
CC VGS1VMR REFURB VIGILANCE CCO/SVO2 SYS * * * EA 1
CC VGSSYS VIGILANCE CCOISVO2 SYSTEM 115V * * * EA 1
CC VGSSYSCR VIGILANCE CCO/SVO2 115V SYS * * * EA 1
CC VGSSYSFCR REFURB VIGILANCE SYS 115V * * * EA 1
CC VGSSYSR REFURB VIGILANCE CCO/SVO2 SYS * * * EA 1
CC VGSTM VIGILANCE TECHNICAL MANUAL * * * EA 1
CC PX-MK053 MAYO CLINIC FDNT "A-KIT" * * * CS 10
CC PX-MK061 CHILDRENS HOSP "ADULT KIT" * * * CS 10
CC PX-MK081 CHILDRENS HOSP ST LOUIS * * * CS 10
CC PX-MK085 MAYO CLINIC FDNT SWAN DUAL * * * CS 10
CC PX-MK086 MAYO CLINIC FDNT "A-KIT" * * * CS 10
cc PX-MK087 DUKE UNIVERSITY * * * CS 10
CC PX-MK088 DUKE UNIVERSITY * * * CS 10
CC PX-MK093 SAN JUAQUIN HOSP * * * CS 10
CC PX-MK099 MAYO CLINIC A KIT * * * CS 10
CC PX-MK142 CHILDRENS HOSP IN DC * * * CS 10
CC PX-MK237 ALEXIAN BROS. 1X2 * * * CS 20
CC PXAMK359 BAXTER AUSTRALIA * * * CS 20
CC PXCMK315 PLAINS HEALTH CTR * * * CS 20
CC PXCMK488 1X2 KIT BAXTER CANADA * * * CS 10
CC PXMK287 HAHNEMAN HOSP CDP SINGLE KIT * * * CS 10
CC PXMK307 FROEDTERT ANESTHESIA KIT * * * CS 20
CC PXMK363 HEARTLAND HOSP * * * CS 10
cc PXMK364 HEARTLAND HOSP * * * CS 10
CC PXMK367 MIRIAM HOSP SINGLE LINE KIT * * * CS 20
CC PXMK368 MIRIAM HOSP 1X2 KIT * * * CS 20
cc PXMK411 1X2 SAN JUAQUIN HOSP * * * CS 20
CC PXMK416 LITTLE CO OF MARY 24N * * * CS 10
</TABLE>
24 OF 49
<PAGE>
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH
SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
EXHIBIT A - Products
<TABLE>
<CAPTION>
13-Aug-96
===============================================================================================
DIV MODEL SIZE DESCRIPTION PRICE/UOM UOM QPC
===============================================================================================
<S> <C> <C> <C> <C> <C> <C>
CC PXMK422 ST LUKES IN BOISE ID * * * CS 10
CC PXMK433 SINGLE LINE KIT FOR GRANDVIEW * * * CS 10
CC PXMK478 HBAR CDP KIT FOR METHODIST * * * CS 20
CC PXMK485 LAHEY CLINIC 1 B1F CDP KIT * * * CS 20
CC PXMK509 SINGLE CDP KIT FOR ST MARYS * * * CS 10
CC PX-MK034 2X2 CDP KIT FOR READING HOSP * * * CS 10
CC PX-MK120 CHILDRENS HOSP 2X2 * * * CS 10
CC PX-MK244 ST LUKES 2X2 CDP KIT * * * CS 10
CC PXCMK314 PLAINS HEALTH CTR * * * CS 20
CC PXMK332 CATHOLIC MED CTR * * * CS 10
CC PXMK351 2X2 TRI CDP KIT FOR CHILDRENS * * * CS 20
CC PXMK355 NORTHSHORE * * * CS 10
CC PXMK358 PROVIDENCE HOSP 2X2 SWAN KIT * * * CS 20
CC PXMK393 2X2/3 CDP KIT FOR JEWISH HOSP * * * CS 20
CC PXMK424 ST VINCENTS 2X2 * * * CS 20
CC PXMK464 2X2 CDK KIT FOR READSBURG * * * CS 10
CC PXMK474 2X2 272 MT CARMEL * * * CS 20
CC PXMK9119 VALLEY MEMORIAL HOSP * * * CS 20
CC PXMK9146 FTN VALLEY 2X2 KIT * * * CS 20
CC PXNMK479 CDP KIT FOR BAXTER-AUKLAND * * * CS 20
CC PX-MK031 UNIV OF BOSTON CDP KIT 3X3 * * * CS 10
CC PX-MK035 3X3 CDP KIT FOR READNG HOSP * * * CS 10
CC PX-MK062 CHILDRENS HOSP "TRIPLE KIT" * * * CS 10
CC PX-MK063 CHILDRENS HOSP "4X4" * * * CS 10
CC PX-MK083 SOUTHEAST ALABAMA MED CTR * * * CS 10
CC PX-MK084 MAYO CLINIC FDNT "CVS KIT" * * * CS 10
CC PX-MK121 ST ALEXIUS 3X3 * * * CS 10
CC PX-MK139 MAYO CLINIC 3X3 * * * CS 10
CC PX-MK181 CDP 3X3 KIT FOR MERCY-REDDING * * * CS 10
CC PX-MK9582 CHILDRENS HOSP 3X3 PED PT * * * CS 20
</TABLE>
25 OF 49
<PAGE>
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH
SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
EXHIBIT A - Products
<TABLE>
<CAPTION>
13-Aug-96
===============================================================================================
DIV MODEL SIZE DESCRIPTION PRICE/UOM UOM QPC
===============================================================================================
<S> <C> <C> <C> <C> <C> <C>
CC PXCMK449 3X3 CDP KIT FOR ST BONIFACE * * * CS 20
CC PXMK189 WHITE MEMORIAL 3X3 CDP KIT * * * CS 10
CC PXMK194 HEARTLAND HOSP 3X4 * * * CS 10
CC PXMK318 3X3 KIT FOR MAMONIDES * * * CS 10
CC PXMK356 NORTHSHORE * * * CS 10
CC PXMK366 3X3 CDP KIT FOR POMONA VALLEY * * * CS 10
CC PXMK401 BROWNSVILLE MED CTR * * * CS 10
CC PXMK413 3X3R CDP KIT FOR HAHNEMAN * * * CS 10
CC PXMK487 ST PETERS HOSP 3X3 * * * CS 10
CC PXMK537 3X3 CDP KIT ST ANTHONY/ST LUKE * * * CS 20
CC PXMK188 WHITE MEMORIAL 30CC CDP KIT * * * CS 10
CC PXMK381 ST JUDE HOSP * * * CS 20
CC PXMK415 LAC/USC MED CTR 30CC KIT * * * CS 20
CC PXMK7266 CDP KIT FOR FTN VALLEY HOSP * * * CS 20
CC PXMK7729 NORTHSHORE * * * CS 20
CC PXCMK448 2X2 CDP KIT FOR ST BONIFACE * * * CS 20
CC PXAK438 CDP 5 GANG KIT FOR ST JOSEPHS * * * CS 20
CC PXCAK469 3GANG KIT FOR PORT ARTHUR * * * CS 20
CC PXCMX427 TORONTO GENERAL * * * CS 20
CC PXMK357 UNITED HOSP -GRAND FORK * * * CS 10
CC PXMK360 PROVIDENCE HOSP ICP KIT * * * CS 10
CC PXMK410 ENLOE ICP KIT * * * CS 10
CC PXMK456 CDP KIT SINGLE LINE ICP KIT * * * CS 10
CC PXMK4r SINGLE CDP KIT FOR ST JOSEPH'S * * * CS 20
CC PXMK559 ICP KIT FOR METHODIST HOSP * * * CS 20
CC PXMK7859 NORTHWESTERN MEMORIAL KIT * * * CS 10
CC PXMK9715 ST FRANCIS SINGLE LINE KIT * * * CS 20
CC PXMK9716 ST FRANCIS HOSP 2X2 W/MANIFOLD * * * CS 20
CC PXMK9717 ST FRANCIS 3X3 W/MANIFOLD * * * CS 20
</TABLE>
26 OF 49
<PAGE>
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH
SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
EXHIBIT A - Products
<TABLE>
<CAPTION>
13-Aug-96
===============================================================================================
DIV MODEL SIZE DESCRIPTION PRICE/UOM UOM QPC
===============================================================================================
<S> <C> <C> <C> <C> <C> <C>
CC PXMK9851 12" FLSH KIT FOR NORTHSHORE * * * CS 20
CC 33-MK050 SINGLE ART LINE KIT-MT SINAI * * * CS 10
CC 33-MK077 IX2 FOR DEL PLAY COMM HOSP * * * CS 20
CC 33-MK084 IX2 FOR ST JOSEPS-HAZELTON-PA * * * CS 10
CC 33-MK120 SIERRA MED CTR "PA KIT" * * * CS 10
CC 33-MK130 CVP SINGLE PRESS MON KIT * * * CS 10
CC 33-MK133 UNIV OF PITTSBURGH SPCL ORDER * * * CS 10
CC 33-MK152 1X2 KIT FOR VENICE HOSP * * * CS 20
CC 33-MK158 SUMMIT REVERSED ART LINE 272 * * * CS 20
CC 33-MK175 SUMMIT DPT 1X2 SPECIAL ORDER * * * CS 10
CC 33-MK223 IUP SUMMIT DPT KIT * * * CS 20
CC 33-MK235 SINGLE DPT W/3CC SPCL ORDER * * * CS 20
CC 33-MK236 SINGLE LINE KIT FOR CLEVELAND * * * CS 20
CC 33-MK334 GRADUATE CDP KIT * * * CS 10
CC 33-MK335 GRADUATE CDP KIT * * * CS 10
CC 33-MK345 33-284 FOR SCRIPPS * * * CS 10
CC 33-MK350 N.OAKLAND MED CTR 1X2 * * * CS 20
CC 33-MK7266 SPECIAL ORDER 30CC KIT FOR * * * CS 20
CC 33-MK7884 SUMMIT DPT KIT-SINGLE ARTERIAL * * * CS 10
CC 33-MK9045 GOOD SAMARITAN HOSP * * * CS 20
CC 33-MK9313 VA-OMAHA * * * CS 20
CC 33-MK9659 SINGLE LINE SPECIAL ORDER KIT * * * CS 20
CC 33-MK9661 GARDEN CITY HOSP * * * CS 20
CC 33-MK9710 SINGLE LINE SPECIAL ORDER KIT * * * CS 20
CC 33-MK9851 NORTHSHORE CDP KIT * * * CS 20
CC 33-MK9911 SINGLE LINE SPECIAL ORDER KIT * * * CS 20
CC 33-MK049 SUMMIT DPT 2X2 SPECIAL ORDER * * * CS 10
CC 33-MK131 UNIV OF PITTSBURGH-2X2 KIT * * * CS 10
CC 33-MK7859 SUMMIT 5-GANG MANIFOLD KIT * * * CS 10
</TABLE>
27 OF 49
<PAGE>
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH
SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
EXHIBIT A - Products
<TABLE>
<CAPTION>
13-Aug-96
===============================================================================================
DIV MODEL SIZE DESCRIPTION PRICE/UOM UOM QPC
===============================================================================================
<S> <C> <C> <C> <C> <C> <C>
CC 33-MK7876 SUMMIT 2X2 SPECIAL ORDER * * * CS 20
CC 33-MK7883 SUMMIT DPT KIT-2X3 * * * CS 20
CC 33-MK7913 NORTHSHORE UNIV, HOSP * * * CS 10
CC 33-MK9119 SUMMIT-DISPOSABLE TR-ANSDUCER * * * CS 20
CC 33-MK9146 SPECIAL ORDER 2X2 KIT FOR * * * CS 20
CC 33-MK9709 SPECIAL ORDER 2X2 KIT * * * CS 20
CC 33-MK048 X3 COLOR CODED SUMMIT KIT * * * CS 10
CC 33-MK086 JO ELLEN SMITH -4X4 MACRO IV * * * CS 10
CC 33-MK123 DOCTORS HOSP SPECIAL ORDER * * * CS 20
CC 33-MK125 SUMMIT DPT 4X4 SPECIAL ORDER * * * CS 10
CC 33-MK342 GUTHRIE HEALTHCARE SYS 3X3 * * * CS 10
CC 33-MK347 33-3X3 FOR SCRIPPS * * * CS 10
CC 33-MK7386 ST FRANCIS MED CTR 3X3 * * * CS 20
CC 33-MK7455 WASHINGTON ADVENTIST SPECIAL * * * CS 10
CC 33-MK7504 NORTHSHORE HOSP * * * CS 10
CC 33-MK7710 SPECIAL ORDER 3X3 * * * CS 10
CC 33-MK9144 SAMUEL MERRITS-3X3 * * * CS 20
CC 33-MK9373 BAY STATE MEDICAL CENTER * * * CS 20
CC 33-MK9480 STRAUB CLINIC * * * CS 20
CC 33-MK9571 SUMMIT DPT KIT 3X3 * * * CS 20
CC 33-MK9990 CARDINAL GLENNON * * * CS 10
CC 33-MK9993 3X3 KIT FOR CENTENIAL HOSP * * * CS 10
CC 33-MK352 UNIV OF PITTS 4 DPTS W/O FLUSH * * * CS 20
CC 33-MK306 30CC 12N W/LIPID RES. * * * CS 10
CC 33-MK9103 LANCASTER GENERAL * * * CS 20
CC 33-MK9410 30CC SPECIAL ORDER KIT FOR * * * CS 20
CC 33-MK9688 SPECIAL ORDER NEO-NATE * * * CS 20
CC 33-MK9986 VANDERBILT UNIV * * * CS 20
CC 33-MK340 CDP KIT FOR LANCASTER GENERAL * * * CS 10
</TABLE>
28 OF 49
<PAGE>
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH
SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
EXHIBIT A - Products
<TABLE>
<CAPTION>
13-Aug-96
===============================================================================================
DIV MODEL SIZE DESCRIPTION PRICE/UOM UOM QPC
===============================================================================================
<S> <C> <C> <C> <C> <C> <C>
CC 33MK354 ICP KIT FOR ST ANNS HOSP * * * CS 20
CC 33-MK132 UNIV OF PITTSBURGH * * * CS 10
CC 51-69MK135 GLENDALE ADVENTIST * * * CS 20
CC 51-CMK024 TORONTO GENERAL HOSPITAL * * * CS 20
CC 51-CMK046 VICTORIA HOSPITAL * * * CS 20
CC 51-CMK077 CALGARY GENERAL HOSPITAL * * * CS 20
CC 51-CMK095 MONTREAL GENERAL HOSPITAL * * * CS 20
CC 51-MK2022 UNIVERSAL M/F NON-VENTED CAP * * * CS 50
CC 51-MK2025 BIFURCATED IV SET * * * CS 10
CC 51-MK2039 PENROSE ST FRANCES * * * CS 20
CC 51-MK2041 DUKE UNIV TRI IV SET 60" * * * CS 20
CC 51-MK2042 MERCY HOSP CDP KIT * * * CS 20
CC 51-MK7493 CDP BRIDGE KIT * * * CS 20
CC 51-MK7597 ST FRANCIS * * * CS 20
CC 51-MK7832 MT CARMEL * * * CS 20
CC 51-MK7906 W O BOSWELL MEM * * * CS 20
CC 51-MK9017 CDP BRIDGE KIT * * * CS 20
CC 51-MK9142 ST FRANCIS * * * CS 20
CC 51-MK9212 CDP 3 GANG MNFLD KIT * * * CS 20
CC 51-MK9473 DANIEL FREEMAN HSP * * * CS 20
CC 51-MK9944 F/F ADAPTOR * * * CS 50
CC 51-MK9994 ST ELIZABETHS * * * CS 10
CC MK106P PEDIATRIC M/F 6" PRESS TUBING * * * CS 20
CC MK112P PEDIATRIC M/F 12" PRESS TUBING * * * CS 20
CC MK148P PEDIATRIC M/F 48" PRESS TUBING * * * CS 20
CC MK2047 BROOKESVILLE REGIONAL * * * CS 20
CC MK2065 MAYO FOUND CDP COSET KIT * * * CS 20
CC MK2079 BRIDGE FOR WESTERN MED CTR * * * CS 20
CC MK212P PEDIATRIC M/M 12' PRESS TUBING * * * CS 20
</TABLE>
29 OF 49
<PAGE>
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH
SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
EXHIBIT A - Products
<TABLE>
<CAPTION>
13-Aug-96
===============================================================================================
DIV MODEL SIZE DESCRIPTION PRICE/UOM UOM QPC
===============================================================================================
<S> <C> <C> <C> <C> <C> <C>
CC PX-VK272 RAPID CITY CDP AVMP 2X2 * * * CS 10
CC PX-VK276 SW WASHINGTON HOSP 3X3 COSET * * * CS 10
CC PXCVK323 PLAINS HEALTH CTR * * * CS 20
CC PXVJ084 CHILDRENS HOSP 3X3 VAMP JR * * * CS 10
CC PXVJ287 JR COMBO 3CC FOR LUBBOCK * * * CS 20
CC PXVK023 ALTA BATES 2X 3 COMBO * * * CS 10
CC PXVK055 3X3 COMBO CDP KIT FOR ST MARYS * * * CS 10
CC PXVK088 ST AGNES - AVMP COMBO SINGLE * * * CS 10
CC PXVK093 ST LUKES CDP VAMP/COMBO KIT * * * CS 20
CC PXVK220 ST. AGNES - AVMP COMBO 2X2 * * * CS 20
CC PXVK225 2X2 VMP FOR N COLORADO M.C. * * * CS 10
CC PXVK268 ST JOSEPHS 3X3 VAMP COMBO * * * CS 20
CC PXVK274 ST LUKES 3X3 VAMP COMBO * * * CS 10
CC PXVK292 SW WASHINGTON HOSP 2X2 V/COSET * * * CS 10
CC PXVK304 PROVIDENCE HOSP - SINGLE LINE * * * CS 20
CC PXVK306 PROVIDENCE HOSP 3X3 COMBO * * * CS 20
CC PXVK327 ST LUKES IN BOISE ID * * * CS 10
CC 33-VK023 ALTA BATES 2X3 VAMP COMBO KIT * * * CS 10
CC 33-VK050 SIERRA MED CTR VAMP KIT * * * CS 10
CC 33-VK053 SUMMIT/160 VAMP COMBO SPCL KIT * * * CS 20
CC 33-VK064 BLOOD SAMPLING ART. KIT FOR * * * CS 10
CC 33-VK096 ART LINE FOR ANESTHESIA * * * CS 10
CC 33-VK099 FULL HEART KIT FOR GRADUATE * * * CS 10
CC 33-VK284 48-VMP172S FOR SCRIPPS * * * CS 10
CC 33-VK7733 3X3 VMP/SUMMIT SPCL ORDR FOR * * * CS 10
CC 33-VK7968 SUMMIT VAMP COMBO KIT FOR * * * CS 20
CC 33-VK9061 SUMMIT VAMP COMBO 2X3 KIT * * * CS 10
CC 33-VK9144 SUMMIT MEDICAL CENTER 3X3 * * * CS 20
CC 33-VK9482 ST FRANCIS HOSP -HI * * * CS 20
</TABLE>
30 OF 49
