EMPLOYMENT AGREEMENT

 SEVERANCE AGREEMENT

Contract Amendment

Severance Amendment

 

 

EMPLOYMENT AGREEMENT

 

THIS AGREEMENT, made and entered into as of April 19, 2004, by and between Robert L. Parkinson, Jr. (the “Executive”) and Baxter International Inc. (the “Company”);

 

WITNESSETH THAT:

 

WHEREAS, the parties desire to enter into this Agreement pertaining to the employment of the Executive by the Company;

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth below, it is hereby agreed by the Executive and the Company as follows:

 

1. Performance of Services. The Executive’s employment with the Company shall commence on April 26, 2004 (the “Effective Date”), and shall be subject to the following:

 

(a)

Subject to the terms of this Agreement, the Company hereby agrees to employ the Executive as its Chairman, Chief Executive Officer and President during the Agreement Term (as defined below), and the Executive hereby agrees to serve in such capacity during the Agreement Term.

 

(b)

During the Agreement Term, while the Executive is employed by the Company, the Board of Directors of the Company (the “Board”) shall use its best efforts to cause the Executive to be elected as a member of the Board. It is understood by the parties that, pursuant to its fiduciary responsibilities, duty of care and obligations with respect to corporate governance, the Board may determine that it is appropriate for the position of Chairman of the Board to be held by a director who is not an employee or officer of the Company. If two-thirds of the Board affirmatively vote at a meeting of the Board called and held for such purpose that it is appropriate to separate the positions of Chairman and CEO, notwithstanding any other provisions of the Agreement, the occurrence of such a determination by the Board resulting in the failure of the Executive to be elected as the Chairman of the Board will not constitute Good Reason or a breach of this Agreement, provided that Executive concurs with the decision. The Board agrees to elect Executive as a member of the Board and Chairman no later than the Effective Date. In addition, this determination will not result in any change to the Executive’s remuneration under the terms of this Agreement.

 

(c)

The Executive agrees that he shall perform his duties faithfully and efficiently subject to the directions of the Board, and the Executive shall have the authority and duty generally to supervise and direct the business of the Company, subject only to the control and direction of the Board. The Executive’s duties may include providing services for both the Company and the Subsidiaries (as defined below) as determined by the Board; provided that the Executive shall not, without his consent, be assigned tasks that would be inconsistent with those of Chairman, President and Chief Executive Officer. The Executive shall report to the Board and shall have such authority, power, responsibilities and duties as are set forth in the Company’s Bylaws and as are inherent in his positions

 

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(and the undertakings applicable to his positions) and necessary to carry out his responsibilities and the duties required of him hereunder.

 

(d)

During the Agreement Term, while the Executive is employed by the Company, the Executive shall devote his full time, energies and talents to serving as its Chairman, President and Chief Executive Officer. The Executive will exert his best efforts in the performance of his duties as an employee of the Company and will remain loyal to the Company during the term of his employment.

 

(e)

The Executive may be asked to submit to drug testing as a condition of employment or continued employment and consents to such testing as determined by the Company to be appropriate.

 

(f)

The Executive will comply with Baxter Shared Values: Standards for Business Ethics. The Board has the right to make and enforce any other rules and regulations generally applicable to other senior officers that will govern Executive’s employment provided that they are not contrary to the Agreement.

 

(g)

The Executive acknowledges and agrees that the Executive owes a fiduciary duty of loyalty, fidelity, and allegiance to act at all times in the best interests of the Company and its shareholders, in accordance with Delaware law. In keeping with these duties, the Executive shall make full disclosure to the Company of all business opportunities pertaining to the Company’s business and shall not appropriate for the Executive’s own benefit business opportunities concerning the subject matter of the fiduciary relationship.

 

(h)

Notwithstanding the foregoing provisions of this paragraph 1, during the Agreement Term, the Executive may devote reasonable time to activities other than those required under this Agreement, including the supervision of his personal investments, and activities involving professional, charitable, community, educational, religious and similar types of organizations, speaking engagements, membership on the boards of directors of other organizations (as limited by the Company’s Corporate Governance Guidelines), and similar types of activities, to the extent that such other activities do not, in the judgment of the Board, inhibit or prohibit the performance of the Executive’s duties under this Agreement, or conflict in any material way with the business of the Company or any Subsidiary; provided, however, that the Executive shall not serve on the board of any business, hold any other position with any business, or otherwise engage in any business activity, without the consent of the Board. The Company acknowledges that, as of the date of this Agreement, the Executive is a member of the board of directors of Enzon Pharma, Inc. and GeneProt Inc, and the Executive will be allowed a reasonable time to resign from these boards, as well as from any other boards on which he sits and from which it is appropriate that he resigns pursuant to the terms of this Agreement. Notwithstanding the foregoing, the Board understands and agrees to the Executive’s continued service on the boards of Northwestern Memorial Hospital and Northwestern Memorial Foundation, and to the Executive’s requirements to cooperate with Abbott Laboratories and GeneProt Inc., respectively, in connection with certain ongoing litigation.

 

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(i)

Subject to the terms of this Agreement, the Executive shall not be required to perform services under this Agreement during any period that he is Disabled. The Executive shall be considered “Disabled” during any period in which he has a physical or mental disability which renders him incapable of performing his duties under this Agreement. In the event of a dispute as to whether the Executive is Disabled or Permanently Disabled (as defined in paragraph 3(b)), the Company may refer the same to a licensed practicing physician of the Company’s choice and reasonably acceptable to the Executive, and the Executive agrees to submit to such tests and examinations as such physician shall deem appropriate. During the period in which the Executive is Disabled, the Company may appoint a temporary replacement to assume the Executive’s responsibilities.

 

(j)

The “Agreement Term” shall be determined as follows:

 

(i) The Agreement Term shall begin on the Effective Date.

 

(ii) The Agreement Term shall end on the three-year anniversary of the Effective Date; provided that, subject to subparagraph (iii) below, beginning on the one-year anniversary of the Effective Date, the Agreement Term shall, on a daily basis, be automatically extended by one day. As a result of this day-to-day extension, and subject to subparagraph (iii) below, at any time after the one-year anniversary of the Effective Date, the Agreement Term shall be two years.

 

(iii) Either party may, at any time during the Agreement Term, cease the automatic extensions otherwise provided in subparagraph (ii) above, by delivery to the other party of written notice of such cessation. Such cessation of extensions will not be effective earlier than the date of delivery of such notice. For the avoidance of doubt, the end of the Agreement Term shall not be less than two years following the delivery of the written notice of cessation referred to in this subparagraph (iii).

 

(k)

For purposes of this Agreement, the term “Subsidiary” shall mean any corporation, partnership, joint venture or other entity during any period in which at least a fifty percent interest in such entity is owned, directly or indirectly, by the Company (or a successor to the Company).

 

2. Compensation. Subject to the terms of this Agreement, during the Agreement Term, while the Executive is employed by the Company, the Company shall compensate him for his services as follows:

 

(a)

Salary. The Executive shall receive, for each 12-consecutive month period beginning on the Effective Date and each anniversary thereof, in substantially equal monthly or more frequent installments, an annual base salary of not less than $1,100,000 (the “Salary”). The Executive’s Salary rate shall be reviewed annually by the Compensation Committee of the Board during the Agreement Term, while the Executive is employed by the Company, to determine whether an increase in the amount of Salary is appropriate. In no event shall the Salary of the Executive be reduced to an amount that is less than the amount specified in this paragraph 2(a), or to an amount that is less than the amount that he was previously receiving, except to the extent that reductions of the same percentage

 

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are being made at the same time to the salaries of all other Company officers named in the Company’s then-current proxy statement, and such Salary shall be restored to its prior level when, and to the same extent, as the restoration that applies to such other officers.

 

(b)

Annual Bonus. The Executive shall participate in an annual officer bonus program attached hereto as Exhibit A, subject to subparagraph (i) below. The bonus program provides for payment of a cash bonus amount equal to (i) 200% of the Executive’s annual Salary (as in effect on the first day of the performance period) if maximum performance levels are achieved for the performance period, (ii) 125% of the Executive’s annual Salary (as in effect on the first day of the performance period) if target performance levels are achieved for the performance period, and (iii) such lesser amounts as provided in the program document. The performance objectives shall be established by the Compensation Committee, subject to subparagraph (i) below, following consultation with the Executive prior to, or within 90 days after the commencement of, each fiscal year. The bonus shall be paid to the Executive no later than the date on which bonuses are typically paid to other senior officers of the Company. Notwithstanding the foregoing provisions of this paragraph 2(b):

 

(i) The performance period ending December 31, 2004 shall begin on the Effective Date, and the Executive’s bonus for such period shall be subject to a pro-rata reduction to reflect the fact that the performance period is less than 12 months. The performance objectives for the performance period ending on December 31, 2004 shall be established not later than May 31, 2004.

 

(ii) For the performance period ending December 31, 2004, and subject to subparagraph (i) above, the bonus paid to the Executive shall not be less than the target level for that performance period. For the performance period ending December 31, 2005, the bonus paid to the Executive shall not be less than the target level for that performance period.

 

(c)

Quarterly Bonus. In addition to the annual bonus program described in paragraph 2(b) above, the Executive shall be eligible to participate in the quarterly bonus program, a copy of which is attached hereto as Exhibit B, beginning with the second calendar quarter of 2004. Under the quarterly bonus program, if the performance goals for the quarter are achieved, the Executive shall receive a payment equal to 5% of his annual target bonus as described in paragraph 2(b) above. The performance objectives shall be established by the Compensation Committee. The Compensation Committee may modify or cancel the quarterly bonus program at any time for participating senior officers of the Company, and if such modification or cancellation occurs, a corresponding change or cancellation shall apply to the Executive’s rights to such quarterly bonus payments under this paragraph 2(c). Such quarterly bonus shall not be in lieu of, or offset against, the annual bonus payable under paragraph 2(b) above.

 

(d)

Equity Awards. The Executive will be eligible for the following equity awards:

 

(i) As of the date of this Agreement, the Executive will be granted a non-qualified option to purchase 650,000 shares of stock of the Company, with an option exercise price equal to the fair market value of the Company’s stock on that date. The option shall be subject

 

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to the terms provided under the generally applicable option awards for the Company’s senior officers, as set forth in Exhibit C to this Agreement, which is attached to and forms a part of this Agreement. No other options or other equity awards will be granted to the Executive for calendar year 2004.

 

(ii) For calendar years after 2004, the Executive shall be granted stock options and restricted stock at such times as options and restricted stock are granted to the Company’s other senior executives. Such options and restricted stock shall be subject to the terms provided under the generally applicable option and restricted stock awards for the Company’s senior officers at the time of the awards, except as modified by this Agreement. Pursuant to the Company’s Long Term Incentive Plan, as set forth in Exhibit D to this Agreement, which is attached to and forms a part of this Agreement, for calendar year 2005, at the time other officers are granted equity awards, the Executive will be granted an option for a minimum of 455,000 shares of Company stock and a restricted Company stock award for a minimum of 48,750 shares. After 2005, all such awards to the Executive shall be commensurate with his position as Chief Executive Officer as determined by the Compensation Committee.

 

(e)

Other Fringe Benefits. Except as otherwise specifically provided to the contrary in this Agreement, the Executive shall be provided with the welfare benefits and other fringe benefits and perquisites to the same extent and on the same terms as those benefits are provided by the Company from time to time to the Company’s other senior executives and as described in the attached Exhibit E, provided, however, that if any such benefits are adjusted to reflect an executive’s position, the Executive’s benefits shall be adjusted in a manner commensurate with his position. The Executive shall also be entitled to the perquisites that are customarily provided in connection with his position. Nothing in this paragraph 2(e) shall be construed to prevent the Company from revising the benefits or perquisites generally provided to executives from time to time. However, the Company shall not be required to provide a benefit under this paragraph 2(e) if such benefit would duplicate (or otherwise be of the same type as) a benefit specifically required to be provided under another provision of this Agreement. The Executive shall complete all forms and physical examinations, and otherwise take all other similar actions to secure coverage and benefits described in this paragraph 2, to the extent determined to be necessary or appropriate by the Company.