<PAGE>
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH
SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
EXHIBIT A - Products
<TABLE>
<CAPTION>
13-Aug-96
===============================================================================================
DIV MODEL SIZE DESCRIPTION PRICE/UOM UOM QPC
===============================================================================================
<S> <C> <C> <C> <C> <C> <C>
CC 43-VK279 3X3 172 VAMP COMBO * * * CS 10
CC 43-VK003 VAMP COMBO OPEN HEART KIT FOR * * * CS 10
CC 43-VK011 MERCY HOSP - UNIFLO/VAMP COMBO * * * CS 20
CC 43-VK012 MERCY HSP - UNIFLO/VAMP COMBO * * * CS 20
CC 43-VK013 MERCY HSP - UNIFLO/VMP COMBO * * * CS 20
CC 43-VK017 VAMP COMBO SPECIAL ORDER KIT * * * CS 20
CC 43-VK018 VAMP COMBO SPECIAL ORDER * * * CS 20
CC 43-VK055 ST MARYS - VAMP COMBO SPECIAL * * * CS 10
CC 43-VK088 UNIFLOW/VAMP ANESTHESIA COMBO * * * CS 10
CC 43-VK093T ST LUKES VAMP COMBO * * * CS 20
CC 43-VK214 CUSTOM VAMP-UNIFLOW COMBO * * * CS 10
CC 43-VK215 2X2 VAMP COMBO FOR VA NASHVILE * * * CS 20
CC 43-VK216 SINGLE LINE DUAL Z VA NASHVILE * * * CS 10
CC 43-VK7619 3X3 UNIFLOW W/VAMP ANESTHESIA * * * CS 10
CC 43-CMK124 VICTORIA HOSPITAL * * * CS 20
CC 43-CMK201 SINGLE ART LINE PM KIT FOR * * * CS 10
CC 43-CMK203 NO IV SET - SINGLE ART LINE FOR * * * CS 10
CC 43-MK036 DONALD SHARP * * * CS 20
CC 43-MK091 DONALD SHARP / CABRILLO * * * CS 20
CC 43-MK092 DONALD SHARP / CABRILLO * * * CS 20
CC 43-MK093 DONALD SHARP / CABRILLO * * * CS 20
CC 43-MK132 ROCHESTER GEN. HOSP. * * * CS 20
CC 43-MK134 CHRISTIAN HOSP NE * * * CS 20
CC 43-MK154 ST MARYS ST LOUIS MO * * * CS 10
CC 43-MK188 UNIV OF TENNESSEE-PEDIATRIC * * * CS 10
CC 43-MK209 METHODIST HOSPITAL-SINGLE ART * * * CS 20
CC 43-MK238 "SWAN KIT" SPECIAL ORDER * * * CS 20
CC 43-MK256 43-2X2 60" DPT KIT UNIFLOW * * * CS 20
CC 43-MK292 CATH LAB DPT SPECIAL ORDER KIT * * * CS 20
</TABLE>
31 OF 49
<PAGE>
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH
SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
EXHIBIT A - Products
<TABLE>
<CAPTION>
13-Aug-96
===============================================================================================
DIV MODEL SIZE DESCRIPTION PRICE/UOM UOM QPC
===============================================================================================
<S> <C> <C> <C> <C> <C> <C>
CC 43-MK298 60" TRIFURCATED UNIFLOW * * * CS 10
CC 43-MK312 108" SINGLE LINE CUSTOMER * * * CS 20
CC 43-MK343 24" PED KIT FOR LITTLE CO OF * * * CS 10
CC 43-MK377 VA BUFFALO CDP KIT * * * CS 10
CC 43-MK9121 ST ELIZABETHS KIT * * * CS 20
CC 43-MK9239 ST MARYS-MADISON * * * CS 20
CC 43-MK9626 WATERBURY HOSP. * * * CS 20
CC 43-MK9829 CHILDRENS IN FRESNO * * * CS 20
CC 43-CMK280 BIFURCATED 43 SERIES 72IN LINE * * * CS 20
CC 43-MK037 DONALD SHARP * * * CS 20
CC 43-MK297 TRIFURCTED 2X# UNIFLOW KIT * * * CS 10
CC 43-MK309 2X2 CUSTOMER DEFINED PRODUCT * * * CS 20
CC 43-MK345 2X2 TRI CUST. DEFNED KIT FOR * * * CS 10
CC 43-MK9209 METHODIST HOSP * * * CS 20
CC 43-VK220 UNIFLOW 2X2 VAMP COMBO * * * CS 20
CC 43-CMK202 3X3 MACRO PM KIT FOR BRITISH * * * CS 10
CC 43-MK049 BRISTOL MEM HSP * * * CS 10
CC 43-MK125 ROCHESTER GEN. HOSP. * * * CS 20
CC 43-MK183 ST ANTHONY'S * * * CS 20
CC 43-MK189 JEWISH HOSPITAL - 3X3 REVERSED * * * CS 20
CC 43-MK214 UNIFLOW-DISPOSABLE TRANSDUCER * * * CS 20
CC 43-MK229 ELLIS HOSP * * * CS 10
CC 43-MK239 TRIFURCATED DPT KIT * * * CS 10
CC 43-MK306 UNIFLOW TRIPLE LINE KIT * * * CS 20
CC 43-MK311 UNIFLOW TRIPLE LINE KIT * * * CS 20
CC 43-MK9208 METHODIST HOSP * * * CS 20
CC 43-MK9317 ST JOSEPH BURBANK * * * CS 10
CC 43-VK293 ST PETERS 3X3 VAMP COMBO * * * CS 10
CC 43-AMK063 SPECIAL ORDER DISPOSABLE TRANS * * * CS 20
</TABLE>
32 OF 49
<PAGE>
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH
SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
EXHIBIT A - Products
<TABLE>
<CAPTION>
13-Aug-96
===============================================================================================
DIV MODEL SIZE DESCRIPTION PRICE/UOM UOM QPC
===============================================================================================
<S> <C> <C> <C> <C> <C> <C>
CC 43-CMK071 HOSPITAL FOR SICK CHILDREN * * * CS 20
CC 43-MK031 LUTHERN HOSP * * * CS 20
CC 43-MK322 30CC LIPID RESISTANT 36N * * * CS 10
CC 43-MK9493 ST JOSEPH BURBANK * * * CS 20
CC 43-MK9625 WATERBURY HOSP. * * * CS 20
CC 43-MK357 CDP KIT FOR PENROSE * * * CS 10
CC 48-VJ244 CDP VAMP JR FOR UNIV OF KANSAS * * * CS 20
CC 49-VK233 UC DAVIS * * * CS 20
CC VJ259 CHILDRENS HOSP-DALLAS * * * CS 20
CC VK298 BALL MEMORIAL VENOUS VAMP KIT * * * CS 20
CC 59PXCT 6" ADAPTOR CABLE FOR PX SERIES * * * EA 1
CC PX-1800 896021-001 PX DPT SYSTEM INTERFACE CABLE * * * EA 1
CC PX-1800 896040-001 PX DPT SYSTEM INTERFACE CABLE * * * EA 1
CC PX-1800 896033-011 PX DPT SYSTEM INTERFACE CABLE * * * EA 1
CC PX-1800 896032-001 PX DPT SYSTEM INTERFACE CABLE * * * EA 1
CC PX-1800 896031-011 PX DPT SYSTEM INTERFACE CABLE * * * EA 1
CC PX-1800 896031-001 PX DPT SYSTEM INTERFACE CABLE * * * EA 1
CC PX-1800 896029-011 INTERFACE CALE FOR TRUWAVE DPT * * * EA 1
CC PX-1800 896028-001 PX DPT SYSTEM INTERFACE CABLE * * * EA 1
CC PX-1800 896025-001 PX DFT SYSTEM INTERFACE CABLE * * * EA 1
CC PX-1800 896507-011 TRUWAVE INTERFACE CABLE * * * EA 1
CC PX-1800 896019-011 PX DPT SYSTEM INTERFACE CABLE * * * EA 1
CC PX-1800 896019-001 PX DFT SYSTEM INTERFACE CABLE * * * EA 1
CC PX-1800 896012-016 PHOENIX INTERFACE CABLE FOR * * * EA 1
CC PX-1800 896012-013 TRUWAVE INTERFACE CABLE * * * EA 1
CC PX-1800 896008-011 PX DPT SYSTEM INTERFACE CABLE * * * EA 1
CC PX-1800 896007-011 PX DPT SYSTEM INTERFACE CABLE * * * EA 1
CC PX-1800 896004-011 PX DPT SYSTEM INTERFACE CABLE * * * EA 1
CC PX-1800 896004-001 PX DPT SYSTEM INTERFACE CABLE * * * EA 1
</TABLE>
33 OF 49
<PAGE>
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH
SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
EXHIBIT A - Products
<TABLE>
<CAPTION>
13-Aug-96
===============================================================================================
DIV MODEL SIZE DESCRIPTION PRICE/UOM UOM QPC
===============================================================================================
<S> <C> <C> <C> <C> <C> <C>
CC PX-1800 896003-001 PX DPT SYSTEM INTERFACE CABLE * * * EA 1
CC PX-1800 896025-011 PX DPT SYSTEM INTERFACE CABLE * * * EA 1
CC PX-1800 896090-011 PX DPT SYSTEM INTERFACE CABLE * * * EA 1
CC PX-1800 896494-011 PX DPT SYSTEM INTERFACE CABLE * * * EA 1
CC PX-1800 896137-011 PHOENIX INTERFACE CABLE FOR * * * EA 1
CC PX-1800 896125-011 PX DPT SYSTEM INTERFACE CABLE * * * EA 1
CC PX-1800 896115-011 TRUWAVE DPT INTERFACE CABLE * * * EA 1
CC PX-1800 896106-011 PX DPT SYSTEM INTERFACE CABLE * * * EA 1
CC PX-1800 896089-001 PX DPT SYSTEM INTERFACE CABLE * * * EA 1
CC PX-1800 896088-011 PX DPT SYSTEM INTERFACE CABLE * * * EA 1
CC PX-1800 896083-013 TRUWAVE DPT CONNECTING CABLE * * * EA 1
CC PX-1800 896038-001 PX DPT SYSTEM INTERFACE CABLE * * * EA 1
CC PX-1800 896083-001 INTERFACE CABLE FOR PHOENIX * * * EA 1
CC PX-1800 896033-001 PX DPT SYSTEM INTERFACE CABLE * * * EA 1
CC PX-1800 896080-001 PX DPT SYSTEM INTERFACE CABLE * * * EA 1
CC PX-1800 896079-011 PX DPT SYSTEM INTERFACE CABLE * * * EA 1
CC PX-1800 896056-001 PX DPT SYSTEM INTERFACE CABLE * * * EA 1
CC PX-1800 896056-011 PX DPT SYSTEM INTERFACE CABLE * * * EA 1
CC PX-1800 896036-001 PX DPT SYSTEM INTERFACE CABLE * * * EA 1
CC PX-1800 896053-001 PX DPT SYSTEM INTERFACE CABLE * * * EA 1
CC PX-1800 896049-011 PX DPT SYSTEM INTERFACE CABLE * * * EA 1
CC PX-1800 896047-001 PX DPT SYSTEM INTERFACE CABLE * * * EA 1
CC PX-1800 896044-001 INTERFACE CABLE FOR PHOENIX * * * EA 1
CC PX-1800 896042-001 PX DPT SYSTEM INTERFACE CABLE * * * EA 1
CC PX-I800 896083-011 INTERFACE CABLE FOR PHOENIX * * * EA 1
CC PX-1800 896034-011 PX DPT SYSTEM INTERFACE CABLE * * * EA 1
CC PX-1800 896507-001 PX DPT SYSTEM INTERFACE CABLE * * * EA 1
CC PX-1800 896508-011 PX DPT SYSTEM INTERFACE CABLE * * * EA 1
CC PX12N PX 12 INCH NEONATE KIT * * * CS 10
</TABLE>
34 OF 49
<PAGE>
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH
SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
EXHIBIT A - Products
<TABLE>
<CAPTION>
13-Aug-96
===============================================================================================
DIV MODEL SIZE DESCRIPTION PRICE/UOM UOM QPC
===============================================================================================
<S> <C> <C> <C> <C> <C> <C>
CC PXIX2 PX 1 DPT STANDARD KIT * * * CS 10
CC PX200 PX VAMP READY KIT * * * CS 10
CC PX-L PX SINGLE LINE DPT 12" * * * CS 10
CC PX24N PX 24 INCH NEONATE KIT * * * CS 10
CC PX260 PX SINGLE LINE DPT KIT 60" * * * CS 10
CC PX260R PX 60" POLE MOUNT OR KIT * * * CS 10
CC PX272 PX SINGLE LINE DPT 72" * * * CS 10
CC PX284 PX SINGLE LINE DPT 84" * * * CS 10
CC PX36N PX 36 INCH NEONATE KIT * * * CS 10
CC PX600 PX STANDALONE TRANSDUCER * * * CS 20
CC PX600F PX STANDALONE TRANSDUCER 3CC * * * CS 20
CC PX600F30 PX STANDALONE TRANSDUCER 30CC * * * CS 20
CC PX6001 PX STANDALONE TRANSDUCER * * * CS 20
CC PX601 PX STANDALONE TRANSDUCER * * * CS 20
CC PX604 PX STANDALONE TRANSDUCER * * * CS 20
CC PXSIM PHOENIX DPT TESTER * * * EA 1
CC PX2X2 PX 2 DPT STANDARD KIT * * * CS 10
CC PX2X3 PX 2 DPT STANDARD KIT * * * CS 10
CC PX3X3 PX 3 DPT STANDARD KIT * * * CS 10
CC PX3X3272 PX 3 DPT ANESTH PM KIT 72" * * * CS 10
CC PXAVMP PX VAMP SINGLE DPT ANESTH * * * CS 10
CC PXAVMP3 PX 3X3 VAMP DPT ANESTHESIA * * * CS 10
CC PXVMP120 PX VAMP/TRANSDCER 120 CMBO KIT * * * CS 10
CC PXVMP160 PX VAMP/TRANSDCER 160 CMBO KIT * * * CS 10
CC PXVMP172 PX VAMP/TRANSDCER 172 CMBO KIT * * * CS 10
CC PXVMP184 PX VAMP/TRANSDCER 184 CMBO KIT * * * CS 10
CC PXVMP260 PX POLE MOUNT VAMP/DPT CMBO * * * CS 10
CC PXVMP272 PX POLE MOUNT VAMP/DPT KIT * * * CS 10
CC PXMP284 PX POLE MOUNT VAMP/DPT KIT * * * CS 10
</TABLE>
35 OF 49
<PAGE>
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH
SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
EXHIBIT A - Products
<TABLE>
<CAPTION>
13-Aug-96
===============================================================================================
DIV MODEL SIZE DESCRIPTION PRICE/UOM UOM QPC
===============================================================================================
<S> <C> <C> <C> <C> <C> <C>
CC PXVMP2X21 PX ARM MOUNT VAMP DPT 160 2X2 * * * CS 10
CC PXVMP2X22 PX POLE MOUNT VAMP/DPT 260 2X2 * * * CS 10
CC PXVMP2X31 PX ARM MOUNT VAMP/DPT 160 2X3 * * * CS 10
CC PXVMP3X31 PX ARM MOUNT VAMP/DPT 160 3X3 * * * CS 10
CC PXVMP3X32 PX POLE MOUNT VAMP/DPT 272 3X3 * * * CS 10
CC VMP306PX VAMP JR "PX" DPT COMBO KIT * * * CS 10
CC VMP406PX VAMP JR "PX" DPT COMBO KIT * * * CS 10
CC VMP448PX VAMP JR "PX" DPT COMBO KIT * * * CS 10
CC 43-AVMP SINGLE UNIFLOW VAMP ANESTH * * * CS 10
CC 43-AVMP3 3X3 UNIFLOW VAMP ANESTHESIA * * * CS 10
CC 49-VMP120UF VAMP 120 KIT, TRANSDUCER READY * * * CS 10
CC 48-VW160UF VAMP 160 KIT, TRANSDUCER READY * * * CS 10
CC 48-VMP172UF VAMP 172 KIT, TRANSDUCER READY * * * CS 10
CC 48-VMP184UF VAMP 184 KIT, TRANSDUCER READY * * * CS 10
CC 48-VMP260UF VAMP POLE MOUNT DPT COMBO KIT * * * CS 10
CC 48-VMP272UF VAMP POLE MOUNT DFT COMBO KIT * * * CS 10
CC 48-VMP2X2UF1 VAMP/UNIFLOW 160 2X2 ARM MOUNT * * * CS 10
CC 49-VMP2X3UF1 VAMP/UNIFLOW 160 2X2 ARM MOUNT * * * CS 10
CC 48-VMP3X3160UF 60" VAMP W/ ARM MOUNT /3 DTS * * * CS 10
CC 48-VMP3X3272UF UNIFLOW VAMP COMBO 3X3 POLE * * * CS 10
CC VWP306UF VAMP JR DPT COMBO KIT * * * CS 10
CC VMP426UF VAMP JR/UNIFLOW DPT COMBO KIT * * * CS 10
CC 33-AVMP SINGLE SUMMIT VAMP ANES * * * CS 10
CC 33-AVMP3 3X3 SUMMIT VAMP ANESTHESIA * * * CS 10
CC 49-VMP120S VAMP/TRANSDUCER 120 COMBO KIT * * * CS 10
CC 48-VMP160S VAMP/TRANSDUCER 160 COMBO KIT * * * CS 10
CC 48-VMP172S VAMP AND SUMMIT TRANSDUCER * * * CS 10
CC 48-VMP184S VAMP AND SUMMIT TRANSDUCER * * * CS 10
CC 48-VMP260S VAMP POLE MOUNT COMBO DPT KIT * * * CS 10
</TABLE>
36 OF 49
<PAGE>
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH
SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
EXHIBIT A - Products
<TABLE>
<CAPTION>
13-Aug-96
===============================================================================================
DIV MODEL SIZE DESCRIPTION PRICE/UOM UOM QPC
===============================================================================================
<S> <C> <C> <C> <C> <C> <C>
CC 48-VMP272S VAMP POLE MOUNT DPT COMBO KIT * * * CS 10
CC 49-VMP2X2S1 VAMP/SUMMIT 160 2X2 ARM MOUNT * * * CS 10
CC 48-VMP2X2S2 VAMP/SUMMIT 260 2X2 POLE MOUNT * * * CS 10
CC 48-VMP2X3S1 VAMP/SUMMIT 160 2X3 ARM MOUNT * * * CS 10
CC 48-VMP2X3S2 VAMP/SUMMIT 260 2X3 POLE MOUNT * * * CS 10
CC 48-VMP3X3160S 60" VAMP W/ ARM MOUNT /3 DPTS * * * CS 10
CC 48-VMP3X3272S VAMP COMBO 3X3 POLE MOUNT 72" * * * CS 10
CC VMP306 VAMP JR * * * CS 20
CC VMP406 VAMP JR * * * CS 20
CC VMP426 VAMP JR * * * CS 20
CC VMP448 VAMP JR * * * CS 20
CC CC-02-80 80 CM SHIELD HEMO * * * CS 40
CC CC-03-80.5F 8.5F POLYURETANE SHEATHS * * * CS 40
CC CC-52-80 80 CM SHIELD, TUOHY * * * CS 40
CC CC-300 8.5F INTRODUCER TRAY W/ AUTOMATIC * * * CS 10
CC CC-350B-8.5F TUOHY-BORST VALVE, BONDED * * * CS 10
CC CC-500-8.5F INTRODUCER TRAY W/ AUTOMATIC * * * CS 10
CC CC-500B-8.5F INTRO SHEATH BONDED HEMO VALVE * * * CS 10
CC CC-507-8.5F INTRO SHEATH W/DETACHABLE * * * CS 10
CC CC-507B-8.5F INTRO SHEATH W/BONDED HEMO * * * CS 10
CC CC-550-8.5F INTRODUCER TRAY; 8.5F * * * CS 10
CC CC-550B-8.5F INTRODUCER TRAY; 8.5 F * * * CS 10
CC CC-A301B-8.5F INTRO KIT W / AMC STD * * * CS 10
CC CC-A351B-8.5F INTRO KIT W / AMC STD * * * CS 10
CC CC-A502-8.5F INTRO TRAY / AMC STD * * * CS 10
CC CC-A502B-8.5F INTRO TRAY / AMC STD * * * CS 10
CC CC-A551-8.5F INTRO TRAY / TD * * * CS 10
CC CC-A551B-8.5F INTRO TRAY / AMC STD * * * CS 10
CC GW-25-35 GUIDEWIRE.025X35 CM * * * CS 20
</TABLE>
37 OF 49
<PAGE>
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH
SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
EXHIBIT A - Products
<TABLE>
<CAPTION>
13-Aug-96
===============================================================================================
DIV MODEL SIZE DESCRIPTION PRICE/UOM UOM QPC
===============================================================================================
<S> <C> <C> <C> <C> <C> <C>
CC GW-25-45HS GUIDEWIRE.025 X 45CM * * * CS 20
CC GW-35-45 GUIDEWIRE.035X45 CM * * * CS 20
CC GW-35-70 GUIDEWIRE.035X70 CM * * * CS 20
CC 48-AVMP ANESTHESIA VAMP * * * CS 20
CC 48-VMP106 6* SAMPLING KIT FOR BODY MOUNT * * * CS 20
CC 489-VWP120 ARM MOUNT RES. FOR BODY MOUNT * * * CS 20
CC 48-VMP160 PKG. ASSY. 48-VMP160 * * * CS 20
CC 48-VMP172 PKG. ASSY. 48-VMP172 * * * CS 20
CC 49-VMP184 PKG ASSY.48-VMP184 * * * CS 20
CC 48-VMP260 PKG. ASSY 48-VMP260 * * * CS 20
CC 48-VMP2.72 PKG. ASSY. 49-VMP272 * * * CS 20
CC 48-VMP503H PKG ASSY .3 CC SYRINGE * * * CS 50
CC 48-VMP600 PKG. ASSY., 48-VMP600 * * * CS 50
CC VMP400 PKG. ASSY. - VAMP CANNULA * * * CS 200
CC VMP700 VAMP DIRECT DRAW * * * CS 50
CC CC-07-7F COMPONENT OBTURATOR * * * CS 40
CC CC-301-5F INTRODUCER TRAY 5F W/AUTOMATIC * * * CS 10
CC CC-301-6F INTRODUCER TRAY-6F * * * CS 10
CC CC-301-7F INTRODUCER TRAY-7F * * * CS 10
CC CC-301-8F INTRODUCER TRAY -8F * * * CS 10
C CC-351B-6F INTRODUCER TRAY 6F * * * CS 10
CC CC-351B-7F INTRODUCER TRAY-7F * * * CS 10
CC CC-351B-8F INT0RDUCER TRAY OF * * * CS 10
CC CC-500-5F INTRODUCER TRAY 5F * * * CS 10
CC CC-500-6F INTRODUCER TRAY-6F * * * CS 10
CC CC-500-7F INTRODUCER TRAY-7F * * * CS 10
CC CC-500-F INTRODUCER TRAY - 8F * * * CS 10
CC CC-550B-5F INTRODUCER TRAY 5F * * * CS 10
CC CC-550B-6F INTRODUCER TRAY - 6F * * * CS 10
</TABLE>
38 OF 49
<PAGE>
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH
SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
EXHIBIT A - Products
<TABLE>
<CAPTION>
13-Aug-96
===============================================================================================
DIV MODEL SIZE DESCRIPTION PRICE/UOM UOM QPC
===============================================================================================
<S> <C> <C> <C> <C> <C> <C>
CC CC-550B-7F INTRODUCER TRAY-7F * * * CS 10
CC CC-550B-8F INTRODUCER TRAY 8F * * * CS 10
CC 33-12N 12 INCH NEONATE KIT * * * CS 10
CC 33-1X2 SUMMIT 1DPT STANDARD KIT * * * CS 10
CC 33-200 VAMP READY KIT- SUMMIT * * * CS 10
CC 33-212 SUMMIT 1 DPT STANDARD KIT * * * CS 10
CC 33-24N 24 INCH NEONATE KIT * * * CS 10
CC 33-260 SUMMIT 1 DTP STANDARD KIT * * * CS 10
CC 33-272 SUMMIT 1 DPT STANDARD KIT * * * CS 10
CC 33-284 SUMMIT 1 DPT STANDARD KIT * * * CS 10
CC 33-36N 36 INCH NEONATE KIT * * * CS 10
CC 33-600 SUMMIT STANDALONE TRANSDUCER * * * CS 20
CC 33-600F SUMMIT STANDALONE TRANSDUCER * * * CS 20
CC 33-600F30 SUMMIT STANDALONE TRANSDUCER * * * CS 20
CC 33-6001 SUMMIT STANDALONE TRANSDUCER * * * CS 20
CC 33-2X2 SUMMIT 2DPT STANDARD KIT * * * CS 10
CC 33-2X3 SUMMIT 2DPT STANDARD KIT * * * CS 10
CC 33-3X3 SUMMIT 3DPT STANDARD KIT * * * CS 10
CC 33-3X3.272 SUMMIT 3 DPT ANESTH PM KIT * * * CS 10
CC 57-BD240 I LINDEN FITTINGS FOR USE WITH * * * CS 20
CC 57-BD241 I LUER-LOCK FITTINGS.FOR USE * * * CS 20
CC 57-BH271 I DISPOSABLE DOME FOR * * * CS 20
CC S7-GD261 I LUER-LOCK FITTINGS.FOR USE * * * CS 20
CC 57-HPQ290 I LINDEN FITTINGS,FOR USE WITH * * * CS 20
CC 54-IV1-2 IV ADMINISTRATION SET. SINGLE, * * * CS 10
CC 54-IV2-2 IV ADMINISTRATION SET, * * * CS 10
CC 54-IV3-2 IV ADMINISTRATION SET. * * * CS 20
CC 58-1WV-06 1 WAY VALVE/6INCH TUBING * * * CS 20
</TABLE>
39 OF 49
<PAGE>
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH
SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
EXHIBIT A - Products
<TABLE>
<CAPTION>
13-Aug-96
===============================================================================================
DIV MODEL SIZE DESCRIPTION PRICE/UOM UOM QPC
===============================================================================================
<S> <C> <C> <C> <C> <C> <C>
CC 58-K169-06 STOPCOCK WITH 6 INCH PRESSURE * * * CS 20
CC 58-K169-12 STOPCOCK WITH 12 INCH PRESSURE * * * CS 20
CC 50-P20OR ROTATING M-M ADAIYTER * * * CS 50
CC 59-1 WSC 1 -WAY STOPCOCK L-L * * * CS 50
CC 59-3WSC 3-WAY STOPCOCK L/L * * * CS 50
CC 59-4WSC 4-WAY L-L STOPCOCK * * * CS 50
CC 59-AM300 ADHESIVE BODY MOUNT FOR * * * CS 100
CC 59-CL200 HOLDER FOR MANIFOLD II * * * EA 1
CC 59-DTH4 DISPOSABLE HOLDER FOR DPT * * * CS 10
CC 59-DTS-C CLAMP FOR DISPOSABLE PRESSURE * * * EA 1
CC 59-DTS-S PKG ASSY-AARM STRAP,59-DTS-S * * * CS 10
CC 59-MNVC MALE NONVNTD CAP 100 EA-2 PER * * * CS 5O
CC 59-UAS PKG ASSY-ARM STRAP 59-UAS * * * CS 10
CC 50-P106 20 PRESSURE TUBING, 6" M\F * * * CS 20
CC 50-P112 20 PRESSURE TUBING, 12", M\F * * * CS 20
CC 50-P124 20 PRESSURE TUBING, 24", M\F * * * CS 20
CC 50-P136 20 PRESSURE TUBING, 36", M\F * * * CS 20
CC 50-P148 20 PRESSURE TUBE, M\F, 48" * * * CS 20
CC 50-P160 20 PRESSURE TUBING. 60", M\F * * * CS 20
CC 50-P172 20 PRESSURE TUBING, 72",M\F * * * CS 20
CC 50-P184 20 PRESSURE TUBING, 84", M\F * * * CS 20
CC 50-P206 20 PRESSURE TUBING, 6", M\M * * * CS 20
CC 50-P212 20 PRESSURE TUBING, 12", M\M * * * CS 20
CC 50-P224 20 PRESSURE TUBING, 24", M\M * * * CS 20
CC 50-P236 20 PRESSURE TUBING. 36", M\M * * * CS 20
CC 50-P248 20 PRESSURE TUBING, 48", M\M * * * CS 20
CC 50-P260 20 PRESSURE TUBING, 60", M\M * * * CS 20
CC 5O.P272 20 PRESSURE TUBING. 72", M\M * * * CS 20
CC 50-P284 20 PRESSURE TUBING, 84", M\M * * * CS 20
</TABLE>
40 OF 49
<PAGE>
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH
SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
EXHIBIT A - Products
<TABLE>
<CAPTION>
13-Aug-96
===============================================================================================
DIV MODEL SIZE DESCRIPTION PRICE/UOM UOM QPC
===============================================================================================
<S> <C> <C> <C> <C> <C> <C>
CC 52-F211 STD PRESSURE MONITORING KIT * * * CS 20
CC 52-F221 STD PRESSURE MONITORING KIT * * * CS 20
CC 52-F231 STD PRESSURE MONITORING KIT * * * CS 20
CC 52-F234 STD PRESSURE MONITORING KIT * * * CS 20
CC 52-F235BE STD PRESSURE MONITORING KIT * * * CS 20
CC 52-F235G STD PRESSURE MONITORING KIT * * * CS 20
CC 52-F235HPQ KIT WITH DOME FOR USE W/HP * * * CS 20
CC 52-F248HPQ STD PRESSURE MONITORING KIT * * * CS 20
CC 52-F72HPQ KIT WITH DOME FOR USE W/HP * * * CS 20
CC 55-LTFIDO FLUSH DEVICE, 3CC/HOUR * * * CS 20
CC 55-UF130 FLUSH DEVICE, 30CC/HR * * * CS 20
CC 43-12N 12 IN NEONATE KIT * * * CS 10
CC 43-1X2 POLE MOUNT 1DPT FOR 3 PRESSURE * * * CS 20
CC 43-200 VAMP READY KIT-TRANSDUCER * * * CS 10
CC 43-212 12 IN ARM MOUNT KIT * * * CS 10
CC 43-24N 24 IN NEONATE KIT * * * CS 10
CC 43-260 60 IN POLE MOUNT KIT * * * CS 10
CC 43-26OR 60 IN POLE MOUNT OR VJT * * * CS 10
CC 43-272 72 IN POLE MOUNT KIT * * * CS 10
CC 43-284 84 IN POLE MOUNT KIT * * * CS 10
CC 43-36N 36 N NEONATE KIT * * * CS 10
CC 43-600 STAND ALONE DPT * * * CS 20
CC 43-60OF STANDALONE WITH 3ML FLUSH * * * CS 20
CC 43-60OF30 STANDALONE WITH 30ML FLUSH * * * CS 20
CC 43-6001 1CP AND 1UP KIT * * * CS 20
CC 43-604 STANDALONE DPT WITH 4FT CABLE * * * CS 20
CC 43212F 12 IN POLE MOUNT KIT W-FLUSH * * * CS 10
CC 43284F 84 IN POLE MOUNT KIT W-FLUSH * * * CS 10
CC 43-2X POLE MOUNT 2DPT FOR 3 PRESSURE * * * CS 20
</TABLE>
41 OF 49
<PAGE>
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH
SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
EXHIBIT A - Products
<TABLE>
<CAPTION>
13-Aug-96
===============================================================================================
DIV MODEL SIZE DESCRIPTION PRICE/UOM UOM QPC
===============================================================================================
<S> <C> <C> <C> <C> <C> <C>
CC 43-2X3 POLE MOUNT 2DPT FOR 3 PRESSURE * * * CS 20
CC 43-3X3 POLE MOUNT 3DPT FOR 3 PRESSURE * * * CS 20
CC 43-3X3-272 UNIFLOW3DPT ANESTH PM KIT * * * CS 20
CC DIVISION TOTAL MODELS 873
</TABLE>
42 OF 49
<PAGE>
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH
SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
EXHIBIT A - Products
<TABLE>
<CAPTION>
13-Aug-96
===============================================================================================
DIV MODEL SIZE DESCRIPTION PRICE/UOM UOM QPC
===============================================================================================
<S> <C> <C> <C> <C> <C> <C>
CVS 4700 PERICARDIAL PATCH * * * EA 1
CVS 4800 JANKE-BARRON HEART SUPPORT * * * CS 6
CVS DIVISION TOTAL MODELS 2
</TABLE>
43 OF 49
<PAGE>
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH
SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
EXHIBIT A - Products
<TABLE>
<CAPTION>
13-Aug-96
===============================================================================================
DIV MODEL SIZE DESCRIPTION PRICE/UOM UOM QPC
===============================================================================================
<S> <C> <C> <C> <C> <C> <C>
VS 830515F MILLER ATRIOSEPTOSTOMY CATH * * * EA 1
VS 830705F ATRIOSEPTOSTOMY DILATION CATH * * * EA 1
VS 620403F 3F OCCLUSION CATHETER 40CM * * * EA 1
VS 620404F 4F OCCLUSION CATHETER 40CM * * * EA 1
VS 620405F 5F OCCLUSION CATHETER 40CM * * * EA 1
VS 62AO403F OCCLUSIN CATH 3F, 40CM * * * EA 1
VS 62AO404F OCCLUSIN CATH 4F, 40CM * * * EA 1
VS 62AO405F OCCLUSIN CATH 5F, 40CM * * * EA 1
VS 12TL0404F FOGARTY THRU-LUMEN ARTERIAL * * * EA 1
VS 12TLO904F FOGARTY THRU-LUMEN ARTERIAL * * * EA 1
VS 12TLO805F FOGARTY THRU-LUMEN ARTERIAL * * * EA 1
VS 12TLO806F FOGARTY THRU-LUMEN ARTERIAL * * * EA 1
VS 12TLO807F FOGARTY THRU-LUMEN ARTERIAL * * * EA 1
VS 12TLW403F FOGARTY THRU-LUMIN EMBO CATH * * * EA 1
VS 12TLW404F FOGARTY THRU-LUMIN EMBO CATH * * * EA 1
VS 12TLW803F FOGARTY THRU-LUMIN EMBO CATH * * * EA 1
VS 12TLW804F FOGARTY THRU-LUMIN EMBO CATH * * * EA 1
VS 12TLW805F FOGARTY THRU-LUMIN EMBO CATH * * * EA 1
VS 12TLW806F FOGARTY THRU-LUMIN EMBO CATH * * * EA 1
VS CV6000 FOGARTY CATHETER RACK * * * EA 1
VS 420404F EDSLAB CHOLANGIOGRAPHY * * * EA 1
VS 420406F CHOLANGIOGILAPHY CATHETER * * * EA 1
VS 420804F LAPAROSCOPIC CHOLANGIOGRAM * * * EA 1
VS 42TL0804F LAPAROSCOPIC CHOLANGIOGRAPHY * * * EA 1
VS CV8000 CHOLANGIOGRAPHY KIT * * * EA 1
VS 1408010 FOGARTY ADHERANT CLOT CATH * * * EA 1
VS 140806 FOGARTY ADHERENT CLOT 4F 6MM * * * EA 1
VS 140808 ADHERENT CLOT CATHETER * * * EA 1
VS 160245F FOGARTY GRAFT THROMBECTOWY * * * EA 1
</TABLE>
44 OF 49
<PAGE>
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH
SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
EXHIBIT A - Products
<TABLE>
<CAPTION>
13-Aug-96
===============================================================================================
DIV MODEL SIZE DESCRIPTION PRICE/UOM UOM QPC
===============================================================================================
<S> <C> <C> <C> <C> <C> <C>
VS 160246F FOGARTY GRAFT THROMBECTOMY * * * EA 1
VS 120403FS FOGARTY ART EMBO CATH W STYLET * * * EA 1