 

(f)

Disability Insurance. The Executive shall receive from the Company disability income replacement coverage which will provide for replacement of income subject to the terms of the Company disability insurance plan that applies to senior officers of the Company during any period in which the Executive is Disabled if the disability arose during the Agreement Term and prior to the Executive’s Date of Termination. During any period while the Executive is Disabled and is otherwise entitled to receive Salary and bonus payments under this Agreement, any such Salary and bonus payments to the Executive shall be reduced by the amount of any benefits paid for the same period of time under the Company-provided disability income replacement coverage.

 

(g)

Expenses. The Executive is authorized to incur reasonable expenses for entertainment, traveling, meals, lodging and similar items in promoting the Company’s business. The

 

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Company will reimburse the Executive for all reasonable expenses so incurred, provided that such expenses are incurred and accounted for in accordance with its reasonable policies and procedures applicable from time to time with respect to its senior officers.

 

(h)

Pension. The Executive shall be entitled to a Pension from the Company or any successor thereto, subject to the following and the other terms of this Agreement:

 

(i) No Pension shall be payable if the Participant’s Date of Termination occurs for any reason prior to the three-year anniversary of the Effective Date or if the Date of Termination occurs for Cause.

 

(ii) The Pension shall be paid monthly to the Executive for life commencing as of the first day of the calendar month following such Date of Termination in an amount equal to one-twelfth (1/12) of 1.75% of Executive’s final average pay multiplied by his number of credited service years, minus (ii) 1.75% of the Executive’s estimated primary social security benefit multiplied by his number of actual service years.

 

(iii) The Pension payments shall be offset by the pension payments to Executive under any tax-qualified or other defined benefit pension plans of the Company.

 

(iv) The Executive’s final average pay is equal to the average of the Executive’s five (or his total actual service years, if shorter) highest consecutive calendar years of earnings (Salary and bonus) out of his last ten (or his total actual service years, if shorter) calendar years of earnings.

 

(v) The number of credited service years shall be equal to the number of twelve-month periods commencing with the Effective Date during which the Executive is employed by the Company (each an “actual service year”), provided that the Executive shall receive “credited service years” in accordance with the following schedule:

 

 

 

 

 

 

Actual Service Years

 

Cumulative Credited Service Years

 

 

Less than three years

 

Zero years

 

 

At least three years but less than four years

 

Five years

 

 

At least four years but less than five years

 

Six years

 

 

At least five years but less than six years

 

Nine years

 

 

Six or more years

 

Nine years plus one year for each full

actual service year after five years of

actual service

 

3. Termination. The Executive’s employment with the Company during the Agreement Term may be terminated by the Company or the Executive without any breach of this Agreement only under the circumstances described in paragraphs 3(a) through 3(g):

 

(a)

Death. The Executive’s employment hereunder will terminate upon his death.

 

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(b)

Permanent Disability. The Company may terminate the Executive’s employment during any period in which he is Permanently Disabled. The Executive shall be considered “Permanently Disabled” during any period in which he is Disabled; provided, however, that the Executive shall be not be considered “Permanently Disabled” unless (i) the Executive has a physical or mental disability which renders the Executive incapable of performing the Executive’s duties on a permanent, full-time basis; (ii) such disability is reasonably expected by the Board to continue for at least 90 days; and (iii) at the Executive’s Date of Termination, the Executive is entitled to income replacement benefits under the Company’s long-term disability plan or another arrangement providing substantially similar benefits.

 

(c)

Cause. The Company may terminate the Executive’s employment hereunder at any time for Cause. For purposes of this Agreement, the term “Cause” shall mean:

 

(i) the willful and continued failure by the Executive to substantially perform his duties with the Company (other than any such failure resulting from the Executive’s being Disabled), within a reasonable period of time after a written demand for substantial performance is delivered to the Executive by the Board, which demand specifically identifies the manner in which the Board believes that the Executive has not substantially performed his duties;

 

(ii) the willful engaging by the Executive in conduct which is demonstrably and materially injurious to the Company, monetarily or otherwise; or

 

(iii) the engaging by the Executive in egregious misconduct involving serious moral turpitude to the extent that, in the reasonable judgment of the Company’s Board, the Executive’s credibility and reputation no longer conform to the standard of the Company’s executives.

 

For purposes of this Agreement, no act, or failure to act, on the Executive’s part shall be deemed “willful” unless done, or omitted to be done, by the Executive not in good faith and without reasonable belief that the Executive’s action or omission was in the best interest of the Company. Notwithstanding the foregoing, the Executive shall not be deemed to have been terminated for Cause unless and until the Company delivers to the Executive a copy of a resolution duly adopted by the affirmative vote of the majority of the entire membership of the Board (not including the Executive) at a meeting of the Board called and held for such purpose (after reasonable notice to the Executive).

 

(d)

Constructive Discharge. If (I) the Executive provides written notice to the Company of the occurrence of Good Reason (as defined below) within 10 business days after the Executive has knowledge of the circumstances constituting Good Reason, which notice specifically identifies the circumstances which the Executive believes constitute Good Reason; (II) the Company fails to notify the Executive of the Company’s intended method of correction within 10 business days after the Company receives the notice, or the Company fails to correct the circumstances within 10 business days after such notice; and (III) the Executive resigns within 10 business days after receiving the Company’s response, if such notice does not indicate an intention to correct such circumstances, or

 

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within 10 business days after the Company fails to correct such circumstances; then the Executive shall be considered to have been subject to a Constructive Discharge by the Company. For purposes of this Agreement, “Good Reason” shall mean, without the Executive’s express written consent (and except in consequence of a prior termination of the Executive’s employment), the occurrence of any of the following circumstances:

 

(i) Except as otherwise agreed by the Executive and the Board, (I) the assignment to the Executive of any duties materially inconsistent with the Executive’s position and status as set forth in paragraph 1, (II) any material reduction in the authority or responsibility of the Executive or other substantial reduction in the terms and conditions of the Executive’s employment, (III) a change in the Executive’s reporting relationship so that the Executive ceases to report directly to the Board, (IV) the failure of the Executive to be elected to the Board as of the Effective Date or to be reelected to the Board while employed by the Company, (V) the failure of the Board to nominate the Executive for reelection to the Board and recommend to the Company’s stockholders that they vote in favor of the Executive’s reelection to the Board, or (VI) the failure to elect or reelect the Executive as Chairman (without the Executive’s advance written consent to such failure), with the date of such Good Reason deemed to occur on the failure to elect or reelect the Executive as Chairman.

 

(ii) The relocation of the Executive’s base office to an office that is more than 50 highway miles of the Executive’s base office on the Effective Date.

 

(iii) The failure of the Company to obtain a satisfactory agreement from any successor to assume and agree to perform this Agreement.

 

(iv) Any purported termination of the Executive’s employment which is not effected pursuant to a Notice of Termination satisfying the requirements of paragraph 3(h) below, and for purposes of this Agreement, no such purported termination shall be effective.

 

(v) Except as permitted in paragraph 2(a), a reduction in the Executive’s Salary as the same may be increased from time to time.

 

(vi) A change in the bonus program identified in paragraph 2(b) that disproportionately reduces the Executive’s bonus opportunity as compared to other senior officers named in the then-current annual proxy statement.

 

(vii) Any material breach of this Agreement by the Company not described in paragraphs (i) through (vi) next above.

 

The Executive’s right to terminate his employment pursuant to this paragraph 3(d) shall not be affected by his incapacity due to physical or mental illness.

 

(e)

Termination by Executive. The Executive may terminate his employment hereunder at any time for any reason by giving the Company prior written Notice of Termination (as defined in paragraph 3(h)), which Notice of Termination shall be effective not less than 90 days after it is given to the Company, provided that nothing in this Agreement shall require the Executive to specify a reason for any such termination. However, to the

 

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extent that the procedures specified in paragraph 3(d) are required, the procedures of this paragraph 3(e) may not be used in lieu of the procedures required under paragraph 3(d).

 

(f)

Termination by Company. The Company may terminate the Executive’s employment hereunder at any time for any reason, by giving the Executive prior written Notice of Termination, which Notice of Termination shall be effective immediately, or such later time as is specified in such notice. The Company shall not be required to specify a reason for the termination under this paragraph 3(f), provided that termination of the Executive’s employment by the Company shall be deemed to have occurred under this paragraph 3(f) only if it is not for reasons described in paragraph 3(b), 3(c), 3(d), or 3(e). Notwithstanding the foregoing provisions of this paragraph 3(f), if the Executive’s employment is terminated by the Company in accordance with this paragraph 3(f), and within 10 business days thereafter, it is determined by the Board that circumstances existed which would have constituted a basis for termination of the Executive’s employment for Cause in accordance with paragraph 3(c) (disregarding circumstances which could have been remedied if notice had been given in accordance with paragraph 3(c)(i)), the Executive’s employment will be deemed to have been terminated for Cause in accordance with paragraph 3(c).

 

(g)

Termination After Change in Control. The Executive may terminate his employment with the Company or a successor for any reason following a Change in Control (as defined in the Company’s 2003 Incentive Compensation Program on the Effective Date).

 

(h)

Notice of Termination. Any termination of the Executive’s employment by the Company or the Executive (other than a termination pursuant to paragraph 3(a)) must be communicated by a written Notice of Termination to the other party hereto. For purposes of this Agreement, a “Notice of Termination” means a dated notice which indicates the Date of Termination (not earlier than the date on which the notice is provided), and which indicates the specific termination provision in this Agreement relied on and which sets forth in reasonable detail the facts and circumstances, if any, claimed to provide a basis for termination of the Executive’s employment under the provision so indicated.

 

(i)

Date of Termination. “Date of Termination” means the last day the Executive is employed by the Company (including any successor to the Company as determined in accordance with paragraph 21). If the Executive becomes employed by the entity into which the Company is merged, or the purchaser of substantially all of the assets of the Company, or a successor to such entity or purchaser, the Executive shall not be treated as having terminated employment for purposes of this Agreement until such time as the Executive terminates employment with the successor (including, without limitation, the merged entity or purchaser).

 

(j)

Effect of Termination. If, on the Date of Termination, the Executive is a member of the Board of Directors of the Company or any of the Subsidiaries, or holds any other position with the Company and the Subsidiaries, the Executive shall resign from all such positions as of the Date of Termination.

 

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(k)

Intervening Termination Event. If, prior to the scheduled date of the Executive’s termination of employment pursuant to the originally filed Notice of Termination (the “Original Notice of Termination”), the Executive’s termination of employment occurs under circumstances described in another provision of paragraph 3, then, for purposes of this Agreement, the Date of Termination shall not be deemed to have occurred by reason of Original Notice of Termination, but by reason of the subsequent event resulting in employment termination.

 

4. Rights Upon Termination. The Executive’s right to payment and benefits under this Agreement for periods after his Date of Termination shall be determined in accordance with the following provisions of this paragraph 4:

 

(a)

General. If the Executive’s Date of Termination occurs during the Agreement Term for any reason, the Company shall pay to the Executive (or, in the event of his death, his beneficiary) the compensation and benefits set forth below and, as applicable, those under paragraphs 4(c) and 4(d):

 

(i) The Executive’s Salary for the period ending on the Date of Termination.

 

(ii) Payment for unused vacation days, as determined in accordance with Company policy as in effect from time to time.

 

(iii) If the Date of Termination occurs after the end of a performance period and prior to the payment of the annual bonus and quarterly bonus (as described in paragraphs 2(b) and 2(c)) for the period, the Executive shall be paid such bonus amounts at the regularly scheduled time.

 

(iv) The Executive and any of his dependents shall be eligible for COBRA continuation coverage (as described in section 4980B of the Internal Revenue Code of 1986, as amended) to the extent required by applicable law.