VS 120803FS FOGARTY ART EMBO CATH W STYLET * * * EA 1
VS 12A0403F FOGARTY EMBOLECTOMY (FLAT PKG) * * * EA I
VS 12A0404F FOGARTY EMBOLECTOMY (FLAT PKG) * * * EA 1
VS 12A0602F FOGARTY EMBOLECTOMY (FLAT PKG) * * * EA 1
VS 12A0803F FOGARTY EMBOLECTOMY (FLAT PKG) * * * EA 1
VS 12A0804F FOGARTY EMBOLECTOMY (FLAT PKG) * * * EA 1
VS 12A0805F FOGARTY EMBOLECTOMY (FLAT PKG) * * * EA 1
VS 12A0806F FOGARTY EMBOLECTOMY (FLAT PKG) * * * EA 1
VS 12AO807F FOGARTY EMBOLECTOWY (FLAT PKG) * * * EA 1
VS 12A1004F FOGARTY EMBOLECTOMY (FLAT PKG) * * * EA 1
VS 320806F FOGARTY THROMBECTOMY CATHETER * * * EA 1
VS 32080810F FOGARTY THROMBECTOMY CATH * * * EA 1
VS 320909F FOGARTY THROMBECTOMY CATHETER * * * EA 1
VS 62080814F FOGARTY OCCLUSION CATHETER * * * EA 1
VS 62080822F FOGARTY OCCLUSION CATHETER * * * EA 1
VS 2202310F FOGARTY VENOUS IRRIGATION * * * EA 1
VS 220804F FOGARTY ARTEIUAL IMUGATION * * * EA 1
VS 220906F FOGARTY ARTERIAL IRRIGATION * * * EA 1
VS 410235F FOGARTY BILIARY PROBE * * * EA 1
VS 410236F FOGARTY BILIARY PROBE * * * EA 1
VS 410405F FOGARTY BILIARY PROBE * * * EA 1
VS 120403F FOGARTY EMBOLECTOMY CATHETER * * * EA 1
VS 120404F FOGARTY EMBOLECTOMY CATHETER * * * EA 1
VS 120602F FOGARTY EMBOLECTOMY (TUBE PKG) * * * EA 1
VS 120803F FOGARTY EMBOLECTOMY (TUBE PKG) * * * EA 1
VS 120904F FOGARTY EMBOLECTOMY (TUBE PKG) * * * EA 1
VS 120805F FOGARTY EMBOLECTOMY (TUBE PKG) * * * EA 1
</TABLE>
45 OF 49
<PAGE>
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH
SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
EXHIBIT A - Products
<TABLE>
<CAPTION>
13-Aug-96
===============================================================================================
DIV MODEL SIZE DESCRIPTION PRICE/UOM UOM QPC
===============================================================================================
<S> <C> <C> <C> <C> <C> <C>
VS 120806F FOGARTY EMBOLECTOMY (TUBE PKG) * * * EA 1
VS 120807F FOGARTY EMBOLECTOMY (TUBE PKG) * * * EA 1
VS DHYDRA33 FOGARTY DOUBLE HYDRAJAW * * * CS 10
VS DHYDRA61 FOGARTY DOUBLE HYDRAJAW * * * CS 10
VS DHYDRA86 FOGARTY DOUBLE HYDRAJAW * * * CS 10
VS SAFEHY33 FOGARTY SAFEJAW-HYDRAJAW * * * CS 10
VS SAFEHY86 FOGARTY SAFEJAW-HYDRAJAW * * * CS 10
VS CDSAFE12 FOGARTY DOUBLE SOFTJAW * * * CS 10
VS CDSAFE6 FOGART DOUBLE SOFTJAW * * * CS 10
VS CSAFE6 FOGARTY SAFEJAW CLIP * * * CS 10
VS 700014 1.5 PASSIVE ANGIOSCOPE * * * EA 1
VS 700015 0.7 PASSIVE ANGIOSCOPE * * * EA 1
VS 700046 ANGIOSCOPIC VALVULOTOME * * * EA 1
VS 700047 2.3 PASSIVE ANGIOSCOPE * * * EA 1
VS 700070 1.9 PASSIVE ANGIOSCOPE * * * EA 1
VS 700071 AV ANGIOSCOPE * * * EA 1
VS 700072 DEFLECTNG ANGIOSCOPE * * * EA 1
VS 700073 2.8 PASSIVE ANGIOSCOPE * * * EA 1
VS 700031 IRRIGATION TUBING:5 PACK * * * EA 1
VS 700042 TUBING EX7ENSION SET: 5 PACK * * * EA 1
VS 700081 PULLING CATHETER * * * CS 5
VS 700082 LIGHT REDUCER * * * EA 1
VS 700051 CBD STONE BASKET * * * EA 1
VS 704000 BAX 2.5D70 CBD SCOPE * * * EA 1
VS 700018 CAMERA COUPLER * * * EA 1
VS 700025 STORZ ADAPTER * * * EA 1
VS 700026 WOLF ADAPTER * * * EA 1
VS 700029 V TO C ADAPTER * * * EA 1
VS 700030 EYEPIECE ADAPTER * * * EA 1
</TABLE>
46 OF 49
<PAGE>
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH
SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
EXHIBIT A - Products
<TABLE>
<CAPTION>
13-Aug-96
===============================================================================================
DIV MODEL SIZE DESCRIPTION PRICE/UOM UOM QPC
===============================================================================================
<S> <C> <C> <C> <C> <C> <C>
VS 700038 OLYMPUS TO C ADAPTER * * * EA 1
VS 700039 STRYKER ADAPTER * * * EA 1
VS 700041 MAGNIFIER * * * EA 1
VS 700043 ENDOSCOPIC PUMP (110/115V) * * * EA 1
VS 700085 LIGHT SOURCE ADAPTOR * * * EA 1
VS 700086 CAMERA COUPLER FIXED FOCUS * * * EA 1
VS 700087 ENDOSCOPIC FOOT PEDAL 120/220 * * * EA 1
VS 702010 2.8 PASSIVE REUSABLE SHAFT * * * EA 1
VS 702018 1.9 PASSIVE REUSABLE SHAFT * * * EA 1
VS 702023 2.4 PASS REUSE ANGIOSCOPE SET * * * EA 1
VS 702025 ANGIOSCOPE SHAFT. 2.4MM * * * EA 1
VS 702002 STERILIZATION CONTAINER * * * EA 1
VS 702003 LUS OLYMPUS ADAPTER * * * EA 1
VS 702004 LUS STORZ ADAPTER * * * EA 1
VS 702005 LUS WOLF ADAPTER * * * EA 1
VS 702006 LUS ACMI ADAPTER * * * EA 1
VS 702007 LEAK TESTER * * * EA 1
VS 702011 BAX OPTICS MODULE * * * EA 1
VS 702012 CLEANING BRUSH 1 MM: 5 PACK * * * EA 1
VS 702013 LUS EYEPIECE * * * EA 1
VS 702014 CLEANING BRUSH 0.6MM: 5 PACK * * * EA 1
VS 702020 BAX LIGHT REDUCER * * * EA 1
VS 702021 BAX LSA SOLOS * * * EA 1
VS 702000 2.8 PASSIVE REUSE SET * * * EA 1
VS 702016 1.9 PASSIVE REUSE SET * * * EA 1
VS DSOFT33 FOGARTY DOUBLE SOFTJAW * * * CS 10
VS DSOFT61 FOGARTY DOUBLE SOFTJAW * * * CS 10
VS DSOFT86 FOGARTY DOUBLE SOFTJAW * * * CS 10
VS SOFT33 FOGARTY SOFTJAW * * * CS 10
</TABLE>
47 OF 49
<PAGE>
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH
SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
EXHIBIT A - Products
<TABLE>
<CAPTION>
13-Aug-96
===============================================================================================
DIV MODEL SIZE DESCRIPTION PRICE/UOM UOM QPC
===============================================================================================
<S> <C> <C> <C> <C> <C> <C>
VS SOFT61 FOGARTY SOFTJAW * * * CS 10
VS SOFT86 FOGARTY SOFJTAW * * * CS 10
VS HYDRA33 FOGARTY HYDRAJAW * * * CS 10
VS HYDRA61 FOGARTY HYDRAJAW * * * CS 10
VS HYDRA86 FOGARTY HYDRAJAW * * * CS 10
VS CCATH6 CATHETER SPRING CLIP * * * CS 10
VS CPARAL12 PARALLEL JAW CLIP * * * CS 10
VS CPARAL6 PARALLEL JAW CLIP * * * CS 10
VS HCDSOFT8 EDSLAB HANDLELESS CLAMP * * * CS 10
VS HCSOFT10 EDSLAB HANDLELESS CLAMP * * * CS 10
VS DSAFE33 FOGARTY DOUBLE SOFTJAW * * * CS 10
VS DSAFE61 FOGARTY DOUBLE SAFEJAW * * * CS 10
VS DSAFE86 FOGARTY DOUBLE SAFEJAW * * * CS 10
VS SAFE33 FOGARTY SAFEJAW * * * CS 10
VS SAFE61 FOGARTY SAFEJAW * * * CS 10
VS SAFE86 FOGARTY SAFEJAW * * * CS 10
VS SAFEHY61 FOGARTY SAFEJAW-HYDRAJAW * * * CS 10
VS CSOFT12 FOGARTY SOFTJAW CLIP * * * CS 10
VS CSOFT6 FOGARTY SOFTJAW CLIP * * * CS 10
VS CSAFE12 FOGARTY SOFTJAW CLIP * * * CS 10
VS CV3200 2F EMBOLECTOMY CATH/ACCESS SET * * * EA 1
VS Division Total Models 137
</TABLE>
48 OF 49
<PAGE>
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH
SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
EXHIBIT A - Products
<TABLE>
<CAPTION>
13-Aug-96
===============================================================================================
DIV MODEL SIZE DESCRIPTION PRICE/UOM UOM QPC
===============================================================================================
<S> <C> <C> <C> <C> <C> <C>
BPS PERFUSION SERVICES ALL PERFUSION AND RELATED SERVICES * * * N/A N/A
OFFERED BY BAXTER PERFUSION
SERVICES AS OF SEPTEMBER 30, 1996
CVG Total Models 1,326
</TABLE>
49 OF 49
<PAGE>
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH
SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
Schedule 1 to Exhibit A
<TABLE>
<CAPTION>
13-Aug-96
===============================================================================================
DIV MODEL SIZE DESCRIPTION PRICE/UOM UOM QPC
===============================================================================================
<S> <C> <C> <C> <C> <C>
BEN C0006A1D CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C0006K2C CUSTOM DESIGNED PERFUSION KITS * * * CS 4
BEN C0006Z2D CUSTOM DESIGNED PERFUSION KITS * * * CS 15
BEN C0008Q3T CUSTOM DESIGNED PERFUSION KITS * * * CS 2
BEN C0225A1F CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C03B0UIN CUSTOM DESIGNED PERFUSION KITS * * * CS 4
BEN C0380U2L CUSTOM DESIGNED PERFUSION KITS * * * CS 4
BEN C0380YIC CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C052012J CUSTOM DESIGNED PEPFUSION KITS * * * EA 1
BEN C0520Z6A CUSTOM DESIGNED PERFUSION KITS * * * CS 25
BEN C0580K31 CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C0580K61 CUSTOM DESIGNED PERFUSION KITS * * * CS 2
BEN C0580M3M CUSTOM DESIGNED PERFUSION KITS * * * CS 2
BEN C0580Y1F CUSTOM DESIGNED PERFUSION KITS * * * CS 4
BEN C0690L4C CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C0750M1W CUSTOM DESIGNED PERFUSION KITS * * * CS 2
BEN C0750M3U CUSTOM DESIGNED PERFUSION KITS * * * CS 2
BEN C0790X3C CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C0810E1J CUSTOM DESIGNED PERFUSION KITS * * * CS 2
BEN C0810F2K CUSTOM DESIGNED PERFUSION KITS * * * CS 4
BEN C0810H2A CUSTOM DESIGNED PERFUSION KITS * * * CS 4
BEN C0810X1M CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C0830G6E CUSTOM DESIGNED PERFUSION KITS * * * CS 2
BEN C0830X2T CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C0900A2B CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C0900A2Z CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C0900K2C CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C0900Z1A CUSTOM DESIGNED PERFUSION KITS * * * CS 10
BEN C0930P2F CUSTOM DESIGNED PERFUSION KITS * * * EA 1
</TABLE>
1 OF 10
<PAGE>
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH
SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
Schedule 1 to Exhibit A
<TABLE>
<CAPTION>
13-Aug-96
===============================================================================================
DIV MODEL SIZE DESCRIPTION PRICE/UOM UOM QPC
===============================================================================================
<S> <C> <C> <C> <C> <C>
BEN C0930X3G CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C095OY1A CUSTOM DESIGNED PERFUSION KITS * * * CS 4
BEN C0950Z1Y CUSTOM DESIGNED PERFUSION KITS * * * CS 2
BEN C1010X1B CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C1090L2X CUSTOM DESIGNED PERFUSION KITS * * * EA I
BEN C1110W1D CUSTOM DESIGNED PERFUSION KITS * * * EA I
BEN C1620X7F CUSTOM DESIGNED PERFUSION KITS * * * EA I
BEN C1850H1A CUSTOM DESIGNED PERFUSION KITS * * * CS 2
BEN C1860W1S CUSTOM DESIGNED PERFUSION KITS * * * CS 24
BEN C1860Z3D CUSTOM DESIGNED PERFUSION KITS * * * CS 5
BEN C1860ZSC CUSTOM DESIGNED PERFUSION KITS * * * CS 12
BEN C2130M1E CUSTOM DESIGNED PERFUSION KITS * * * CS 2
BEN C2130P1B CUSTOM DESIGNED PERFUSION KITS * * * CS 2
BEN C2130S1A CUSTOM DESIGNED PERFUSION KITS * * * CS 10
BEN C2130X1G CUSTOM DESIGNED PERFUSION KITS * * * EA I
BEN C2170F1A CUSTOM DESIGNED PERFUSION KITS * * * EA I
BEN C2170G1D CUSTOM DESIGNED PERFUSION KITS * * * CS 24
BEN C2170G2A CUSTOM DESIGNED PERFUSION KITS * * * CS 24
BEN C2170H1A CUSTOM DESIGNED PERFUSION KITS * * * CS 2
SEN C2170JIA CUSTOM DESIGNED PERFUSION KITS * * * CS 50
BEN C2170K2D CUSTOM DESIGNED PERFUSION KITS * * * CS 6
BEN C2170K4A CUSTOM DESIGNED PERFUSION KITS * * * CS 6
BEN C2170N1P CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C2170N2N CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C2170N3H CUSTOM DESIGNED PERFUSION KITS * * * CS 6
BEN C2170N6D CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C2I70N9C CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C2170PIM CUSTOM DESIGNED PERFUSION KITS * * * CS 6
BEN C2170P3C CUSTOM DESIGNED PERFUSION KITS * * * CS 2
</TABLE>
2 OF 10
<PAGE>
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH
SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
Schedule 1 to Exhibit A
<TABLE>
<CAPTION>
13-Aug-96
===============================================================================================
DIV MODEL SIZE DESCRIPTION PRICE/UOM UOM QPC
===============================================================================================
<S> <C> <C> <C> <C> <C>
BEN C2170P7B CUSTOM DESIGNED PERFUSION KITS * * * CS 6
BEN C2170Z2B CUSTOM DESIGNED PERFUSION KITS * * * CS 24
BEN C2410D2B CUSTOM DESIGNED PERFUSION KITS * * * CS 6
BEN C2410K4F CUSTOM DESIGNED PERFUSION KITS * * * CS 4
BEN C2410KSB CUSTOM DESIGNED PERFUSION KITS * * * CS 4
BEN C2410WIC CUSTOM DESIGNED PERFUSION KITS * * * CS 2
BEN C241OX2Z CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C2410X3A CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C2410X4A CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C2560Y2E CUSTOM DESIGNED PERFUSION KITS * * * CS 5
BEN C2570M2U CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C2570X4E CUSTOM DESIOWED PERFUSION KITS * * * EA 1
BEN C2640K4L CUSTOM DESIGNED PERFUSION KITS * * * CS 2
BEN C2640Z6A CUSTOM DESIGNED PERFUSION KITS * * * CS 10
BEN C2660K1D CUSTOM DESIGNED PERFUSION KITS * * * CS 2
BEN C2820Z3A CUSTOM DESIGNED PERFUSION KITS * * * CS 20