 

(v) Any other payments or benefits to be provided to the Executive by the Company or a Subsidiary pursuant to any employee benefit plans or arrangements established or adopted by the Company or a Subsidiary (including, without limitation, any rights to indemnification from the Company (or from a third-party insurer for directors and officers liability coverage) with respect to any costs, losses, claims, suits, proceedings, damages or liabilities to which the Executive may become subject which arise out of, are based upon or relate to the Executive’s employment by the Company or the Executive’s service as an officer or member of the Board of Directors of the Company (or any Subsidiary), to the extent such amounts are due from the Company in accordance with the terms of such plans or arrangements.

 

(vi) Executive will receive pension benefits upon termination as set forth in section 2(h).

 

Except as may otherwise be expressly provided to the contrary in this Agreement, nothing in this Agreement shall be construed as requiring the Executive to be treated as employed by the Company for purposes of any employee benefit plan or arrangement following the Executive’s Date of Termination.

 

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(b)

Resignation and Termination for Cause. If the Executive’s Date of Termination occurs during the Agreement Term under circumstances described in paragraph 3(c) (relating to the Executive’s termination for Cause), or paragraph 3(e) (relating to the Executive’s resignation), then, except as otherwise expressly provided in this Agreement or otherwise agreed in writing between the Executive and the Company, the Executive shall not be entitled to the annual bonus and quarterly bonus amounts (as described in paragraphs 2(b) and 2(c)) for the performance periods in which the Date of Termination occurs, or for subsequent performance periods; and if terminated for Cause the Company shall have no obligation to make payments under the Agreement for periods after the Executive’s Date of Termination.

 

(c)

Death or Disability. If the Executive’s Date of Termination occurs during the Agreement Term under circumstances described in paragraph 3(a) (relating to Executive’s death) or paragraph 3(b) (relating to Executive’s being Permanently Disabled), then, in addition to the amounts payable in accordance with paragraph 4(a), the Executive shall receive payment of the annual bonus and quarterly bonus (as described in paragraphs 2(b) and 2(c)) for the performance periods in which his Date of Termination occurs, based on actual performance for the entire periods, and payable at the same time as it is payable for other participants in the bonus plan; provided, however, that it shall be subject to a pro-rata reduction for the portion of the performance period following the Date of Termination. If the Executive’s Date of Termination occurs during the Agreement Term under circumstances described in paragraph 3(a) (relating to the Executive’s death) or paragraph 3(b) (relating to the Executive being Permanently Disabled), all restricted stock awards shall fully vest immediately and all restrictions shall lapse and all stock options shall fully vest immediately and be exercisable for five years, but in no event later than the date fixed for expiration of the option (determined without regard to Executive’s termination of employment), and the Executive and his family members shall be entitled to receive the maximum level of medical benefits afforded to senior executives or their beneficiaries upon termination resulting from death or Disability of the senior executive, but not less than 18 months (or 36 months in the case of death) of Company paid coverage, with the period of such medical benefit coverage being counted toward the Company’s obligation to provide COBRA medical continuation coverage (as described in section 4980B of the Internal Revenue Code of 1986, as amended (if any)). In addition, if the Executive Date of Termination occurs during the Agreement Term under circumstances described in paragraph 3(b) (relating to the Executive’s being Permanently Disabled), he shall be entitled to payment of his Salary through the commencement of long term disability payments to him under any plan provided or paid for by the Company.

 

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(d)

Termination without Cause, Constructive Discharge, Change in Control and Non-Renewal of Agreement. If the Executive’s Date of Termination occurs during the Agreement Term under circumstances described in paragraph 3(d) (relating to Constructive Discharge), paragraph 3(f) (relating to termination by the Company without Cause), 3(g) (relating to termination after a Change in Control), or this Agreement expires at the end of the Agreement Term without being renewed by the Company, then, in addition to the amounts payable in accordance with paragraph 4(a):

 

(i) The Executive (or, in the event of death after the commencement of receipt of Severance Payments, his beneficiary) shall receive Severance Payments from the Company for the Severance Period. The annual rate of Severance Payments shall be equal to the Aggregate Compensation Amount, and shall be payable in arrears in monthly or more frequent installments. For purposes of this subparagraph (i), the term “Aggregate Annual Compensation” shall mean the sum of (A) and (B) below:

 

(A) The Executive’s annual Salary rate in effect on the date immediately prior to the Executive’s Date of Termination.

 

(B) The Executive’s target annual bonus amount (as described in paragraph 2(b)) for the year in which the Date of Termination occurs.

 

For purposes of paragraphs (A) and (B) above, if any portion of the Executive’s Salary or bonus has been reduced to reflect elective deferrals by the Executive, the amounts included in Salary and bonus shall be determined without regard to those deferrals. The “Severance Period” will be the period beginning on the Date of Termination and ending on the earlier to occur of:

 

(I) the later of the last day of the Agreement Term or the two-year anniversary of the Date of Termination; or

 

(II) the date, if any, of a material breach by the Executive of the provisions of paragraph 8, paragraph 9, paragraph 10, or paragraph 11.

 

(ii) The Executive shall receive payment of the annual bonus and quarterly bonus (as described in paragraph 2(b) and 2(c)) for the performance period in which his Date of Termination occurs, based on actual performance for the entire period, and payable at the same time as it is payable for other participants in the bonus plan; provided, however, that it shall be subject to a pro-rata reduction for the portion of the performance period following the Date of Termination.

 

(iii) The exercise restrictions with respect to stock options granted to the Executive by the Company shall lapse, and the options shall become fully vested and exercisable as of the Date of Termination. The portion of any stock option granted to the Executive that is exercisable immediately prior to the Date of Termination, as well as the portion of any stock option that becomes exercisable by reason of this subparagraph (iii), shall remain exercisable for the Extended Exercise Period (as defined below), but in no event later than the date fixed for expiration of the option (determined without regard to Executive’s termination of employment). The “Extended Exercise Period” shall be the period beginning on the Date of Termination and ending on the later of the date that is five years after the Date of Termination or the date that is the number of days after the Date of Termination that is equal to the number of days that the Executive was employed by the Company between the Effective Date and the Date of Termination.

 

(iv) All restricted stock awards shall fully vest immediately and all restrictions shall lapse.

 

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(v) The Executive and his family members shall be entitled to receive the maximum level of medical benefits afforded to senior executives who have retired or terminated employment, but no less than 18 months of Company-paid coverage, with the period of such medical benefit coverage being counted toward the Company’s obligation to provide COBRA medical continuation coverage (as described in section 4980B of the Internal Revenue Code of 1986, as amended (if any).

 

In no event, however, shall the Executive be entitled to receive any amounts, rights, or benefits under this paragraph 4(d) unless he executes a release of claims.

 

(e)

Except as may be otherwise specifically provided in an amendment of this paragraph 4(e) adopted in accordance with paragraph 12, the Executive’s rights under this paragraph 4 shall be in lieu of any benefits that may be otherwise payable to or on behalf of the Executive pursuant to the terms of any severance pay arrangement of the Company or any Subsidiary or any other, similar arrangement of the Company or any Subsidiary providing benefits upon involuntary termination of employment. This paragraph 4(e) shall not be construed to adversely affect the Executive’s rights under the terms of any option on stock of the Company or any other award based on the stock of the Company.

 

5. Duties on Termination. Subject to the terms and conditions of this Agreement, during the period beginning on the date of delivery of a Notice of Termination, and ending on the Date of Termination, the Executive shall continue to perform his duties as set forth in this Agreement, and shall also perform such services for the Company as are necessary and appropriate for an effective transition to the Executive’s successor, if any. Notwithstanding the foregoing provisions of this paragraph 5, the Company may suspend the Executive from performing his duties under this Agreement (including, without limitation, his duties as a member of the Board of Directors of the Company or any Subsidiary) following the delivery of a Notice of Termination providing for the Executive’s resignation, or delivery by the Company of a Notice of Termination providing for the Executive’s termination of employment for any reason; provided, however, that during the period of suspension (which shall end on the Date of Termination), the Executive shall continue to be treated as employed by the Company for other purposes, and his rights to compensation or benefits shall not be reduced by reason of the suspension.

 

6. Return of Property. Following the Date of Termination, the Executive agrees to return to the Company any keys, credit cards, passes, confidential documents or material, or other property belonging to the Company, and to return all writings, files, records, correspondence, notebooks, notes and other documents and things (including any copies thereof) containing any Confidential Information ; provided, however, that the Executive shall be entitled to retain a copy of any rolodex or other compilation maintained by him of the names of business contacts with their addresses, telephone numbers and similar information. The Executive agrees to represent in writing to the Company upon termination of employment that he has complied with the foregoing provisions of this paragraph 6 and that he will comply with paragraphs 8, 9, 10, 11, and 12.

 

7. Mitigation, Alienation, and Set-Off. The Executive shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment or otherwise. The Company shall be entitled to set off against amounts payable to the Executive

 

13


any amounts owed to the Company by the Executive, but the Company shall not be entitled to set off against the amounts payable to the Executive under this Agreement any amounts earned by the Executive in other employment after termination of his employment with the Company, or any amounts which might have been earned by the Executive in other employment had he sought such other employment. This Agreement is personal to the Executive and may not be assigned by the Executive without the written consent of the Company. The interests of the Executive under this Agreement are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors of the Executive or the Executive’s beneficiary. However, to the extent that rights or benefits under this Agreement otherwise survive the Executive’s death, the Executive’s heirs and estate shall succeed to such rights and benefits pursuant to the Executive’s will or the laws of descent and distribution; provided that the Executive shall have the right at any time and from time to time, by notice delivered to the Company, to designate or to change the beneficiary or beneficiaries with respect to such benefits.

 

8. Confidential Information. Each Item and all Confidential Information (both as defined below) that comes into his possession by reason of the Executive’s employment are the property of the Company or the Subsidiaries and shall not be used by the Executive in any way except in the course of his employment by, and for the benefit of the Company or the Subsidiaries. The Executive will not remove any Items from premises owned or leased by the Company or the Subsidiaries except as his duties shall require, and upon termination of his employment, all Items will be turned over to the Company. The Executive will preserve as confidential all Confidential Information that has been or may be obtained by him. The Executive will not, without written authority from the Company, use for his own benefit or purposes, or disclose to others, either during his employment or thereafter, except as required by his employment with the Company, any Confidential Information or any copy or notes made from any Item embodying Confidential Information. The Executive understands that his obligations with respect to Confidential Information shall continue even after termination of his employment with the Company. These restrictions concerning use and disclosure of Confidential Information shall not apply to information which is or becomes publicly known by lawful means, or comes into his possession from sources not under an obligation of confidentiality to the Company or the Subsidiaries.

 

(a)

Confidential Information” means information relating to the present or planned business of the Company or the Subsidiaries which has not been released publicly by authorized representatives of the Company or the Subsidiaries. The Executive understands that Confidential Information may include, for example, Trade Secrets, Inventions, know-how and products, customer, patient, supplier and competitor information, sales, pricing, cost, and financial data, research, development, marketing and sales programs and strategies, manufacturing, marketing and service techniques, processes and practices, and regulatory strategies. The Executive understands further that Confidential Information also includes all information received by the Company or the Subsidiaries under an obligation of confidentiality to a third party.

 

(b)

Items” include documents, reports, drawings, photographs, designs, specifications, formulae, plans, samples, research or development information, prototypes, tools, equipment, proposals, marketing or sales plans, customer information, customer lists,

 

14


patient lists, patient information, regulatory files, financial data, costs, pricing information, supplier information, written, printed or graphic matter, or other information and materials that concern the Company’s or the Subsidiaries’ business that come into his possession or about which the Executive has knowledge by reason of his employment.

 

(c)

Trade Secrets” include all information encompassed in all Items, and in all manufacturing processes, methods of production, concepts or ideas, to the extent that such information has not been released publicly by duly authorized representatives of the Company or the Subsidiaries.

 

9. Non-Disparagement. The Executive agrees that, while he is employed by the Company, and after his Date of Termination, he shall not make any false, defamatory or disparaging statements about the Company, the Subsidiaries, or the officers or directors of the Company or the Subsidiaries that are reasonably likely to cause material damage to the Company, the Subsidiaries, or the officers or directors of the Company or the Subsidiaries. While the Executive is employed by the Company, and after his Date of Termination, the Company agrees, on behalf of itself and the Subsidiaries, that neither the officers nor the directors of the Company or the Subsidiaries shall make any false, defamatory or disparaging statements about the Executive that are reasonably likely to cause material damage to the Executive.

 

10. Noncompetition. The Executive understands that any entrusting of Confidential Information to him by the Company is done in reliance on a confidential relationship arising out of his employment with the Company. The Executive further understands that Confidential Information that the Executive may acquire or to which the Executive may have access, especially with regard to research and development projects and findings, formulae, designs, formulation, processes, the identity of suppliers, customers and patients, methods of manufacture, and cost and pricing data is of great value to the Company. In consequence of such entrusting and such consideration, the Executive will not, directly or indirectly, for a period of two years after the Date of Termination: (i) render services to any Competing Organization in connection with any Competing Product within such geographic limits as the Company and such Competing Organization are, or would be, in actual competition when such rendering of services might potentially involve the disclosure or use of Confidential Information or Trade Secrets; or (ii) provide advice as to investment in a Competitive Business (including, without limitation, advice with respect to the purchase, sale, or operation of such business, or advice with respect to financing or other economic structuring of such business). The Executive understands that services described in the preceding sentence, including without limitation those rendered to such Competing Organization in an executive, scientific, administrative, or consulting capacity in connection with Competing Products are in support of actual competition in various geographic areas and thus fall within the prohibition of this Agreement regardless of where such services physically are rendered.

 

(a)

Competing Products” means products, processes, or services of any person or organization other than the Company, in existence or under development, which are substantially the same, may be substituted for, or applied to substantially the same end use as the products, processes or services with which the Executive works during the time

 

15


of his employment with the Company or about which the Executive acquires Confidential Information through his work with the Company.

 

(b)

Competing Organization” means persons or organizations, including himself, engaged in, or about to become engaged in, research or development, production, distribution, marketing, providing or selling of a Competing Product.

 

(c)

Competitive Business” means any business in which the Company or any of the Subsidiaries was engaged during the 12-month period prior to the Executive’s Date of Termination, any business if the Company or any Subsidiary has devoted material resources to entering into such business during such 12-month period prior to the Date of Termination, and any business to the extent that it is engaged in the investing in or acquisition of all or a portion of the assets or stock of the Company or the Subsidiaries.

 

Executive has the right to pursue employment with any healthcare company or entity that he views as non-competitive within the definitions set forth above, subject to Company approval (which approval shall not be unreasonably withheld). Should the parties fail to mutually agree, arbitration will be undertaken under the provisions of Section 23.

 

11. Solicitation of Customers, Suppliers and Employees. While he is employed by the Company, and for a period of 24 months after the Executive’s Date of Termination for any reason:

 

(a)

The Executive shall not solicit or attempt to solicit any party who is then or, during the 12-month period prior to such solicitation or attempt by the Executive was (or was solicited to become), a customer or supplier of the Company or Affiliate, provided that the restriction in this paragraph 11(a) shall not apply to any activity on behalf of a business that is not a Competing Organization.

 

(b)

The Executive shall not solicit, entice, persuade or induce any individual who is employed by the Company or the Subsidiaries (or was so employed within 90 days prior to the Executive’s action) to terminate or refrain from renewing or extending such employment or to become employed by or enter into contractual relations with any other individual or entity other than the Company or the Subsidiaries, and the Executive shall not approach any such employee for any such purpose or authorize or knowingly cooperate with the taking of any such actions by any other individual or entity.

 

12. Inventions. With respect to Inventions and related matters, the Executive and the Company agree as follows:

 

(a)

All Inventions related to the present or planned business of the Company, which are conceived or reduced to practice by the Executive, either alone or with others, during the period of his employment or during a period of one hundred twenty (120) days after termination of such employment, whether or not done during his regular working hours, are the sole property of the Company. The provisions of this paragraph 12(a) shall not apply to an invention for which no equipment, supplies, facilities or trade secret information of the Company was used and which was developed entirely on his own time, unless (A) the invention relates (i) to the business of the Company, or (ii) to his

 

16


actual or demonstrably anticipated research or development for the Company, or (B) the invention results from any work performed by the Executive for the Company.

 

(b)

The Executive will disclose promptly and in writing to the Company, through the General Counsel of the Company, all Inventions which are covered by this Agreement, and the Executive agree to assign to the Company or its nominee all his right, title, and interest in and to such Inventions. The Executive agrees not to disclose any of these Inventions to others, without the express consent of the Company, except as required by his employment.

 

(c)

The Executive will, at any time during or after his employment, on request of the Company, execute specific assignments in favor of the Company or its nominee of his interest in and to any of the Inventions covered by this Agreement, as well as execute all papers, render all assistance, and perform all lawful acts which the Company considers necessary or advisable for the preparation, filing, prosecution, issuance, procurement, maintenance or enforcement of patent applications and patents of the United States and foreign countries for these Inventions, and for the transfer of any interest the Executive may have. The Executive will execute any and all papers and documents required to vest title in the Company or its nominee in the above Inventions, patent applications, patents, and interests.

 

(d)

The Executive understands that if the Executive is not employed by the Company at the time the Executive is requested to execute any document under paragraph 12(a), the Executive shall receive fifty dollars ($50.00) for the execution of each document, and one hundred fifty dollars ($150.00) per day of each day or portion thereof spent at the request of the Company in the performance of acts pursuant to paragraph 12(a), plus reimbursement for any out-of-pocket expenses incurred by the Executive at the Company’s request in such performance.

 

(e)

The Executive further understands that the absence of a request by the Company for information, or for the making of an oath, or for the execution of any document, shall in no way be construed to constitute a waiver of the Company’s rights under this Agreement.

 

(f)

The Executive has disclosed to the Company all continuing obligations which the Executive has with respect to the assignment of Inventions to any previous employers, and the Executive claims no previous unpatented Inventions as his own, except for those which have been reduced to practice and which are shown on a schedule, if any, attached to this Agreement. The Executive understands that the Company does not seek any confidential information which the Executive may have acquired from a previous employer, and the Executive will not disclose any such information to the Company.

 

(g)

Invention” means procedures, systems, machines, methods, processes, uses, apparatuses, compositions of matter, designs or configurations, computer programs of any kind, or any improvements of the foregoing, discovered, conceived, reduced to practice, developed, made, or produced, and shall not be limited to the meaning of “Invention” under the United States patent laws.

 

17


13. Copyright. All writings and other works which may be copyrighted (including computer programs) which are related to the present or planned business of the Company and are prepared by the Executive during his employment by the Company shall be, to the extent permitted by law, works made for hire, and the authorship and copyright of the work shall be in the Company’s name. To the extent that such writings and works are not works for hire, the Executive agrees to the waiver of “moral rights” in such writings and works, and to assign to the Company all his right, title and interest in and to such writings and works, including copyright.

 

14. Images. The Executive will permit the Company and its agents to use and distribute any pictorial images which are taken of him during his employment by the Company as often as desired for any lawful purpose. The Executive waives all rights of prior inspection or approval and releases the Company and its agents from any and all claims or demands which the Executive may have on account of the lawful use or publication of such pictorial images.

 

15. Assistance with Claims. The Executive agrees that, for the period beginning on the Effective Date, and continuing for a reasonable period, not less than two years after the Executive’s Date of Termination, the Executive will assist the Company and the Subsidiaries in the defense of any claims that may be made against the Company and the Subsidiaries, and will assist the Company and the Subsidiaries in the prosecution of any claims that may be made by the Company or the Subsidiaries, to the extent that such claims may relate to services performed by the Executive for the Company and the Subsidiaries. The Executive agrees to promptly inform the Company if he becomes aware of any lawsuits involving such claims that may be filed against the Company or any Subsidiary. The Company agrees to provide legal counsel to the Executive in connection with such assistance (to the extent legally permitted), and to reimburse the Executive for all of the Executive’s reasonable out-of-pocket expenses associated with such assistance, including travel expenses. For periods after the Executive’s employment with the Company terminates, the Company agrees to provide reasonable compensation to the Executive for such assistance. The Executive also agrees to promptly inform the Company if he is asked to assist in any investigation of the Company or the Subsidiaries (or their actions) that may relate to services performed by the Executive for the Company or the Subsidiaries, regardless of whether a lawsuit has then been filed against the Company or the Subsidiaries with respect to such investigation.

 

16. Equitable Remedies. The Executive acknowledges that the Company would be irreparably injured by a violation of paragraph 8, paragraph 9, paragraph 10, and paragraph 11, and he agrees that the Company, in addition to any other remedies available to it for such breach or threatened breach, shall be entitled to a preliminary injunction, temporary restraining order, or other equivalent relief, restraining the Executive from any actual or threatened breach of paragraph 8, paragraph 9, paragraph 10, or paragraph 11. If a bond is required to be posted in order for the Company to secure an injunction or other equitable remedy, the parties agree that said bond need not be more than a nominal sum. The Company acknowledges that the Executive would be irreparably injured by a violation of paragraph 9, and he agrees that the Executive, in addition to any other remedies available to it for such breach or threatened breach, shall be entitled to a preliminary injunction, temporary restraining order, or other equivalent relief, restraining the Company from any actual or threatened breach of paragraph 9. If a bond is required to be posted in order for the Executive to secure an injunction or other equitable remedy, the parties agree that said bond need not be more than a nominal sum.

 

18


17. Amendment. This Agreement may be amended or cancelled only by mutual agreement of the parties in writing without the consent of any other person. So long as the Executive lives, no person, other than the parties hereto, shall have any rights under or interest in this Agreement or the subject matter hereof.

 

18. Applicable Law. The provisions of this Agreement shall be construed in accordance with the laws of the State of Illinois, without regard to the conflict of law provisions of any state. All disputes shall be litigated or arbitrated (whichever is applicable) in Chicago, Illinois.

 

19. Severability. The invalidity or unenforceability of any provision of this Agreement will not affect the validity or enforceability of any other provision of this Agreement, and this Agreement will be construed as if such invalid or unenforceable provision were omitted (but only to the extent that such provision cannot be appropriately reformed or modified).

 

20. Waiver of Breach. No waiver by any party hereto of a breach of any provision of this Agreement by any other party, or of compliance with any condition or provision of this Agreement to be performed by such other party, will operate or be construed as a waiver of any subsequent breach by such other party of any similar or dissimilar provisions and conditions at the same or any prior or subsequent time. The failure of any party hereto to take any action by reason of such breach will not deprive such party of the right to take action at any time while such breach continues.

 

21. Successors. This Agreement shall be binding upon, and inure to the benefit of, the Company and its successors and assigns and upon any person acquiring, whether by merger, consolidation, purchase of assets or otherwise, all or substantially all of the Company’s assets and business, and the successor shall be substituted for the Company under this Agreement. The Company will require any successor to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such assignment or succession had taken place.

 

22. Notices. Notices and all other communications provided for in this Agreement shall be in writing and shall be delivered personally or sent by registered or certified mail, return receipt requested, postage prepaid (provided that international mail shall be sent via overnight or two-day delivery), or sent by facsimile or prepaid overnight courier to the parties at the addresses set forth below (or such other addresses as shall be specified by the parties by like notice). Such notices, demands, claims and other communications shall be deemed given:

 

(a)

in the case of delivery by overnight service with guaranteed next day delivery, the next day or the day designated for delivery;

 

(b)

in the case of certified or registered U.S. mail, five days after deposit in the U.S. mail; or

 

(c)

in the case of facsimile, the date upon which the transmitting party received confirmation of receipt by facsimile, telephone or otherwise;

 

provided, however, that in no event shall any such communications be deemed to be given later than the date they are actually received. Communications that are to be delivered by the U.S.