BEN C2900A1D CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C2960Z1A CUSTOM DESIGNED PERFUSION KITS * * * CS 15
BEN C2960Z2A CUSTOM DESIGNED PERFUSION KITS * * * CS 15
BEN C3010A1F CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C3010X3E CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C3010Z1A CUSTOM DESIGNED PERFUSION KITS * * * CS 5
BEN C3030X2J CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C3080A4E CUSTOM DESIGNED PERFUSION KITS * * * EA I
BEN C3080E3E CUSTOM DESIGNED PERFUSION KITS * * * EA I
BEN C308OF6D CUSTOM DESIGNED PERFUSION KITS * * * CS 2
BEN C3080K2B CUSTOM DESIGNED PERFUSION KITS * * * CS 4
BEN C3470A1E CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C3470F1B CUSTOM DESIGNED PERFUSION KITS * * * EA 1
</TABLE>
3 OF 10
<PAGE>
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH
SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
Schedule 1 to Exhibit A
<TABLE>
<CAPTION>
13-Aug-96
===============================================================================================
DIV MODEL SIZE DESCRIPTION PRICE/UOM UOM QPC
===============================================================================================
<S> <C> <C> <C> <C> <C>
BEN C3470F2B CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C3650A1C CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C3790P1T CUSTOM DESIGWED PERFUSION KITS * * * CS 2
BEN C3790T2J CUSTOM DESIGNED PERFUSION KITS * * * CS 6
BEN C3820C41 CUSTOM DESIGNED PERFUSION KIMS * * * CS 4
BEN C3820P10 CUSTOM DESIGNED PERFUSION KRTS * * * CS 5
BEN C3820T2F CUSTOM DESIGNED PERFUSION KITS * * * CS 3
BEN C3820X1C CUSTOM DESIGNED PERFUSION KITS * * * EA I
BEN C4020Z2R CUSTOM DESIGNED PERFUSION KITS * * * EA I
BEN C4030A1B CUSTOM DESIGWED PERFUSION KITS * * * EA 1
BEN C4040Q4H CUSTOM DESIGNED PERFUSION KITS * * * EA I
BEN C4040Q5J CUSTOM DESIGNED PERFUSION KITS * * * EA I
BEN C4040Y1F CUSTOM DESIGNED PERFUSION KM * * * CS 5
BEN C4310X1D CUSTOM DESIGNED PEKFUSION KITS * * * EA 1
BEN C4380K1B CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C4380T1B CUSTOM DESIGNED PEILFUSION KITS * * * EA 1
BEN C4400X6E CUSTOM DESIGNED PFIVUSION KITS * * * EA 1
BEN C4400X7E CUSTOM DESIGNED PEIVUSION KITS * * * EA 1
BEN C4420X4H CUSTOM DESIGNED PERFUSION KLTS * * * EA 1
BEN C4420Y2C CUSTOM DESIGNED PEIVUSION KM * * * CS 4
BEN C4470H2B CUSTOM DESIGNED PEIVUSION KM * * * CS 4
BEN C4470X4O CUSTOM DESIGNED PEPFUSION XITS * * * EA 1
BEN C4470X5D CUSTOM DESIGNED POLRUSION KJTS * * * EA 1
BEN C4470X8B CUSTOM DESIGNED PERFUSION XRTS * * * EA 1
BEN C4470Z5D CUSTOM DESMED PERFUSION KITS * * * CS 2
BEN C4470Z6B CUSTOM DESIGNED PERFUSION KITS * * * CS 2
BEN C4560X4J CUSTOM DESIGNED PERFUSION KM * * * EA 1
BEN C4580M2R CUSTOM DESIGNED PEKFUSION KM * * * EA 1
BEN C4580M3T CUSTOM DESIGNED PERYUSION WS * * * EA 1
</TABLE>
4 OF 10
<PAGE>
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH
SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
Schedule 1 to Exhibit A
<TABLE>
<CAPTION>
13-Aug-96
===============================================================================================
DIV MODEL SIZE DESCRIPTION PRICE/UOM UOM QPC
===============================================================================================
<S> <C> <C> <C> <C> <C>
BEN C4580Z6J CUSTOM DESIGNED PEIVUSION XM * * * EA 1
BEN C4SA0Z7G CUSTOM DESIGNED PEKFUSION KITS * * * EA 1
BEN C4580Z8G CUSTOM DESIGNED PERFUSION KRM * * * EA 1
BEN C4690K1D CUSTOM DESIGNED PERFUSION XRM * * * EA 1
BEN C4690X2G CUSTOM DESIGNED PEIVUSION KM * * * EA 1
BEN C4830H1B CUSTOM DESIGNED PEIVUSION KJTS * * * EA 1
BEN C50807A CUSTOM DESIGNED PEIVUSION KRM * * * CS 5
BEN C5460X2B CUSTOM DESIGNED PERFUSION KRRS * * * EA 1
BEN C5500X5G CUSTOM DESIGNED PERFUSION KRM * * * EA 1
BEN C6030P2F CUSTOM DMGNED PEIVUSION KITS * * * EA 1
BEN C6030P4B CUSTOM DESIGNED PERFUSION KJTS * * * EA 1
BEN C6430X3B CUSTOM DESIGNED PEPLFUSION KITS * * * EA 1
BEN C6500K5B CUSTOM DESIGNED PERFUSION KM * * * CS 2
BEN C650OX4A CUSTOM DESIGNM PERFUSION KITS * * * CS 4
BEN C6500Y1C CUSTOM DESIGNED PERFUSION XFFS * * * CS 6
BEN C6700F1S CUSTOM DESIGNED PEKFUSION XRRS * * * CS 2
BEN C6700X2D CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C6700X3F CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C6916A2C CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C6916A4K CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C6916C1D CUSTOM DESIGNED PERFUSION KITS * * * CS 5
BEN C6916G6F CUSTOM DESIGNED PERFUSION KITS * * * CS 24
BEN C6916G7B CUSTOM DESIGNED PERFUSION KITS * * * CS 24
BEN C6916J7E CUSTOM DESIGNED PERFUSION KITS * * * CS 5
BEN C6916K6F CUSTOM DESIGNED PERFUSION KITS * * * CS 4
BEN C6916K8C CUSTOM DESIGNED PERFUSION KITS * * * CS 4
BEN C6916S1A CUSTOM DESIGNED PERFUSION KITS * * * CS 5
BEN C6916T4C CUSTOM DESIGNED PERFUSION KITS * * * CS 4
BEN C6916T5F CUSTOM DESIGNED PERFUSION KITS * * * CS 6
</TABLE>
5 OF 10
<PAGE>
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH
SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
Schedule 1 to Exhibit A
<TABLE>
<CAPTION>
13-Aug-96
===============================================================================================
DIV MODEL SIZE DESCRIPTION PRICE/UOM UOM QPC
===============================================================================================
<S> <C> <C> <C> <C> <C>
BEN C6916T6H CUSTOM DESIGNED PERFUSION KITS * * * CS 6
BEN C6916V5A CUSTOM DESIGNED PERFUSION KITS * * * CS 20
BEN C6916V6A CUSTOM DESIGNED PERFUSION KITS * * * CS 24
BEN C6916X3G CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C6916X5F CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C6916X6C CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C6916Y2B CUSTOM DESIGNED PERFUSION KITS * * * CS 3
BEN C7004X11 CUSTOM DESIGNED PEIVUSION KITS * * * EA 1
BEN C7006N10 CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C7006P3G CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C9044Y1A CUSTOM DESIGNED PEIVUSION KITS * * * CS 12
BEN C9046X1H CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C9D96X2C CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C9130A4H CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C9130X3B CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C9130Z3B CUSTOM DESIGNED PERFUSION KITS * * * CS 6
BEN C9132Q11 CUSTOM DESIGNED PEPFUSION KITS * * * EA 1
BEN C9138X3G CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C9166M1P CUSTOM DESIGNED PERFUSION KITS * * * CS 2
BEN C9166M6D CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C9166X4C CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C9198M11 CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C9204X3E CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C9204X4H CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C9207A1B CUSTOM DESIGNED PERFUSION KITS * * * CS 4
BEN C9207E1B CUSTOM DESIGNED PERFUSION KITS * * * CS 2
BEN C9207K11 CUSTOM DESIGNED PERFUSION KITS * * * CS 2
BEN C920711A CUSTOM DESIGNED PERFUSION KITS * * * CS 2
BEN C9208P7H CUSTOM DESIGNED PERFUSION KITS * * * EA
</TABLE>
6 OF 10
<PAGE>
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH
SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
Schedule 1 to Exhibit A
<TABLE>
<CAPTION>
13-Aug-96
===============================================================================================
DIV MODEL SIZE DESCRIPTION PRICE/UOM UOM QPC
===============================================================================================
<S> <C> <C> <C> <C> <C>
BEN C9214K4C CUSTOM DESIGNED PERFUSION KITS * * * CS 4
BEN C9214X3H CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C9214X4D CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C9214Y2B CUSTOM DESIGNED PERFUSION KITS * * * CS 6
BEN C9235C4K CUSTOM DESIGNED PERFUSION KITS * * * CS 2
BEN C9235P5B CUSTOM DESIGNED PERFUSION KITS * * * CS 4
BEN C9235V1D CUSTOM DESIGWED PERFUSION KITS * * * CS 24
BEN C9235Z4C CUSTOM DESIGNED PEIVUSION KITS * * * CS 6
BEN C9245A1U CUSTOM DESIGNED PERFUSION KITS * * * CS 2
BEN C9262A1N CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C9276T3K CUSTOM DESIGNED PERFUSION KITS * * * CS 4
BEN C9318A2D CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C9318C1C CUSTOM DESIGNED PERFBSION KITS * * * CS 2
BEN C93I8W31 CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C9336A1K CUSTOM DESIGNED PERFUSION KITS * * * CS 3
BEN C9358X2B CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C9369H1A CUSTOM DESIGNED PERFUSION KITS * * * CS 4
BEN C9369H2B CUSTOM DESIGNED PERFUSION KITS * * * CS 4
BEN C9404G1A CUSTOM DESIGWED PERFUSION KITS * * * CS 2
BEN C9420L3O CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C9420X2D CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C9433Y1C CUSTOM DESIGNED PERFUSION KITS * * * CS 6
BEN C9444X1B CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C9475Q1Z CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C9525K11 CUSTOM DESIGNED PERFUSION KRRS * * * CS 2
BEN C9525X1M CUSTOM DESIGNED PERFUSION KRRS * * * EA I
BEN C9529CIC CUSTOM DESIGNED PERFUSION KITS * * * CS 2
BEN C9529T3C CUSTOM DESIGNED PERFUSION KITS * * * CS 4
BEN C9529X7C CUSTOM DESIGNED PERFUSION KITS * * * EA 1
</TABLE>
7 OF 10
<PAGE>
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH
SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
Schedule 1 to Exhibit A
<TABLE>
<CAPTION>
13-Aug-96
===============================================================================================
DIV MODEL SIZE DESCRIPTION PRICE/UOM UOM QPC
===============================================================================================
<S> <C> <C> <C> <C> <C>
BEN C9533X1H CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C9536K1H CUSTOM DESIGNED PERFUSION KITS * * * CS 2
BEN C9536X1L CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C9536X2G CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C9536Z5A CUSTOM DESIGNED PERFUSION KITS * * * CS 10
BEN C9541C5A CUSTOM DESIGNED PERFUSION KITS * * * CS 10
BEN C9541E2F CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C9541K2G CUSTOM DESIGNED PERFUSION KITS * * * CS 4
BEN C9541K6C CUSTOM DESIGNED PERFUSION KITS * * * CS 4
BEN C9541K7A CUSTOM DESIGNED PERFUSION KITS * * * CS 10
BEN C9541K8A CUSTOM DESIGNED PERFUSION KITS * * * CS 10
BEN C9541P3B CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C9541X6C CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C9541X9F CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C9541Y1F CUSTOM DESIGNED PERFUSION KITS * * * CS 2
BEN C9541Z5A CUSTOM DESIGNED PERFUSION KITS * * * CS 12
JEW C9573A1F CUSTOM DESIGNED PERFUSION KITS * * * CS 2
BEN C9582H1E CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C9587A1L CUSTOM DESIGNED PERFUSION KITS * * * CS 2
BEN C9597D1D CUSTOM DESIGNED PERFUSION KITS * * * CS 2
BEN C9597X2U CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C9603X4I CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C9626A1E CUSTOM DESIGNED PERFUSION KITS * * * CS 2
BEN C9626H1K CUSTOM DESIGNED PERFUSION KITS * * * CS 2
BEN C9626Y1H CUSTOM DESIGNED PERFUSION KITS * * * CS 12
BEN C9663C1A CUSTOM DESIGNED PERFUSION KIT * * * CS 2
BEN C9663K1B CUSTOM DESIGNED PERFUSION KITS * * * CS 4
BEN C9663M3E CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C9671A1A CUSTOM DESIGNED PERFUSION KITS * * * EA 1
</TABLE>
8 OF 10
<PAGE>
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH
SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
Schedule 1 to Exhibit A
<TABLE>
<CAPTION>
13-Aug-96
===============================================================================================
DIV MODEL SIZE DESCRIPTION PRICE/UOM UOM QPC
===============================================================================================
<S> <C> <C> <C> <C> <C>
BEN C9671L2H CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C9685X2G CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C9704X2J CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C9783P1L CUSTOM DESIGNED PERFUSION KITS * * * CS 5
BEN C9783T2D CUSTOM DESIGNED PERFUSION KITS * * * CS 5
BEN C9799K2B CUSTOM DESIGNED PERFUSION KITS * * * CS 6
BEN C9799N3C CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C9799N4C CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C9799P2D CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C9799Z4A CUSTOM DESIGNED PERFUSION KITS * * * CS 6
BEN C9807K1B CUSTOM DESIGNED PERFUSION KITS * * * CS 2