 

19


mail or by overnight service or two-day delivery service are to be delivered to the addresses set forth below:

 

to the Company:

 

Baxter International Inc.

One Baxter Parkway

DF2-2W

Deerfield, IL 60015

Attention: Lead Director

 

or to the Executive:

 

All notices to the Company shall be directed to the attention of General Counsel of the Company, with a copy to the Secretary of the Company. Each party, by written notice furnished to the other party, may modify the applicable delivery address, except that notice of change of address shall be effective only upon receipt.

 

23. Arbitration of All Disputes. Any controversy or claim arising out of or relating to this Agreement (or the breach thereof) shall be settled by final, binding and non-appealable arbitration in Chicago, Illinois by three arbitrators. Except as otherwise expressly provided in this paragraph 23, the arbitration shall be conducted in accordance with the rules of the Center for Public Resources (“CPR”) then in effect. One of the arbitrators shall be appointed by the Company, one shall be appointed by the Executive, and the third shall be appointed by the first two arbitrators. If the first two arbitrators cannot agree on the third arbitrator within 30 days of the appointment of the second arbitrator, then the third arbitrator shall be appointed by CPR. Except as agreed upon by the Executive and the Company, each of the arbitrators shall be (i) an attorney with substantial experience representing executives and/or employers in employment matters; (ii) a former judge with substantial experience hearing employment matters involving executives and employers; or (iii) an individual with substantial human resources experience involving executive employment matters. The arbitrator appointed by the Executive and the arbitrator appointed by the Company shall each be described by any of clauses (i), (ii), and/or (iii) above. The third arbitrator appointed by the other two arbitrators (or by CPR), to the extent reasonably possible, shall be described by the clause(s) (i), (ii), and (iii) not applicable to the arbitrators appointed by the Executive and the Company.

 

24. Survival of Agreement. Except as otherwise expressly provided in this Agreement, the rights and obligations of the parties to this Agreement shall survive the termination of the Executive’s employment with the Company.

 

25. Entire Agreement. Except as otherwise provided herein, this Agreement, including any Exhibit(s) attached hereto, constitutes the entire agreement between the parties concerning the subject matter hereof and supersedes all prior and contemporaneous agreements, if any, between the parties relating to the subject matter hereof; provided, however, that nothing in this Agreement shall be construed to limit the Company’s ability to establish and maintain policies (or require the employee to enter into an agreement) relating to confidentiality, rights to

 

20


inventions, copyrightable material, business and/or technical information, trade secrets, solicitation of employees, interference with relationships with other businesses, competition, and other similar policies or agreement for the protection of the business and operations of the Company and the Subsidiaries.

 

26. Counterparts. This Agreement may be executed in two or more counterparts, any one of which shall be deemed the original without reference to the others.

 

27. Acknowledgment by Executive. Except as permitted under or pursuant to Section 1(h), the Executive represents and warrants that (i) he is not, and will not become a party to any agreement, contract, arrangement or understanding, whether of employment or otherwise, that would in any way restrict or prohibit him from undertaking or performing his duties in accordance with this Agreement or that restricts his ability to be employed by the Company in accordance with this Agreement; (ii) he is not presently engaged in, and will not during the Agreement Term enter into any employment or agency relationship with any third party whose interests might conflict with those of the Company or the Subsidiaries; (iii) he is not and will not during the Agreement Term possess any significant interest, directly, through his family, or through organizations or trusts controlled by him, in any third party whose interests might conflict with those of the Company or its subsidiaries; (iv) his employment by the Company will not violate the terms of any policy of any prior employer of the Executive regarding competition; and (v) his position with the Company, as described in this Agreement, will not require him to improperly use any trade secrets or confidential information of any prior employer, or any other person or entity for whom he has performed services.

 

28. Approval by Board. The Board shall consider approval of this Agreement within three business days after the date of this Agreement. The effectiveness of the Company’s execution of this Agreement is contingent on the Agreement being approved by the Board at the time specified in this paragraph 28, and the Agreement shall be void if such approval is not given.

 

The Executive has hereunto set his hand, and the Company has caused these presents to be executed in its name and on its behalf, all as of the date first stated above.

 

 

 

/s/ Robert L. Parkinson, Jr.


 

Robert L. Parkinson, Jr.

 

BAXTER INTERNATIONAL INC.

 

/s/ Thomas T. Stallkamp


 

Thomas T. Stallkamp, Lead Director

 

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Top of the Document

 


EX-10.1 2 c48272exv10w1.htm EX-10.1

Exhibit 10.1

EMPLOYMENT AGREEMENT

     THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into as of December 12, 2008 (the “Effective Date”), by and between Robert L. Parkinson, Jr. (the “Executive”) and Baxter International Inc. (the “Company”);

WITNESSETH THAT:

     WHEREAS, the parties entered into an Employment Agreement dated as of April 19, 2004 (the “2004 Agreement”) pertaining to the employment of the Executive by the Company; and

     WHEREAS, the parties desire to enter into this Agreement to amend and restate the 2004 Agreement;

     NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth below, the Executive and the Company hereby agree as follows:

     1. Performance of Services. The Executive’s employment with the Company shall be subject to the following:

(a)

 

Subject to the terms of this Agreement, the Company hereby agrees to employ the Executive as its Chairman, Chief Executive Officer and President during the Agreement Term (as defined below), and the Executive hereby agrees to serve in such capacity during the Agreement Term.

 

(b)

 

During the Agreement Term, while the Executive is employed by the Company, the Board of Directors of the Company (the “Board”) shall use its best efforts to cause the Executive to be reelected as a member of the Board. It is understood by the parties that, pursuant to its fiduciary responsibilities, duty of care and obligations with respect to corporate governance, the Board may determine that it is appropriate for the position of Chairman of the Board to be held by a director who is not an employee or officer of the Company. If two-thirds of the Board affirmatively vote at a meeting of the Board called and held for such purpose that it is appropriate to separate the positions of Chairman and CEO, notwithstanding any other provisions of the Agreement, the occurrence of such a determination by the Board resulting in the failure of the Executive to be reelected as the Chairman of the Board will not constitute Good Reason or a breach of this Agreement, provided that Executive concurs with the decision. In addition, this determination will not result in any change to the Executive’s remuneration under the terms of this Agreement.

 

(c)

 

The Executive agrees that he shall perform his duties faithfully and efficiently subject to the directions of the Board, and the Executive shall have the authority and duty generally to supervise and direct the business of the Company, subject only to the control and direction of the Board. The Executive’s duties may include providing services for both the Company and the Subsidiaries (as defined below) as determined by the Board; provided that the Executive shall not, without his consent, be assigned tasks that would be inconsistent with those of Chairman, President and Chief Executive Officer. The

1


 

 

 

Executive shall report to the Board and shall have such authority, power, responsibilities and duties as are set forth in the Company’s Bylaws and as are inherent in his positions (and the undertakings applicable to his positions) and necessary to carry out his responsibilities and the duties required of him hereunder.

 

(d)

 

During the Agreement Term, while the Executive is employed by the Company, the Executive shall devote his full time, energies and talents to serving as its Chairman, President and Chief Executive Officer. The Executive will exert his best efforts in the performance of his duties as an employee of the Company and will remain loyal to the Company during the term of his employment.

 

(e)

 

The Executive may be asked to submit to drug testing as a condition of continued employment and consents to such testing as determined by the Company to be appropriate.

 

(f)

 

The Executive will comply with the Company’s Code of Conduct. The Board has the right to make and enforce any other rules and regulations generally applicable to other senior officers that will govern Executive’s employment provided that they are not contrary to the Agreement.

 

(g)

 

The Executive acknowledges and agrees that the Executive owes a fiduciary duty of loyalty, fidelity, and allegiance to act at all times in the best interests of the Company and its shareholders, in accordance with Delaware law. In keeping with these duties, the Executive shall make full disclosure to the Company of all business opportunities pertaining to the Company’s business and shall not appropriate for the Executive’s own benefit business opportunities concerning the subject matter of the fiduciary relationship.

 

(h)

 

Notwithstanding the foregoing provisions of this paragraph 1, during the Agreement Term, the Executive may devote reasonable time to activities other than those required under this Agreement, including the supervision of his personal investments, and activities involving professional, charitable, community, educational, religious and similar types of organizations, speaking engagements, membership on the boards of directors of other organizations (as limited by the Company’s Corporate Governance Guidelines), and similar types of activities, to the extent that such other activities do not, in the judgment of the Board, inhibit or prohibit the performance of the Executive’s duties under this Agreement, or conflict in any material way with the business of the Company or any Subsidiary; provided, however, that the Executive shall not serve on the board of any business, hold any other position with any business, or otherwise engage in any business activity, without the consent of the Board.

 

(i)

 

Subject to the terms of this Agreement, the Executive shall not be required to perform services under this Agreement during any period that he is Disabled. The Executive shall be considered “Disabled” during any period in which he has a physical or mental disability which renders him incapable of performing his duties under this Agreement. In the event of a dispute as to whether the Executive is Disabled or Permanently Disabled (as defined in paragraph 3(b)), the Company may refer the same to a licensed practicing physician of the Company’s choice and reasonably acceptable to the Executive, and the

2


 

 

 

Executive agrees to submit to such tests and examinations as such physician shall deem appropriate. During the period in which the Executive is Disabled, the Company may appoint a temporary replacement to assume the Executive’s responsibilities.

(j)

 

The “Agreement Term” shall be determined as follows:

(i) The Agreement Term shall begin as of the Effective Date.

(ii) The Agreement Term shall end on the two-year anniversary of the Effective Date; provided that, subject to subparagraph (iii) below, beginning on the Effective Date, the Agreement Term shall, on a daily basis, be automatically extended by one day. As a result of this day-to-day extension, and subject to subparagraph (iii) below, at any time after the Effective Date, the Agreement Term shall be two years. Notwithstanding the foregoing, the Agreement Term will in no case extend beyond January 30, 2016.

(iii) Either party may, at any time during the Agreement Term, cease the automatic extensions otherwise provided in subparagraph (ii) above, by delivery to the other party of written notice of such cessation. Such cessation of extensions will not be effective earlier than the date of delivery of such notice. For the avoidance of doubt, the end of the Agreement Term shall not be less than two years following the delivery of the written notice of cessation referred to in this subparagraph (iii). No amounts shall be payable under paragraph 4 by reason of the end of the Agreement Term or termination of the Executive’s employment on or after January 30, 2016; provided, however, that the foregoing shall not prevent the Executive from receiving benefits (salary through date of termination, earned but unpaid bonus amounts as provided in Section 4(a), Pension as provided in Section 2(g), and other benefits in the nature of those provided in Section 4(a)) to the extent otherwise payable commencing following the end of employment.

(k)

 

For purposes of this Agreement, the term “Subsidiary” shall mean any corporation, partnership, joint venture or other entity during any period in which at least a fifty percent interest in such entity is owned, directly or indirectly, by the Company (or a successor to the Company).

     2. Compensation. Subject to the terms of this Agreement, during the Agreement Term, while the Executive is employed by the Company, the Company shall compensate him for his services as follows:

(a)

 

Salary. The Executive shall receive, in substantially equal monthly or more frequent installments, an annual base salary of not less than $1,300,000 (the “Salary”). The Executive’s Salary rate shall be reviewed annually by the independent members of the Board during the Agreement Term, while the Executive is employed by the Company, to determine whether an increase in the amount of Salary is appropriate. In no event shall the Salary of the Executive be reduced to an amount that is less than the amount specified in this paragraph 2(a), or to an amount that is less than the amount that he was previously receiving, except to the extent that reductions of the same percentage are being made at the same time to the salaries of all other Company officers named in the Company’s then-

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current proxy statement, and such Salary shall be restored to its prior level when, and to the same extent, as the restoration that applies to such other officers.

 

(b)

 

Annual Bonus. The Executive shall participate in an annual officer bonus program. Such participation shall be subject to the terms provided under the generally applicable program for the Company’s senior officers, provided that the terms of the Executive’s participation shall be commensurate with his position as Chief Executive Officer as determined by the independent members of the Board. Any applicable performance objectives shall be established by the independent members of the Board, following consultation with the Executive, prior to, or within 90 days after the commencement of, each fiscal year. The bonus shall be paid to the Executive no later than the date on which bonuses are typically paid to other senior officers of the Company.

 

(c)

 

Equity and other Long-Term Incentive Awards. The Executive shall be granted equity and other cash-based long-term incentive compensation awards at such times as such awards are granted to the Company’s other senior executives. Such awards shall be subject to the terms provided under the generally applicable plans or programs for the Company’s senior officers at the time of the awards. All such awards to the Executive shall be commensurate with his position as Chief Executive Officer as determined by the independent members of the Board.

 

(d)

 

Other Fringe Benefits. Except as otherwise specifically provided to the contrary in this Agreement, the Executive shall be provided with the welfare benefits and other fringe benefits and perquisites to the same extent and on the same terms as those benefits are provided by the Company from time to time to the Company’s other senior executives, provided, however, that if any such benefits are adjusted to reflect an executive’s position, the Executive’s benefits shall be adjusted in a manner commensurate with his position. Nothing in this paragraph 2(d) shall be construed to prevent the Company from revising the benefits or perquisites generally provided to executives from time to time. However, the Company shall not be required to provide a benefit under this paragraph 2(d) if such benefit would duplicate (or otherwise be of the same type as) a benefit specifically required to be provided under another provision of this Agreement. The Executive shall complete all forms and physical examinations, and otherwise take all other similar actions to secure coverage and benefits described in this paragraph 2, to the extent determined to be necessary or appropriate by the Company.

 

(e)

 

Disability Insurance. The Executive shall receive from the Company disability income replacement coverage which will provide for replacement of income subject to the terms of the Company disability insurance plan that applies to senior officers of the Company during any period in which the Executive is Disabled if the disability arose during the Agreement Term and prior to the Executive’s Date of Termination (as defined below). During any period while the Executive is Disabled and is otherwise entitled to receive Salary and bonus payments under this Agreement, any such Salary and bonus payments to the Executive shall be reduced by the amount of any benefits paid for the same period of time under the Company-provided disability income replacement coverage.

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(f)

 

Expenses. The Executive is authorized to incur reasonable expenses for entertainment, traveling, meals, lodging and similar items in promoting the Company’s business. The Company will reimburse the Executive for all reasonable expenses so incurred, provided that such expenses are incurred and accounted for in accordance with its reasonable policies and procedures applicable from time to time with respect to its senior officers.

 

(g)

 

Pension. Upon termination of employment for any reason other than Cause, the Executive shall be entitled to a nonqualified supplemental pension benefit as described in this subparagraph 2(g) (the “Pension”) from the Company or any successor thereto, subject to the other terms of this Agreement. The Pension shall be in addition to the benefit the Executive would otherwise be entitled to under the Baxter International Inc. and Subsidiaries Supplemental Pension Plan, or any successor thereto (the “Supplemental Plan”), provided that if for any reason the Executive is not entitled to the Pension his entitlement to a benefit under the Supplemental Plan shall not be affected thereby.

(i) The monthly amount of the Pension, if paid in the form of a single life annuity, shall be one-twelfth (1/12) of 1.75% of Executive’s final average pay multiplied by his number of credited service years, minus (ii) 1.75% of the Executive’s estimated primary social security benefit multiplied by his number of actual service years, and further offset as described in subparagraph 2(g)(iv), below.

(ii) Payment of the Pension shall commence as of the first day of the month following the Date of Termination (the “effective commencement date”), without actuarial reduction for payment prior to Executive’s normal retirement date. If on the effective commencement date the Executive has not yet incurred a separation from service as defined in subparagraph 4(d)(viii)(E), then payments shall still be calculated as of the effective commencement date, but payment shall not actually commence until the first day of the month following the date on which he incurs a separation from service (or if on the date on which he incurs a separation from service he is a “specified employee” as defined in the Baxter International Inc. and Subsidiaries Deferred Compensation Plan, the first day of the month following the date that is six months after the date on which he incurs a separation from service). Upon commencement of payment, the Executive shall receive a lump sum payment equal to the sum (without interest) of all payments that would have been paid since the effective commencement date but for the preceding sentence. The provisions of this subparagraph 2(g)(ii) (other than the provision that the benefit shall not be actuarially reduced for payment prior to normal retirement) shall also apply to the payment of the Executive’s benefit under the Supplemental Plan (whether or not the Executive is entitled to the Pension), and shall constitute the Executive’s election of the Commencement Date of his benefit under Section 4.6(d) of the Supplemental Plan. Notwithstanding the provisions of the Supplemental Plan, payment of the Executive’s Supplemental Plan benefit shall commence in accordance with this subparagraph 2(g)(ii) even if the Executive has not completed 65 Points (as defined in the Supplemental Plan) on the Date of Termination, provided that if the Executive has not completed 65 Points on the Date of Termination and is not eligible for the Pension, the Executive’s benefit under the Supplemental Plan shall be calculated using the early retirement reduction factors applicable to a participant whose employment is terminated prior to completing 65 Points.

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(iii) In lieu of a single life annuity, the Executive may elect to receive the Pension in the form of any other type of life annuity (as defined in the regulations under Section 409A of the Internal Revenue Code, sometimes referred to as the “Code”) that is then offered as an optional form of benefit under the Baxter International Inc. and Subsidiaries Pension Plan, or any successor thereto (the “Qualified Plan”); provided that the Executive shall elect the same form of life annuity for the Pension that he elects for his benefit under the Supplemental Plan. In such event, the amount of monthly payments shall be adjusted to the equal the actuarial equivalent of the payments described in subparagraph 2(g)(i), using the actuarial factors used in the Qualified Plan. Such election shall be made in writing in accordance with the requirements of Section 409A, as applicable.

(iv) The monthly Pension payments shall be offset by the monthly pension payments to Executive under the Qualified Plan and the Supplemental Plan. The amount of the offset shall be calculated as if the Executive had commenced his Qualified Plan benefit on the effective commencement date, and in the same form as the form in which the Pension is paid, regardless of when and in what form the Qualified Plan benefit is paid. If the effective commencement date occurs prior to payment of the Qualified Plan benefit, no adjustment to the Pension shall be made when payment of the Qualified Plan benefit commences.

(v) For purposes of the Pension, the Executive’s final average pay is equal to the average of the Executive’s five (or his total actual service years, if shorter) highest consecutive calendar years of earnings (Salary and bonus) out of his last ten (or his total actual service years, if shorter) calendar years of earnings, calculated in the same manner as final average pay is calculated under the Qualified Plan (but without regard to any limits on final average pay required by Section 401(a)(17) of the Code).

(vi) For purposes of the Pension, the number of credited service years shall be equal to sum of (i) the number of twelve-month periods commencing April 19, 2004, during which the Executive is employed by the Company (each an “actual service year”), plus (ii) a number of “supplemental service years” determined in accordance with the following schedule:

 

 

 

Actual Service Years

 

Supplemental Service Years

Less than three years

 

Zero years

At least three years but less than four years

 

Five years

At least four years but less than five years

 

Six years

At least five years but less than six years

 

Nine years

Six or more years

 

Nine years plus one year for each full actual service year after five years of actual service

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(vii) If the Executive dies prior to the effective commencement date, his surviving spouse or beneficiary shall receive a survivorship benefit payable in a lump sum, as soon as practical, but not more than 90 days after the date of his death, equal to the present value of either

 

(A)

 

if the beneficiary is the Executive’s surviving spouse, the survivorship benefit his spouse would have received had the effective commencement date of the Pension been the first day of the month in which the Executive dies, if the Pension were being paid in the form of a joint and 100% survivor annuity, or

 

 

(B)

 

if the beneficiary is someone other than the Executive’s surviving spouse, the 120 guaranteed monthly payments the beneficiary would have received had the effective commencement date of the Pension been the first day of the month in which the Executive dies, if the Pension were being paid in the form of a ten year certain and life annuity.

In either case, such benefit shall be based upon the Executive’s accrued benefit at age 65 and shall otherwise be calculated in accordance with the Qualified Plan. The Executive’s beneficiary shall be the same person as his beneficiary under the Qualified Plan, unless he elects a different beneficiary in writing in accordance with procedures specified by the Company; provided that the amount of the survivorship benefit payable hereunder shall be reduced by the survivorship benefit payable under the Qualified Plan and Supplemental Plan even if paid to a different beneficiary. If the Executive dies after the effective commencement date, the amount of survivorship benefit, if any, payable to his surviving spouse or other beneficiary shall be determined by the form of annuity elected; provided that if the Executive dies after the effective commencement date but during a period during which actual payment of his benefit has been suspended pursuant to Section 409A, payment shall commence on the first day of the month following the date of his death or as soon as practical thereafter according to the form of annuity elected, and the Executive’s beneficiary (or estate, if no beneficiary is designated) shall receive a lump sum payment equal to the benefit payments that would have been paid during such period but for the requirements of Section 409A, regardless of whether any survivorship benefits are otherwise payable.

(viii) Except as otherwise provided herein, payment of the Pension shall be determined in accordance with the provisions of the Supplemental Plan. The Pension shall be considered a Special Supplemental Pension as defined in the Supplemental Plan.

     3. Termination. The Executive’s employment with the Company during the Agreement Term may be terminated by the Company or the Executive without any breach of this Agreement only under the circumstances described in paragraphs 3(a) through 3(g):

(a)

 

Death. The Executive’s employment hereunder will terminate upon his death.

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(b)

 

Permanent Disability. The Company may terminate the Executive’s employment during any period in which he is Permanently Disabled. The Executive shall be considered “Permanently Disabled” during any period in which he is Disabled; provided, however, that the Executive shall be not be considered “Permanently Disabled” unless (i) the Executive has a physical or mental disability which renders the Executive incapable of performing the Executive’s duties on a permanent, full-time basis; (ii) such disability is reasonably expected by the Board to continue for at least 90 days; and (iii) at the Executive’s Date of Termination, the Executive is entitled to income replacement benefits under the Company’s long-term disability plan or another arrangement providing substantially similar benefits.

 

(c)

 

Cause. The Company may terminate the Executive’s employment hereunder at any time for Cause. For purposes of this Agreement, the term “Cause” shall mean:

(i) the willful and continued failure by the Executive to substantially perform his duties with the Company (other than any such failure resulting from the Executive’s being Disabled), within a reasonable period of time after a written demand for substantial performance is delivered to the Executive by the Board, which demand specifically identifies the manner in which the Board believes that the Executive has not substantially performed his duties;

(ii) the willful engaging by the Executive in conduct which is demonstrably and materially injurious to the Company, monetarily or otherwise; or

(iii) the engaging by the Executive in egregious misconduct involving serious moral turpitude to the extent that, in the reasonable judgment of the Company’s Board, the Executive’s credibility and reputation no longer conform to the standard of the Company’s executives.

For purposes of this Agreement, no act, or failure to act, on the Executive’s part shall be deemed “willful” unless done, or omitted to be done, by the Executive not in good faith and without reasonable belief that the Executive’s action or omission was in the best interest of the Company. Notwithstanding the foregoing, the Executive shall not be deemed to have been terminated for Cause unless and until the Company delivers to the Executive a copy of a resolution duly adopted by the affirmative vote of the majority of the entire membership of the Board (not including the Executive) at a meeting of the Board called and held for such purpose (after reasonable notice to the Executive).