BEN C9807X3E CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C9810X8P CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C9819Q1X CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C9821A1A CUSTOM DESIGNED PERFUSION KITS * * * CS 5
BEN C9821K1B CUSTOM DESIGNED PERFUSION KITS * * * CS 4
BEN C9821T1B CUSTOM DESIGNED PERFUSION KITS * * * CS 3
BEN C9821X2B CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C9827R2M CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C9850M1F CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C9850X1H CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C9851Y1D CUSTOM DESIGNED PERFUSION KITS * * * CS 5
BEN C9854A1G CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C9854E1J CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C9854F2G CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C9854Z2B CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C9854Z3B CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C9862X2G CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C9867M1K CUSTOM DESIGNED PERFUSION KITS * * * EA 1
</TABLE>
9 OF 10
<PAGE>
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH
SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
Schedule 1 to Exhibit A
<TABLE>
<CAPTION>
13-Aug-96
===============================================================================================
DIV MODEL SIZE DESCRIPTION PRICE/UOM UOM QPC
===============================================================================================
<S> <C> <C> <C> <C> <C>
BEN C9867M2J CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C9889K2E CUSTOM DESIGNED PERFUSION KITS * * * CS 1
BEN C9908X1O CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C9923G3D CUSTOM DESIGNED PERFUSION KITS * * * CS 10
BEN C9923H1C CUSTOM DESIGNED PERFUSION KITS * * * CS 2
BEN C9927A1F CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C9927K1E CUSTOM DESIGNED PERFUSION KITS * * * CS 4
BEN C9927X1D CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C9927X3F CUSTOM DESIGNED PERFUSION KITS * * * EA 1
BEN C9927Y1B CUSTOM DESIGNED PERFUSION KITS * * * CS 4
BEN C9934A1A CUSTOM DESIGNED PERFUSION KITS * * * CS 2
BEN C9934X1C CUSTOM DESIGNED PERFUSION KITS * * * EA 1
273 TOTAL MODELS
</TABLE>
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PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
SERVICES AND DISTRIBUTION AGREEMENT
EXHIBIT B
Allegiance's Duties
-------------------
1. General Duties.
1.1 Corporate Agreement Bonus Program. Allegiance shall participate in
---------------------------------
the corporate agreement bonus program for the Products as follows:
1.1.1 Existing Agreements.
-------------------
1.1.1.1 The "Existing Corporate Agreements" shall mean Baxter's
agreements with stand-alone hospitals and regional and national health
systems with effective dates prior to September 30, 1996 which provide for
annual bonus or discount payments based, inter alia, upon the quantity of
----------
Baxter-manufactured products purchased by the customer.
1.1.1.2 Allegiance will accept assignment of the Existing
Corporate Agreements and will administer the Existing Corporate Agreements
on behalf of itself and Baxter.
1.1.1.3 Allegiance shall honor and administer each Existing
Corporate Agreement through its expiration or earlier termination pursuant
to its terms.
1.1.1.4 The corporate agreement bonus funding process will be
the same as prior to October 1, 1996, i.e., the corporate agreement bonuses
----
will be funded by Baxter and Allegiance, the allocation will be made based
on the estimated total year-end payout and actual May year-to-date sales
and gross profit recognized from the applicable customers, the bonus
allocation will be invoiced by Allegiance to Baxter on a monthly basis
(terms of payment will be net 30 days), and on or before May 31 of each
year, any over-accrual or under-accrual will be allocated to Allegiance or
Baxter based upon the foregoing allocation for the applicable year.
1.1.1.5 Allegiance shall prepare and present the corporate
agreement bonus payments to the customers and Baxter has the right to have
Baxter
B-1
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PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
representatives present.
1.1.2 Future Agreements. For any corporate bonus agreements
-----------------
entered into on or after the Effective Date with stand-alone hospitals and
regional and national health systems, Allegiance shall meet with each Baxter
business unit to determine whether such Baxter business unit desires to
participate in any such agreements.
1.2 Sales Support. Allegiance shall use commercially reasonable efforts
-------------
to support sales of the Products and Perfusion Services in accordance with the
following and such efforts are in lieu of any standard of performance implied by
Section 2-306(2) of the U.C.C.:
1.2.1 Allegiance field service representatives (customer service
representatives in the field) shall direct customer inquiries regarding the
Products and Perfusion Services to Baxter's customer service support
organization for resolution (the parties agree that field service
representatives will be resident in each region as of the Effective Date).
1.2.2 Allegiance account managers shall: (a) provide Baxter with
access to the customer decision-makers; (b) generate sales interest in the
Products and Perfusion Services; (c) actively support the joint customer
satisfaction strategy between Allegiance and Baxter; and (d) work with Baxter
(in a manner similar to that prior to the Effective Date) relative to account
segmentation rating of Baxter customers.
1.2.3 Allegiance shall participate with Baxter in a semi-annual
review of regional account segmentation, performance to critical business
indicators, and regional sales to be conducted with Baxter's leaders of the
respective sales organizations and the Allegiance region president and the
Allegiance region president's steering team.
1.2.4 Allegiance's sales generalist sales force shall continue to
promote sales of the Products and Perfusion Services in the same manner as prior
to the Effective Date.
1.2.5 Upon termination or expiration of any pre-existing customer
contract with a third-party supplier for products that compete with any Product
or Products, Allegiance shall cause such customer contracts to encourage and
facilitate use of the Products (rather than any product competing with any
Product or Products) through appropriate means, including, but not limited to,
the Allegiance customer contract provisions and/or sales representative
incentives.
B-2
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SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
1.2.6 Allegiance shall use commercially reasonable efforts to
encourage its customers to convert BCS Kit components manufactured by third
parties to Baxter-manufactured components.
1.3 Marketing Support. Allegiance shall use commercially reasonable
-----------------
efforts to support marketing of the Products and Perfusion Services in
accordance with the following and such efforts are in lieu of any standard of
performance implied by Section 2-306(2) of the Uniform Commercial Code:
1.3.1 Allegiance shall provide marketing services (other than
product management services which will be provided by Baxter) to Surgery
Centers.
1.3.2 Allegiance shall maintain its own communications resources
and shall coordinate the communications messages with Baxter when appropriate.
1.3.3 Allegiance shall attempt whenever possible to share with
Baxter expenses for convention fees, industry organizations, and industry
databases when and where appropriate.
1.3.4 Prior to publication, Allegiance shall submit to Baxter for
Baxter's approval all Allegiance promotional/communication endeavors
specifically referencing the Products, Perfusion Services or any Baxter
services.
1.3.5 As part of a general promotion, Allegiance shall represent
the Products and Perfusion Services fully and prominently in Allegiance's
product and service literature or any other media, including field sales support
tools, except for non-Cost Management accounts, such promotions shall be
provided by Allegiance at a similar level as provided prior to the Effective
Date.
1.3.6 Allegiance shall include Baxter sales volume by Product
category on Allegiance's sales reports in a similar format as provided by
Allegiance prior to the Effective Date.
1.3.7 For a fee to be agreed upon from time to time, Allegiance
shall provide literature distribution services to Baxter.
1.4 Materials Management. Allegiance and Baxter shall use commercially
--------------------
reasonable efforts to make the supply chain as efficient as possible. Future
opportunities to improve efficiency could include, but are not limited to, EDI,
bar coding, custom palletization, network channels and the use of returnable
totes. Both parties agree to work in good faith to
B-3
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PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
achieve this goal.
1.4.1 Finished Goods Requirements Planning.
------------------------------------
1.4.1.1 Allegiance will adhere to stocking, storage and delivery
levels established by Baxter for all Products.
1.4.1.2 Allegiance will assist Baxter in moving inventory
between Allegiance-owned replenishment centers and all distribution centers
for purposes of re-balancing excess stocks and/or managing back orders.
1.4.1.3 Allegiance will not be required to carry more than 1995
average Days Inventory On Hand.
1.4.2 Tracing Reports.
---------------
1.4.2.1 Allegiance will electronically provide a daily sales
tracing report to Baxter. With respect to Products, this tracing report
will show for all Products sold to customers, including Products sold as
components of PBDS Kits, at a minimum (a) the product model, (b) quantity
shipped, (c) lot number in accordance with Section 1.5.6 of Exhibit B, (d)
oxygenator serial number, only when required, (e) customer name and
address, (f) the Allegiance customer number, and (g) any Products shipped
to customers directly by Baxter on behalf of Allegiance (drop/ship).
1.4.2.2 Within 5 days of the end of each month, Allegiance shall
transmit to Baxter trace sales information for BCS Kit components.
1.5 Distribution.
------------
1.5.1 Shipment From Plants to Replenishment Centers. Allegiance
---------------------------------------------
will be responsible for assisting Baxter in the resolution of all freight claims
for Products manufactured at any Allegiance manufacturing facility.
1.5.2 Receiving (Notification and Planning).
-------------------------------------
1.5.2.1 Product will be system received within one and one-half
business days of arrival at an Allegiance distribution center or an
Allegiance replenishment center.
B-4
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SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
1.5.2.2 Allegiance will work in coordination with Baxter to
schedule receiving appointments for Products coming from Plants and
Replenishment Centers.
1.5.2.3 Allegiance will receive products at distribution
centers using Baxter's and Allegiance's computer systems or an Allegiance
warehouse management system that will upload to such computer system.
1.5.3 Warehouse Management.
--------------------
1.5.3.1 Allegiance will be responsible for the management of all
Allegiance facilities.
1.5.3.2 Allegiance will measure and report to Baxter on a
monthly basis Product damage or loss that occurs subsequent to arrival at
Allegiance distribution centers and prior to shipment to customers. If any
Products purchased by Allegiance under the Distributor Model or Kit Model
are damaged, lost or stolen while in an Allegiance replenishment center or
distribution center, (1) Baxter will issue a credit memo to Allegiance for
such damaged, lost or stolen Products at Baxter's applicable Distributor
List Price, and (2) Baxter will invoice Allegiance monthly for such
damaged, lost or stolen Products (but not carton failure) at its applicable
standard cost as stated in Baxter's inventory valuation reports.
1.5.3.3 Allegiance shall have the right to any amounts recovered
with respect to freight claims for Products shipped from Allegiance
facilities to customers under the Distributor Model.