(d)

 

Constructive Discharge. If (I) the Executive provides written notice to the Company of the occurrence of Good Reason (as defined below) within 10 business days after the Executive has knowledge of the circumstances constituting Good Reason, which notice specifically identifies the circumstances which the Executive believes constitute Good Reason; (II) the Company fails to notify the Executive of the Company’s intended method of correction within 10 business days after the Company receives the notice, or the Company fails to correct the circumstances within 10 business days after such notice; and (III) the Executive resigns within 10 business days after receiving the Company’s response, if such notice does not indicate an intention to correct such circumstances, or

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within 10 business days after the Company fails to correct such circumstances; then the Executive shall be considered to have been subject to a Constructive Discharge by the Company. For purposes of this Agreement, “Good Reason” shall mean, without the Executive’s express written consent (and except in consequence of a prior termination of the Executive’s employment), the occurrence of any of the following circumstances:

(i) Except as otherwise agreed by the Executive and the Board, (I) the assignment to the Executive of any duties materially inconsistent with the Executive’s position and status as set forth in paragraph 1, (II) any material reduction in the authority or responsibility of the Executive or other substantial reduction in the terms and conditions of the Executive’s employment, (III) a change in the Executive’s reporting relationship so that the Executive ceases to report directly to the Board, (IV) the failure of the Executive to be reelected to the Board while employed by the Company, (V) the failure of the Board to nominate the Executive for reelection to the Board and recommend to the Company’s stockholders that they vote in favor of the Executive’s reelection to the Board, or (VI) the failure to reelect the Executive as Chairman (without the Executive’s advance written consent to such failure), with the date of such Good Reason deemed to occur on the failure to reelect the Executive as Chairman.

(ii) The relocation of the Executive’s base office to an office that is more than 50 highway miles further from the Executive’s residence than the Executive’s base office on the Effective Date.

(iii) The failure of the Company to obtain a satisfactory agreement from any successor to assume and agree to perform this Agreement.

(iv) Any purported termination of the Executive’s employment which is not effected pursuant to a Notice of Termination satisfying the requirements of paragraph 3(h) below, and for purposes of this Agreement, no such purported termination shall be effective.

(v) Except as permitted in paragraph 2(a), a reduction in the Executive’s Salary as the same may be increased from time to time.

(vi) A change in the bonus program identified in paragraph 2(b) that disproportionately reduces the Executive’s bonus opportunity as compared to other senior officers named in the then-current annual proxy statement.

(vii) Any material breach of this Agreement by the Company not described in paragraphs (i) through (vi) next above.

The Executive’s right to terminate his employment pursuant to this paragraph 3(d) shall not be affected by his incapacity due to physical or mental illness.

(e)

 

Termination by Executive. The Executive may terminate his employment hereunder at any time for any reason by giving the Company prior written Notice of Termination (as defined in paragraph 3(h)), which Notice of Termination shall be effective not less than 90 days after it is given to the Company, provided that nothing in this Agreement shall require the Executive to specify a reason for any such termination. However, to the

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extent that the procedures specified in paragraph 3(d) are required, the procedures of this paragraph 3(e) may not be used in lieu of the procedures required under paragraph 3(d).

 

(f)

 

Termination by Company. The Company may terminate the Executive’s employment hereunder at any time for any reason, by giving the Executive prior written Notice of Termination, which Notice of Termination shall be effective immediately, or such later time as is specified in such notice. The Company shall not be required to specify a reason for the termination under this paragraph 3(f), provided that termination of the Executive’s employment by the Company shall be deemed to have occurred under this paragraph 3(f) only if it is not for reasons described in paragraph 3(b), 3(c), 3(d), or 3(e). Notwithstanding the foregoing provisions of this paragraph 3(f), if the Executive’s employment is terminated by the Company in accordance with this paragraph 3(f), and within 10 business days thereafter, it is determined by the Board that circumstances existed which would have constituted a basis for termination of the Executive’s employment for Cause in accordance with paragraph 3(c) (disregarding circumstances which could have been remedied if notice had been given in accordance with paragraph 3(c)(i)), the Executive’s employment will be deemed to have been terminated for Cause in accordance with paragraph 3(c).

 

(g)

 

Termination After Change in Control. The Executive may terminate his employment with the Company or a successor for any reason following a Change in Control (as defined in the Company’s 2008 Equity Plan).

 

(h)

 

Notice of Termination. Any termination of the Executive’s employment by the Company or the Executive (other than a termination pursuant to paragraph 3(a)) must be communicated by a written Notice of Termination to the other party hereto. For purposes of this Agreement, a “Notice of Termination” means a dated notice which indicates the Date of Termination (not earlier than the date on which the notice is provided), and which indicates the specific termination provision in this Agreement relied on and which sets forth in reasonable detail the facts and circumstances, if any, claimed to provide a basis for termination of the Executive’s employment under the provision so indicated.

 

(i)

 

Date of Termination. “Date of Termination” means the last day the Executive is employed by the Company (including any successor to the Company as determined in accordance with paragraph 21). If the Executive becomes employed by the entity into which the Company is merged, or the purchaser of substantially all of the assets of the Company, or a successor to such entity or purchaser, the Executive shall not be treated as having terminated employment for purposes of this Agreement until such time as the Executive terminates employment with the successor (including, without limitation, the merged entity or purchaser).

 

(j)

 

Effect of Termination. If, on the Date of Termination, the Executive is a member of the Board of Directors of the Company or any of the Subsidiaries, or holds any other position with the Company and the Subsidiaries, the Executive shall resign from all such positions as of the Date of Termination.

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(k)

 

Intervening Termination Event. If, prior to the scheduled date of the Executive’s termination of employment pursuant to the originally filed Notice of Termination (the “Original Notice of Termination”), the Executive’s termination of employment occurs under circumstances described in another provision of paragraph 3, then, for purposes of this Agreement, the Date of Termination shall not be deemed to have occurred by reason of Original Notice of Termination, but by reason of the subsequent event resulting in employment termination.

     4. Rights Upon Termination. The Executive’s right to payment and benefits under this Agreement for periods after his Date of Termination shall be determined in accordance with the following provisions of this paragraph 4:

(a)

 

General. If the Executive’s Date of Termination occurs during the Agreement Term for any reason, the Company shall pay to the Executive (or, in the event of his death, his beneficiary) the compensation and benefits set forth below and, as applicable, those under paragraphs 4(c) and 4(d):

(i) The Executive’s Salary for the period ending on the Date of Termination.

(ii) Payment for unused vacation days, as determined in accordance with Company policy as in effect from time to time.

(iii) If the Date of Termination occurs after the end of a performance period and prior to the payment of the annual bonus (as described in paragraph 2(b)) for the period, the Executive shall be paid such bonus amount at the regularly scheduled time.

(iv) The Executive and any of his dependents shall be eligible for COBRA continuation coverage (as described in section 4980B of the Internal Revenue Code of 1986, as amended) to the extent required by applicable law.

(v) Any other payments or benefits to be provided to the Executive by the Company or a Subsidiary pursuant to any employee benefit plans or arrangements established or adopted by the Company or a Subsidiary (including, without limitation, any rights to indemnification from the Company (or from a third-party insurer for directors and officers liability coverage) with respect to any costs, losses, claims, suits, proceedings, damages or liabilities to which the Executive may become subject which arise out of, are based upon or relate to the Executive’s employment by the Company or the Executive’s service as an officer or member of the Board of Directors of the Company (or any Subsidiary), to the extent such amounts are due from the Company in accordance with the terms of such plans or arrangements.

(vi) Executive will receive pension benefits upon termination as set forth in section 2(g).

Except as may otherwise be expressly provided to the contrary in this Agreement, nothing in this Agreement shall be construed as requiring the Executive to be treated as employed by the Company for purposes of any employee benefit plan or arrangement following the Executive’s Date of Termination.

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(b)

 

Resignation and Termination for Cause. If the Executive’s Date of Termination occurs during the Agreement Term under circumstances described in paragraph 3(c) (relating to the Executive’s termination for Cause), or paragraph 3(e) (relating to the Executive’s resignation), then, except as otherwise expressly provided in this Agreement or otherwise agreed in writing between the Executive and the Company, the Executive shall not be entitled to the annual bonus (as described in paragraph 2(b)) for the performance period in which the Date of Termination occurs, or for subsequent performance periods; and if terminated for Cause the Company shall have no obligation to make payments under the Agreement for periods after the Executive’s Date of Termination.

 

(c)

 

Death or Disability. If the Executive’s Date of Termination occurs during the Agreement Term under circumstances described in paragraph 3(a) (relating to Executive’s death) or paragraph 3(b) (relating to Executive’s being Permanently Disabled), then, in addition to the amounts payable in accordance with paragraph 4(a):

(i) The Executive shall receive payment of the annual bonus (as described in paragraph 2(b)) for the performance period in which his Date of Termination occurs, based on actual performance for the entire period, and payable at the same time as it is payable for other participants in the bonus plan; provided, however, that it shall be subject to a pro-rata reduction for the portion of the performance period following the Date of Termination.

(ii) All restricted stock awards shall fully vest immediately and all restrictions shall lapse, all stock options shall fully vest immediately and be exercisable for five years, but in no event later than the date fixed for expiration of the option (determined without regard to Executive’s termination of employment), all other performance-based equity incentive and cash-based long-term incentive compensation awards shall immediately vest and become payable at the target level of performance.

(iii) The Executive and his family members shall be entitled to receive the maximum level of medical benefits afforded to senior executives or their beneficiaries upon termination resulting from death or Disability of the senior executive, but not less than 18 months (or 36 months in the case of death) of Company paid coverage, with the period of such medical benefit coverage being counted toward the Company’s obligation to provide COBRA medical continuation coverage (as described in section 4980B of the Internal Revenue Code of 1986, as amended (if any)). In the event that such coverage extends beyond the period during which the Executive would be eligible for COBRA coverage, the Executive will be required for each month after the maximum period of COBRA coverage to pay the full premium that would be required for a former employee on COBRA coverage, and the Company shall pay to the Executive, on the first day of each month during such period of coverage, additional severance pay in an amount such that the net amount of such severance pay, after all applicable tax withholding, equals the difference between the full COBRA premium and the premium charged to active employees, which amount shall be applied to the payment of the premium for coverage during such month.

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(iv) If the Executive’s Date of Termination occurs under circumstances described in paragraph 3(b) (relating to the Executive’s being Permanently Disabled), but not under circumstances described in paragraph 3(a) (relating to Executive’s death) he shall be entitled to payment of his Salary through the commencement of long term disability payments to him under any plan provided or paid for by the Company.

Notwithstanding the foregoing, if any amount that constitutes deferred compensation as defined in Section 409A becomes payable to Executive by reason of termination under circumstances described in paragraph 3(b) (relating to the Executive’s being Permanently Disabled), then (A) if such amount is treated as being paid upon the Executive’s separation from service (as set forth in Treas. Reg. Section 1.409A-3(a)(1)), and if the Executive is a specified employee as defined in subparagraph 2(g)(ii), payment shall be deferred until the first business day that is more than six months after the Date of Termination (or, if sooner, the date upon which the Executive dies), and (B) if such amount would have been payable on a later specified date (such as following the end of a performance period) if Executive’s employment had terminated under circumstances described in paragraph 3(e), and such payment is not treated as being paid upon the Executive’s separation from service (as set forth in Treas. Reg. Section 1.409A-3(a)(1)), payment shall be deferred until the date upon which the payment would otherwise have been made (or, if sooner, the date upon which the Executive dies). Any payments that would have been made during any six-month deferral period shall be paid in a lump sum without interest upon the expiration of such period.