1.5.3.4 Should Baxter redefine storage requirements, Allegiance
and Baxter will mutually agree upon a new fee for service rate.
1.5.3.5 Except as otherwise agreed to, Allegiance will adhere to
existing storage, shipping and receiving practices, including practices
regarding time-sensitive Products.
1.5.3.6 Both parties agree that the echeloning of products based
on line item usage generally makes sense. Assuming there are no significant
customer contractual issues or financial impacts to Baxter, Baxter agrees
to the parameters set forth by the rationalized supply chain. If after the
appropriate review there are significant customer contractual issues or
financial impacts to Baxter, 1995 will be used as the baseline for where
B-5
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SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
products are stocked and the number of low velocity SKU's will not exceed
1995 levels.
1.5.3.7 Allegiance will measure and report to Baxter on a
monthly basis Product damage that occurs prior to arrival at Allegiance
distribution centers or its replenishment centers.
1.5.4 Pipeline Visibility. Visibility to actual inventory levels
-------------------
for all segments of the Allegiance pipeline necessary to support Baxter
production planning will be provided through Allegiance systems as provided
prior to the Effective Date.
1.5.5 Order Fulfillment. When customer orders are released
-----------------
through Baxter's or Allegiance's computer systems, Allegiance personnel will
pick, pack, load and stage the customer order for delivery within the Allegiance
distribution center.
1.5.6 Outbound Shipment.
-----------------
1.5.6.1 Allegiance personnel shall be responsible for the
selection and routing, private fleet or commercial carrier, of the Baxter
customer order.
1.5.6.2 Allegiance shall continue to provide the following
services for all outbound shipments (i.e., shipments to customers), to the
extent that such services were normally being provided by Baxter prior to
the Effective Date: (a) freight payment; (b) audit of freight payments,
(c) transportation cost reporting, and (d) logistics analysis/distribution
technology to include network planning and replenishment center sourcing.
Allegiance's compensation for such services is included in the amounts
provided in Section 7.2. For an additional fee to be agreed upon,
Allegiance may agree to provide to Baxter additional outbound freight
services beyond the scope of the services normally being furnished by
Baxter prior to the Effective Date.
1.5.6.3 Allegiance shipments will be based on bill of lading
(BOL) instructions. If no specific instruction appears in BOL, shipments
will occur on the next scheduled delivery or within a maximum of two
business days (if no scheduled delivery).
1.5.6.4 Whenever Allegiance is responsible for shipping the
Products to the customer, Allegiance will be responsible for filing freight
claims with commercial
B-6
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SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
carriers/private fleet and will be responsible for resolving product
shortages and overages, including proof of delivery.
1.5.6.5 Allegiance will verify shipments of Products to
customers by private fleet or commercial carriers within one business day.
1.5.7 Lot Tracking. Allegiance shall provide lot tracking
------------
capabilities, if any, as provided by Allegiance for the Products prior to the
Effective Date. As the Witron system lot tracking capabilities become available
at each Allegiance distribution center or replenishment center, Allegiance shall
make such capabilities available to Baxter under the existing fee structure.
1.5.8 Returned Goods Management.
-------------------------
1.5.8.1 Allegiance shall pick up, process and dispose of
returned Products at Baxter's request. Allegiance will be compensated by
Baxter for the actual out-of-pocket cost of such returned Product disposal
services.
1.5.8.2 Allegiance will continue practices existing immediately
prior to the Effective Date regarding returned goods processing, including
unloading, segregation, inspection, product disposition (restocking,
disposal, or transport for restocking), documentation, and forwarding
paperwork for Baxter to administer credit to Allegiance.
1.5.8.3 Return goods processing time (receipt date at
distribution center to paperwork receipt at Baxter) will not exceed 30
days.
1.5.8.4 Allegiance shall use commercially reasonable efforts to
dispose of returned Products in a cost-effective manner, subject to
Baxter's instructions.
1.6 Product Field Corrective Actions.
--------------------------------
1.6.1 Allegiance shall perform field corrective action ("FCA")
services in a manner consistent with the quality systems, procedures and
specifications as of the Effective Date. Allegiance shall provide the following
FCA services for the fee stated in Section 6.7:
a. FCA notification processing;
b. FCA disposition processing;
c. storage of Products affected by an FCA inside an Allegiance
distribution center for up to
B-7
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PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
six months from the date of initiation of the FCA;
d. transportation of all Products affected by the FCA to
Baxter, freight collect;
e. rework or inspections of Products by Allegiance employees;
f. discard and destruction of Products utilizing nonhazardous
waste disposal methods by Allegiance employees;
g. delivery of recall report information to Baxter;
h. incoming inspection of all Baxter Products for open FCAs for
twelve months from the date of initiation of the FCA; and
i. third-party invoices for any of the services listed above.
1.6.2 At Baxter's request and with Baxter's approval, Allegiance shall
perform FCA services not included in Section 1.6.1 for additional compensation
to be agreed upon. Baxter will be invoiced separately for such additional
services pursuant to Section of this Agreement. Examples of additional FCA
services addressed by this Section 1.6.2 include:
a. all third-party invoices related to expenses incurred by
Allegiance that arise out of the need for Baxter to issue an
FCA for Products;
b. computer system upgrades requested by Baxter or Baxter for
Allegiance FCA systems;
c. storage of Products affected by an FCA for periods longer
than six months or storage of such Products in rented
trailers; and
d. incoming inspection of all Products for open FCAs for
periods longer than 12 months from the date of initiation of
the FCA.
1.6.3 For purposes of the subsequent provisions of this Section 1.6,
Allegiance shall use commercially reasonable efforts to accomplish the FCA tasks
identified within the time periods indicated. If extraordinary volume or other
circumstances make such time periods impracticable, Baxter and Allegiance will
make adjustments by extending time periods, setting priorities or otherwise.
1.6.4 Allegiance shall perform FCA notification to Allegiance's
distribution centers and replenishment center based upon priorities. Priority A
notification requires extraordinary and immediate action. Priority B
notification requires
B-8
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PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
notification to all Allegiance distribution centers and its replenishment center
within one business day. Priorities will be based on the urgency of the FCA as
determined primarily by Baxter.
1.6.5 For FCAs involving Products sold under the Distributor
Model, Allegiance shall provide customer lists to Baxter the next business day
for requests received before 1:00 p.m. Central Standard Time.
1.6.6 Allegiance shall perform stock checks based upon priorities.
Priority A requires extraordinary and immediate action. Priority B requires
processing and reporting on the same day. Priority C will be negotiated based
upon needs but generally requires processing and reporting in 2 to 5 business
days. Priorities will be based on the urgency of the FCA as determined
primarily by Baxter.
1.6.7 Initial inventory reports shall be issued in 5 business days
from initial FCA notification to Allegiance's distribution centers or
replenishment center unless otherwise requested.
1.6.8 Subject to local restrictions regarding discard of the
products, routine dispositions (as designated by Baxter) shall be issued to
Allegiance's distribution centers and replenishment center in 5 business days.
Allegiance's distribution centers and replenishment center shall then have 5
business days to process the routine disposition.
1.6.9 Subject to local restrictions regarding discard of the
Products, expedited dispositions (as designated by Baxter) shall be issued to
Allegiance's distribution centers and replenishment center within 1 business
day. Allegiance's distribution centers and replenishment center shall then have
five business days to process the expedited disposition.
1.6.10 Subject to local restrictions regarding discard of the
Products, extraordinary dispositions (as designated by Baxter) shall be issued
within 1 business day. Allegiance's distribution centers and replenishment
center shall then have one business day to process the extraordinary
disposition.
1.6.11 Reconciled disposition reports for quantity variance shall be
negotiated between Allegiance and Baxter at the time of disposition.
1.6.12 The necessity for and content of sampling plans
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and protocols shall be negotiated at the time of the FCA.
1.6.13 Allegiance shall cooperate with Baxter in performing any FCA
by identifying affected Products and customers, developing an action-specific
management plan detailing specific responsibilities, and notifying customers of
any such action. Allegiance shall encourage customers to follow instructions
related to any hold or recall situation.
1.7 Special Allegiance Inbound Freight Services. Allegiance shall continue
-------------------------------------------
to provide the following services for all inbound freight shipments (i.e.,
shipments of Products from manufacturing plants to replenishment centers or
distribution centers or from replenishment centers to distribution centers) to
the extent that such services were normally being provided by Baxter's US
Distribution business to Baxter prior to the Effective Date: (a) freight
payment; (b) audit of freight payments, (c) transportation cost reporting, and
(d) logistics analysis/distribution technology to include network planning and
replenishment center sourcing. Allegiance's compensation for such services will
be determined in accordance with the methodology used by Baxter prior to the
Effective Date. For an additional fee to be agreed upon, Allegiance may agree to
provide to Baxter additional inbound freight services beyond the scope of the
services normally being furnished by Baxter prior to the Effective Date.
2. Distributor Model.
2.1 Receipt of Products. Allegiance system receives the Products into its
-------------------
computer system.
2.2 Customer Service. Allegiance shall provide customer service support
----------------
and order entry as follows for all Products and Perfusion Services sold under
the Distributor Model:
2.2.1 Product/Service Specifications - Allegiance shall forward to
------------------------------
Baxter any requests for Product information not available on Allegiance systems.
2.2.2 Pricing/Contracting Information - Allegiance shall develop
-------------------------------
and maintain contract information for all contracts, and such information shall
be accessible to Allegiance via its computer system.
2.2.3 Product Availability - Allegiance shall provide fill rate
--------------------
and product availability information to all service personnel and regions, and
such information shall reside in Allegiance and Baxter systems.
B-10
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PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
2.2.4 Competitive Product Cross-Referencing - Allegiance shall
-------------------------------------
update Product cross-reference information on a consistent time frame and
provide it to the service personnel via Allegiance's system.
2.2.5 Sales Representative Information - Allegiance shall provide
--------------------------------
Allegiance representative identification to the customer. This information will
reside in the customer master file and be updated as needed by the sales
administration group.
2.2.6 New Customer Set-Up - Allegiance customer service
-------------------
representatives will ensure effective and efficient coding of all new customers
into the customer master files.
2.2.7 Order Fulfillment/Sales Process.
-------------------------------
2.2.7.1 Order Placement - Allegiance customer service
---------------
representatives will be the initial access point for customer into
Allegiance and will handle inquiries and order placement efficiently and
effectively. The order entry activity will function on the Allegiance's
computer system (except for hardware ordered through sales support groups).
2.2.7.2 Order Tracking - Allegiance shall maintain the ability
--------------
to identify to customers the location of Products in the order process.
2.2.7.3 Special Request Processing - Allegiance customer service
--------------------------
representatives will process special handling requests by customer such as
drop shipping, alternate shipping, special handling, lot holding, etc., and
will work within contract guidelines and procedural boundaries to service
the customer.
2.2.7.4 Invoicing - Allegiance will perform billing for the
---------
Products and Perfusion Services where required via appropriate computer
system.
2.2.7.5 Customer Satisfaction - Allegiance service personnel are
---------------------
accountable for the customer's satisfaction regarding the service provided.
Allegiance will use processes established to survey customer satisfaction
levels and manage improvement plans.
2.2.8 Post-Sales Service.
------------------
2.2.8.1 Discounts - Allegiance will pass all appropriate sales
---------
information to Baxter who will calculate all discounts and incentives for
all customers.
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SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
2.2.8.2 Credit and Collection - Allegiance shall be responsible
---------------------
for all collection and credit approval processes for all invoices.
Allegiance shall have the sole authority to issue credits. Allegiance
shall inform Baxter when a customer is placed on credit hold.
2.2.8.3 Credits for Shortages, Damages, Misdeliveries -
---------------------------------------------
Allegiance shall issue credits and resolve customer issues and communicate
with Baxter.
2.2.8.4 Pricing Disputes - Allegiance will handle pricing
----------------
disputes.
2.2.8.5 Back Order Status and Resolution - Allegiance will be
--------------------------------
accountable for managing customer communication of back orders to provide
accurate and timely information on resolution. Appropriate product
substitution information will be communicated to customer. Allegiance will
transmit back order details the same as they were transmitted immediately
prior to the Effective Date.
2.2.8.6 Product Complaint - Initial customer complaints will be
-----------------
logged by Allegiance customer service and forwarded to the Vice President
of Regulatory Affairs (or such person's designee) of Baxter (CVG) at a
frequency to be agreed upon by the parties. Such complaints may be
escalated for resolution per FDA procedures.
2.2.8.7 Technical Support - Basic technical support information
-----------------
as resident on Baxter's computer system will be provided to Allegiance.
Additional information including technical letters and clinical information
will be provided by the Baxter Product Information Center.
2.3 Pricing/Billing.
---------------
2.3.1 Allegiance will negotiate the delivered price for the
Products and Perfusion Services sold through the Distributor Model and Kit
Model.
2.3.2 Allegiance will quote the Allegiance price to the customer
in response to market conditions but may quote as its price the Suggested Sales
Price, plus any markup or less any markdown it feels is appropriate including
any markup for added services.
2.3.3 Each customer will sign a bid or contract with Allegiance
and an addendum or new contract with Baxter that states that such customer has
reached agreement with Allegiance
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on the final price such customer will pay. The customer must comply with
purchase requirements of the bilateral contract with Baxter and the bilateral
contract shall continue to constitute a binding commitment of the customer to
Baxter. Shortfall charges and cancellation fees, if any, under such bilateral
contract will be calculated using the Sales Price and will be administered by
Baxter. If shipment to a customer occurs prior to execution of a bilateral
contract, Allegiance will be charged the List Price for the Products shipped
less the applicable percentage specified in Section 6.2.
2.3.4 Allegiance shall process all billing to the customer on its
computer system.
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SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
SERVICES AND DISTRIBUTION AGREEMENT
EXHIBIT C
Baxter's Duties
---------------
1. General Duties.
1.1 Corporate Agreement Bonus Program. Baxter shall participate in the
---------------------------------
corporate agreement bonus program as follows:
1.1.1 Baxter shall assign the Existing Corporate Agreements to
Allegiance.
1.1.2 Baxter shall provide to Allegiance comparable sales and
gross profit data as it provided prior to October 1, 1996, for each applicable
customer.
1.1.3 Baxter shall pay to Allegiance Baxter's share of operations
and systems expenses required to support the administration of the Existing
Corporate Agreements and bonus plan based upon Baxter's share of the corporate
agreement bonus as a percentage of the total corporate agreement bonus.
1.1.4 Baxter may have a representative(s) present when Allegiance
presents each bonus check to each customer.
1.2 Sales.
-----
1.2.1 Baxter shall participate with Allegiance in a semi-annual
review of regional account segmentation, performance to critical business
indicators, and regional sales to be conducted with Baxter's leader of the
respective sales organizations and the Allegiance region president and the
Allegiance region president's steering team.
1.3 Marketing. Baxter shall market the Products and Perfusion Services in
---------
accordance with the following:
1.3.1 Baxter's marketing organizations shall remain substantially
as they were prior to the Effective Date promoting the Products and Perfusion
Services.
1.3.2 Baxter shall provide product and service development in a
comparable manner as provided by Baxter prior to the Effective Date.
1.3.3 Baxter shall maintain its own communications
C-1
<PAGE>
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH
SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
resources and will coordinate communications messages with Allegiance where
appropriate.
1.3.4 Baxter shall attempt whenever possible to share with
Allegiance expenses for convention fees, industry organizations, and industry
databases where appropriate, and convention assets originally purchased by
Baxter shall remain Baxter's.
1.3.5 Baxter shall maintain a convention and planning
organization.
1.3.6 Baxter shall provide sales volumes by Product category for
inclusion on Allegiance sales reports as provided by Baxter prior to the
Effective Date.
1.4 Materials Management. Allegiance and Baxter shall use commercially
--------------------
reasonable efforts to make the supply chain as efficient as possible. Future
opportunities to improve efficiency could include, but are not limited to, EDI,
bar coding, custom palletization, network channels and the use of returnable
totes. Both parties shall work in good faith to achieve this goal. A
Baxter/Allegiance transportation council (the "Transportation Council") will be
formed to provide joint input on management of freight costs and to be the forum
for problem resolution and to establish and review performance standards.
Performance standards will be set annually including, but not limited to,
receiving turn time, picking accuracy, freight claims management, and inventory
accuracy.
1.4.1 Finished Goods Requirements Planning.
------------------------------------
1.4.1.1 Baxter and Allegiance will establish appropriate
stocking levels for all product codes to meet required customer service
commitments.
1.4.1.2 Allegiance will not be required to carry more than 1995
average Days Inventory On Hand.
1.4.1.3 Both parties agree that the echeloning of products based
on line item usage generally makes sense. Assuming there are no significant
customer contractual issues or financial impacts to Baxter, Baxter agrees
to the parameters set forth by the rationalized supply chain. If after the
appropriate review there are significant customer contractual issues or
financial impacts to Baxter, 1995 will be used as the baseline for where
products are stocked and the number of low velocity SKU's will not exceed
1995 levels.
C-2
<PAGE>
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH
SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
1.4.2 Pipeline Visibility. Visibility to actual in transit
-------------------
inventory levels for all segments of the Baxter pipeline will be provided upon
request by Allegiance.
1.4.3 Shipments from Plants to Replenishment Centers.
----------------------------------------------
1.4.3.1 Baxter will ship all products to appropriate
replenishment centers as directed by the replenishment center sourcing
model.
1.4.3.2 Product will move on carriers agreed upon by the
Council.
1.4.3.3 Baxter will be responsible for paying freight charges
for shipments of Products to appropriate Baxter or Allegiance replenishment
centers.
1.4.3.4 Baxter will be responsible for filing freight claims
with commercial carriers and will be responsible for resolving product
shortages and overages including proof of delivery.
1.4.3.5 Baxter will work in coordination with Allegiance to
schedule receiving appointments for Products coming from Plants and
Replenishment Centers.
1.4.4 Shipments from Replenishment Center to Distribution Center.
----------------------------------------------------------
1.4.4.1 Baxter shall be responsible for the physical
replenishment of Baxter product from replenishment center to
distribution center, except where specifically ordered by Allegiance,
using the following process: (a) variable review, (b) load build, and
(c) pick, pack, schedule delivery, load and ship.
1.4.4.2 Shipping terms are FOB destination, freight to be paid
by Baxter at cost.
1.4.4.3 Baxter will be responsible for filing freight claims
with commercial carriers and will be responsible for resolving product
shortages and overages including proof of delivery.
1.4.5 Packaging Quality and Load Build Configuration. Quality of
----------------------------------------------
packaging and load build configuration will conform to uniform distribution
standards (e.g., palletized, etc.) as agreed by the parties in the Council.
----
C-3
<PAGE>
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH
SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
1.4.6 Warehouse Management.
--------------------
1.4.6.1 Except as otherwise agreed to, existing storage
requirements will be adhered to by Baxter.
1.4.6.2 Should Baxter redefine storage requirements, Baxter and
Allegiance will mutually agree upon a new fee for service rate.
1.5 Product FCAs.
------------
1.5.1 Baxter shall provide to Allegiance in a format to be agreed
upon by the parties all information reasonably required by Allegiance to perform
Allegiance's duties in connection with Product FCAs. Such information shall
include, without limitation, product identifiers, reason priority, and any
information related to disposition plans.
1.5.2 Baxter shall have sole authority to initiate any FCA. If
Baxter is required to initiate an FCA for any Product, Baxter's Vice President
of Quality Management (or such person's designee) shall notify Allegiance's Vice
President of Quality Management (or such person's designee).
1.5.3 Baxter shall cooperate with Allegiance in performing any FCA by
identifying affected Products and customers, developing an action-specific
management plan detailing specific responsibilities, and notifying customers of
any such action. Baxter and Allegiance shall encourage customers to follow
instructions related to any FCA situation.
1.5.4 Baxter shall be solely responsible for all communications with
the U.S. Food and Drug Administration in connection with the Products.
1.6 Perfusion Services Sales Information. Baxter will provide to
------------------------------------
Allegiance quarterly sales information for Perfusion Services.
2. Distributor Model.
2.1 Pricing/Billing.
---------------
2.1.1 If a customer approaches Baxter rather than Allegiance in
connection with a Distributor Model transaction, Baxter will advise the customer
that the customer must obtain the delivered price from Allegiance, and Baxter
will advise Allegiance of the Suggested Sales Price. Baxter may inform the
customer that it will provide a Suggested Sales Price to
C-4
<PAGE>
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH
SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
Allegiance, and Allegiance could use the Suggested Sales Price as a starting
point. Nevertheless, Allegiance shall have the sole right to set the delivered
price.
2.1.2 New Customer Set-Up - Allegiance and Baxter customer service
representatives will ensure effective and efficient coding of all new customers
into their respective customer master files.
2.1.3 Baxter will administer customer contracts on its computer
system including, without limitation, account number set-up, ship-to/sold-to
information, licensing information and ongoing customer contract maintenance.
2.1.4 Baxter will provide to Allegiance the Suggested Sales Price
related to the Products and Perfusion Services.
2.1.5 Baxter will use commercially reasonable efforts to provide
Product-related technical support to Allegiance, including the basic technical
information resident on Baxter's computer system, technical letters and clinical
information. Baxter will respond to Product-related technical questions from
Allegiance's Distributor Model customers.
2.1.6 Dealer Management Group
2.1.6.1 Terms and Fees. For a period not to exceed six months
from the Effective Date, Baxter may continue to use the Dealer Management
Group (DMG) services. For any and all sales of Products that occur after
the Effective Date through DMG, a service fee of * * * of the net sales of
such Products will apply. Such services fee will be invoiced to Baxter on
a monthly basis and will be due 30 days from date of invoice. For purposes
of this section, "net sales" shall be defined as gross sales of Products
sold through DMG at dealer price less any applicable rebates, cash
discounts and allowances.
2.1.6.2 Obligations. For any DMG transactions, Baxter shall
bear final responsibility, accountability and liability for sales, sales
revenue, dealer rebates and account receivables in connection with the
dealer and inventory carrying costs for inventory held by Allegiance.
Carrying costs shall be calculated at * * * per month of the cost of
Products sold at Distributor List Price. DMG transactions shall not be
included in calculating Gross Profit Growth or in calculating any fees or
refunds set forth in Section 6.
C-5
<PAGE>
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH
SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
2.1.6.3 Transition. Upon transition of DMG transactions to
Baxter, DMG shall continue for a period of 90 days from the date of such
transition to provide dealer rebate data to Baxter and to reconcile the
accrued rebate and actual dealer trace sales as performed prior to the
Effective Date. Upon expiration of such 90 day period, Baxter shall be
responsible for such reconciliation.
C-6
<PAGE>
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH
SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
Exhibit D
---------
<TABLE>
<CAPTION>
-------------------------------
1996
Critical Care Post Split
Price*
-------------------------------
Model Name
- ----------
<S> <C>
201708001 - Stopcock-3-Way, Blue Fixed Nut * * *
33-260 - Summit 1dtp Standard Kit * * *
33-600F - Summit Standalone Transducer * * *
33-600I - Summit Standalone Transducer * * *
33-MK9313 - Va-Omaha * * *
33-MK9851 - Northershore Cdp Kit * * *
43-600I - Icp And Iup Kit * * *
50-P106 - Pressure Tubing, 6", M/F * * *
50-P112 - Pressure Tubing, 12", M/F * * *
50-P124 - Pressure Tubing, 24", M/F * * *
50-P136 - Pressure Tubing, 36", M/F * * *
50-P148 - Pressure Tube, M/F, 48" * * *
50-P160 - Pressure Tubing, 60", M/F * * *
50-P172 - Pressure Tubing, 72", M/F * * *
50-P184 - Pressure Tubing, 84", M/F * * *
50-P248 - Pressure Tubing, 48", M/M * * *
50-P260 - Pressure Tubing, 60", M/M * * *
50-P272 - Pressure Tubing, 72", M/M * * *
50-P284 - Pressure Tubing, 84", M/M * * *
57-BD240 - Disposable Dome For Trantec * * *
58-K169-06 - Stopcock With 6 Inch Pressure * * *
59-DTH4 - Disposable Holder For Dpt * * *
CC-02-80 - 80 Cm Shield Hemo * * *
CC-55OB-8.5F - Introducer Tray; 8.5f * * *
CC-A301B-8.5F - Intro Kit W/Amc Std * * *
PX200 - Px Vamp Ready Kit * * *
PX600I - Px Standalone Transducer * * *
-------------------------------
</TABLE>
*These prices are effective through 12/21/97. Thereafter prices are to be
negotiated annually.
<PAGE>
CONFIDENTIAL MATERIAL APPEARING IN THIS DOCUMENT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION IN ACCORDANCE WITH
SECTION 24(B) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 24b-2
PROMULGATED THEREUNDER. OMITTED INFORMATION HAS BEEN REPLACED WITH ASTERISKS.
Exhibit D
---------
<TABLE>
<CAPTION>
-------------------------------
1996
Bentley Post Split
Model Name Price*
- -----------------------------------------------------------------------------------------------
<S> <C>
10510303 - Noz Cov 1/4 Vented Blue * * *
10510311 - Noz Cov 1/4 Vented Green * * *
20079819 - Tubing-Pvc 1/4xl/16 (G) * * *
200870 - Adapter Male-Male Luer * * *
C110B - Connector, Non-Sterile * * *
C120B - Connector, Non-Sterile * * *
C125B - Connector, Non-Sterile * * *
C130B - Connector, Non-Sterile * * *
C130S - Connector, Sterile * * *
C135B - Connector, Non-Sterile * * *
C140B - Connector, Non-Sterile * * *
C140S - Connector, Sterile * * *
C145B - Connector, Non-Sterile * * *
C220B - Connector, Non-Sterile * * *
C230B - Connector, Non-Sterile * * *
C240B - Connector, Non-Sterile * * *
C245B - Connector, Non-Sterile * * *
C320B - Connector, Non-Sterile * * *
C330B - Connector, Non-Sterile * * *
C330S - Connector, Sterile * * *
C335B - Connector, Non-Sterile * * *
C340B - Connector, Non-Sterile * * *
C430B - Connector, Non-sterile * * *
C430S - Connector, Sterile * * *
C435B - Connector, Non-Sterile * * *
C440B - Connector, Non-Sterile * * *
C521B - Disposable Locknuts * * *
C532B - Disopsable Locknuts * * *
C5570Z7B - Custompac, * * *
C9772G2A - Custompac, * * *
CSP20 - Cell Saver Suction Assembly * * *
CSP208 - Assembly, Basic A & A * * *
SDB08 - Tubing, Ster 1/4xl/16x8 * * *
SFB06 - Tubing, Ster 3/8xl/16x6 * * *
-------------------------------
</TABLE>
*These prices are effective through 12/21/97. Thereafter prices are to be
negotiated annually.
<PAGE>
Exhibit 10.13
CONFIDENTIALITY AGREEMENT
THIS AGREEMENT entered into by and between ________________ having an
address at _____________ ("RECIPIENT") and Edwards Lifescience Corporation, a
Delaware corporation, having an address at _____________, Irvine, California,
92614 ("EDWARDS").
EDWARDS is the owner of certain proprietary information related to
_____________ ("INFORMATION") with all right, title and interest vested therein
and has authority to disclose said INFORMATION. EDWARDS agrees to disclose such
INFORMATION, and RECIPIENT agrees to accept such disclosure to allow RECIPIENT
to evaluate such INFORMATION for the purpose of _____________.
In consideration of the opportunity to evaluate EDWARDS'S INFORMATION,
RECIPIENT agrees to receive that INFORMATION from EDWARDS and to hold the
INFORMATION in confidence and not to disclose it to any third parties, nor to
use it for any purpose other than to evaluate it for the purpose described
above, for a period of five (5) years from the date of disclosure, unless or
until:
1) said INFORMATION shall become a matter of public knowledge in a
single publication through no fault of RECIPIENT, or
2) said INFORMATION shall have in its entirety been known to RECIPIENT
prior to its receipt from EDWARDS, as exhibited by written records to EDWARDS
within ten (10) days of the disclosure, or
3) said INFORMATION shall be disclosed to RECIPIENT in its entirety by a
third party who is not under any obligation of confidentiality to EDWARDS, or
4) said INFORMATION is approved in writing by EDWARDS for release by
RECIPIENT.
It is understood that acceptance of the INFORMATION by RECIPIENT shall
not give the right to use the INFORMATION for other than evaluation purposes
unless or until a formal written agreement for the specified purpose has been
entered into by the parties.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this instrument to be executed by
their duly authorized representatives.
EDWARDS LIFESCIENCES CORPORATION
By: By:
---------------------------- ----------------------------
Title: Title:
---------------------------- ----------------------------
Date: Date:
---------------------------- ----------------------------
<PAGE>
Exhibit 21.1
At the time of distribution, the following corporations will be wholly-owned
subsidiaries of Edwards Lifesciences Corporation:
STATE OF COUNTRY OF
INCORPORATION/ INCORPORATION/
LEGAL ENTITY FORMATION FORMATION
- ------------ -------------- --------------
Benchmark, Inc. Utah U.S.
Edwards Cardiovascular Services Inc. Pennsylvania U.S.
Edwards Lifesciences Corporation of Puerto Rico Delaware U.S.
Edwards Lifesciences Japan Holdings Inc. Delaware U.S.
Edwards Lifesciences LLC Delaware U.S.
Edwards Lifesciences Research Medical, Inc. Utah U.S.
Edwards Lifesciences Sales Corporation Delaware U.S.
Edwards Lifesciences Sub Inc. Delaware U.S.
Edwards Lifesciences (U.S.) Inc. Delaware U.S.
Edwards Lifesciences World Trade Corporation Delaware U.S.
PSICOR Merger Corporation Delaware U.S.
Edwards Lifesciences Austria GmbH Austria
Edwards Lifesciences S.P.R.L. Belgium
Edwards Lifesciences Macchi Ltda. Brazil
Edwards Lifesciences (Canada) Inc. Canada
Edwards Lifesciences Holding A/S Denmark
Edwards Lifesciences Limited England
Edwards Lifesciences SAS France
Edwards Lifesciences Holding GmbH Germany
Edwards Lifesciences GmbH Germany
PAS Palzer GmbH & Co. KG Germany
PAS Palzer Verwaltungs GmbH Germany
Edwards Lifesciences (India) Pte Ltd. India
CVG Italia SpA Italy
Edwards Lifesciences Limited Japan
Edwards Lifesciences Finance Limited Japan
Edwards Lifesciences Korea Co., Ltd. Korea
Edwards Lifesciences Mexico, S.A. de C.V. Mexico
Edwards Lifesciences BV The Netherlands
Edwards Lifesciences Uden BV The Netherlands
Edwards Lifesciences SL Spain
Edwards Lifesciences AG Switzerland
Edwards Lifesciences Holding AG Switzerland
Edwards Lifesciences GmbH Switzerland
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED COMBINED BALANCE SHEET AS OF DECEMBER 31, 1999 AND THE CONDENSED
COMBINED INCOME STATEMENT FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1999 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 163
<ALLOWANCES> 8
<INVENTORY> 182
<CURRENT-ASSETS> 356
<PP&E> 496
<DEPRECIATION> 270
<TOTAL-ASSETS> 1,437
<CURRENT-LIABILITIES> 156
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,224
<TOTAL-LIABILITY-AND-EQUITY> 1,437
<SALES> 905
<TOTAL-REVENUES> 905
<CGS> 466
<TOTAL-COSTS> 466
<OTHER-EXPENSES> 89<F1>
<LOSS-PROVISION> 5
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 113
<INCOME-TAX> 31
<INCOME-CONTINUING> 82
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 82
<EPS-BASIC> 0
<EPS-DILUTED> 0
<FN>
<F1>INCLUDES RESEARCH AND DEVELOPMENT EXPENSES AND GOODWILL AMORTIZATION.
</FN>
</TABLE>