(d)

 

Termination without Cause, Constructive Discharge, Change in Control and Cessation of the Agreement. If the Executive’s Date of Termination occurs during the Agreement Term under circumstances described in paragraph 3(d) (relating to Constructive Discharge), paragraph 3(f) (relating to termination by the Company without Cause), 3(g) (relating to termination after a Change in Control), or this Agreement expires before January 30, 2016 by reason of the Company’s having provided a notice of cessation pursuant to paragraph 1(j)(iii) above, then, in addition to the amounts payable in accordance with paragraph 4(a):

(i) The Executive (or, in the event of death after the commencement of receipt of Severance Payments, his beneficiary) shall receive Severance Payments from the Company for the Severance Period. The annual rate of Severance Payments shall be equal to the Aggregate Annual Compensation, and shall be payable in arrears in monthly or more frequent installments subject to paragraph 4(d)(vi) below. For purposes of this subparagraph (i), the term “Aggregate Annual Compensation” shall mean the sum of (A) and (B) below:

(A) The Executive’s annual Salary in effect on the date immediately prior to the Executive’s Date of Termination.

(B) The Executive’s target annual bonus amount (as described in paragraph 2(b)) for the year in which the Date of Termination occurs.

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For purposes of paragraphs (A) and (B) above, if any portion of the Executive’s Salary or bonus has been reduced to reflect elective deferrals by the Executive, the amounts included in Salary and bonus shall be determined without regard to those deferrals. The “Severance Period” will be the period beginning on the Date of Termination and ending on the earliest to occur of:

(I) the last day of the Agreement Term or the two-year anniversary of the Date of Termination; or

(II) the date, if any, of a material breach by the Executive of the provisions of paragraph 8, paragraph 9, paragraph 10, or paragraph 11.

(ii) The Executive shall receive payment of the annual bonus (as described in paragraph 2(b)) for the performance period in which his Date of Termination occurs, based on actual performance for the entire period, and payable at the same time as it is payable for other participants in the bonus plan; provided, however, that it shall be subject to a pro-rata reduction for the portion of the performance period following the Date of Termination.

(iii) The exercise restrictions with respect to stock options granted to the Executive by the Company shall lapse, and the options shall become fully vested and exercisable as of the Date of Termination. The portion of any stock option granted to the Executive that is exercisable immediately prior to the Date of Termination, as well as the portion of any stock option that becomes exercisable by reason of this subparagraph (iii), shall remain exercisable for the Extended Exercise Period (as defined below), but in no event later than the date fixed for expiration of the option (determined without regard to Executive’s termination of employment). The “Extended Exercise Period” shall be the period beginning on the Date of Termination and ending on the later of the date that is five years after the Date of Termination or the date that is the number of days after the Date of Termination that is equal to the number of days that the Executive was employed by the Company between April 26, 2004, and the Date of Termination.

(iv) All restricted stock awards shall fully vest immediately and all restrictions shall lapse.

(v) In the case of a termination under circumstances described in paragraph 3(d) or 3(f), all other performance-based equity incentive compensation awards for the performance period in which the Date of Termination occurs shall remain outstanding and be payable based on actual performance for the entire period and shall be payable at the same time as they are payable for other individuals holding such awards, and in the case of a termination under circumstances described in paragraph 3(g), payment if any shall be made pursuant to the terms of the award applicable following a termination.

(vi) The Executive and his family members shall be entitled to receive the maximum level of medical benefits afforded to senior executives who have retired or terminated employment, but no less than 18 months of Company-paid coverage, with the period of such medical benefit coverage being counted toward the Company’s obligation to

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provide COBRA medical continuation coverage (as described in section 4980B of the Internal Revenue Code of 1986, as amended (if any).

In the event that such coverage extends beyond the period during which the Executive would be eligible for COBRA coverage, the Executive will be required for each month after the maximum period of COBRA coverage to pay the full premium that would be required for a former employee on COBRA coverage, and the Company shall pay to the Executive, on the first day of each month during such period of coverage, additional severance pay in an amount such that the net amount of such severance pay, after all applicable tax withholding, equals the difference between the full COBRA premium and the premium charged to active employees, which amount shall be applied to the payment of the premium for coverage during such month.

(vii) In no event, however, shall the Executive be entitled to receive any amounts, rights, or benefits under this paragraph 4(d) unless he executes a release of claims. Such release shall be furnished to the Executive for his review not later than seven business days following the Date of Termination, and shall be executed and returned to the Company in sufficient time so that any period during which the Executive may revoke such release shall expire not later than March 1 of the year following the year that includes the Date of Termination. Any amounts under this paragraph 4(d) that, in the absence of the foregoing release requirement, would have been paid before the revocation period expires shall be paid to the Executive, without interest, as soon as practical after the revocation period expires, but not later than March 15 of the year following the year that includes the Date of Termination.

(viii) In order to satisfy the requirements of Section 409A, the following provisions shall apply:

(A) Each Severance Payment shall be treated as a separate payment for purposes of Section 409A.

(B) If the Executive is terminated prior to a Change in Control, and on or after September 15 of a year, then no Severance Payments shall be payable to him between (i) March 15 of the year following the year that includes the Date of Termination, and (ii) the first business day that is at least six months after the Date of Termination, and all Severance Payments that would otherwise have been paid to him during such period shall be paid in a lump sum at the end of such period, without interest.

(C) If the Executive is terminated following a Change in Control, then no Severance Payments shall be payable to him until the first business day that is at least six months after the Date of Termination, at which time all Severance Payments that would otherwise have been paid to him during such six month period shall be paid in a lump sum, without interest.

(D) If the Executive’s employment is terminated under circumstances that entitle him to the receipt of Severance Payments, but such termination does not

15


 

constitute a separation from service (as defined in subparagraph 4(d)(vi)(E)), then the Executive’s right to the receipt of such Severance Payments shall be vested on the Date of Termination, but no Severance Payments shall be payable to him until the first business day that is at least six months after the date on which he incurs a separation from service (or the day on which he incurs a separation from service if on such date he is no longer a “specified employee” as defined in subparagraph 2(g)(ii)), at which time all Severance Payments that would otherwise have been paid to him prior to such date shall be paid in a lump sum, without interest.

(E) For purposes of subparagraphs 2(g)(ii) and 4(d)(vi)(D), whether the Executive has incurred a separation from service will be determined in accordance with Section 409A. By way of illustration, and without limiting the generality of the foregoing, the following principles shall apply.

     (1) The Executive shall not be considered to have separated from service so long as the Executive is on military leave, sick leave, or other bona fide leave of absence if the period of such leave does not exceed six months, or if longer, so long as the Executive retains a right to reemployment with the Company under an applicable statute or by contract.

     (2) Regardless of whether his employment has been formally terminated, the Executive will be considered to have separated from service as of the date it is reasonably anticipated that no further services will be performed by the Executive for the Company, or that the level of bona fide services the Executive will perform after such date will permanently decrease to no more than 20 percent of the average level of bona fide services performed over the immediately preceding 36-month period (or the full period of employment if the Executive has been employed for less than 36 months). For purposes of the preceding test, during any paid leave of absence the Executive shall be considered to have been performing services at the level commensurate with the amount of compensation received, and unpaid leaves of absence shall be disregarded.

     (3) For purposes of determining whether the Executive has separated from service, all services provided for the Company, or for any other entity that is part of a controlled group that includes the Company as defined in Section 414(b) or (c) of the Code, shall be taken into account, whether provided as an employee or as a consultant or other independent contractor; provided that the Executive shall not be considered to have not separated from service solely by reason of service as a non-employee director of the Company or any other such entity.

(e)

 

Except as may be otherwise specifically provided in an amendment of this paragraph 4(e) adopted in accordance with paragraph 12, the Executive’s rights under this paragraph 4 shall be in lieu of any benefits that may be otherwise payable to or on behalf of the Executive pursuant to the terms of any severance pay arrangement of the Company or

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any Subsidiary or any other, similar arrangement of the Company or any Subsidiary providing benefits upon involuntary termination of employment. This paragraph 4(e) shall not be construed to adversely affect the Executive’s rights under the terms of any option on stock of the Company or any other award based on the stock of the Company.

 

(f)

 

All provisions of this Agreement, including without limitation all rights of the Executive to payments of all kinds following a termination of employment pursuant to this paragraph 4, are intended to comply with the requirements of Section 409A and shall be so interpreted and administered. To the maximum extent possible, the provisions of this Agreement shall be construed in such a manner that no amounts payable to the Executive are subject to the additional tax and interest provided in Section 409A.

     5. Duties on Termination. Subject to the terms and conditions of this Agreement, during the period beginning on the date of delivery of a Notice of Termination, and ending on the Date of Termination, the Executive shall continue to perform his duties as set forth in this Agreement, and shall also perform such services for the Company as are necessary and appropriate for an effective transition to the Executive’s successor, if any. Notwithstanding the foregoing provisions of this paragraph 5, the Company may suspend the Executive from performing his duties under this Agreement (including, without limitation, his duties as a member of the Board of Directors of the Company or any Subsidiary) following the delivery of a Notice of Termination providing for the Executive’s resignation, or delivery by the Company of a Notice of Termination providing for the Executive’s termination of employment for any reason; provided, however, that during the period of suspension (which shall end on the Date of Termination), and subject to the legal rules applicable to such payments and benefits, including, without limitation, the rules applicable to qualified plans under Code Section 401(a) and the rules applicable to nonqualified deferred compensation plans under Code Section 409A, the Executive shall continue to be treated as employed by the Company for other purposes, and his rights to compensation or benefits shall not be reduced by reason of the suspension.

     6. Return of Property. Following the Date of Termination, the Executive agrees to return to the Company any keys, credit cards, passes, confidential documents or material, or other property belonging to the Company, and to return all writings, files, records, correspondence, notebooks, notes and other documents and things (including any copies thereof) containing any Confidential Information; provided, however, that the Executive shall be entitled to retain a copy of any rolodex or other compilation maintained by him of the names of business contacts with their addresses, telephone numbers and similar information. The Executive agrees to represent in writing to the Company upon termination of employment that he has complied with the foregoing provisions of this paragraph 6 and that he will comply with paragraphs 8, 9, 10, 11, and 12.

     7. Mitigation, Alienation, and Set-Off. The Executive shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment or otherwise. The Company shall be entitled to set off against amounts payable to the Executive any amounts owed to the Company by the Executive, but the Company shall not be entitled to set off against the amounts payable to the Executive under this Agreement any amounts earned by the Executive in other employment after termination of his employment with the Company, or any amounts which might have been earned by the Executive in other employment had he sought

17


 

such other employment. This Agreement is personal to the Executive and may not be assigned by the Executive without the written consent of the Company. The interests of the Executive under this Agreement are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors of the Executive or the Executive’s beneficiary. However, to the extent that rights or benefits under this Agreement otherwise survive the Executive’s death, the Executive’s heirs and estate shall succeed to such rights and benefits pursuant to the Executive’s will or the laws of descent and distribution; provided that the Executive shall have the right at any time and from time to time, by notice delivered to the Company, to designate or to change the beneficiary or beneficiaries with respect to such benefits.

     8. Confidential Information. Each Item and all Confidential Information (both as defined below) that comes into his possession by reason of the Executive’s employment are the property of the Company or the Subsidiaries and shall not be used by the Executive in any way except in the course of his employment by, and for the benefit of the Company or the Subsidiaries. The Executive will not remove any Items from premises owned or leased by the Company or the Subsidiaries except as his duties shall require, and upon termination of his employment, all Items will be turned over to the Company. The Executive will preserve as confidential all Confidential Information that has been or may be obtained by him. The Executive will not, without written authority from the Company, use for his own benefit or purposes, or disclose to others, either during his employment or thereafter, except as required by his employment with the Company, any Confidential Information or any copy or notes made from any Item embodying Confidential Information. The Executive understands that his obligations with respect to Confidential Information shall continue even after termination of his employment with the Company. These restrictions concerning use and disclosure of Confidential Information shall not apply to information which is or becomes publicly known by lawful means, or comes into his possession from sources not under an obligation of confidentiality to the Company or the Subsidiaries.

(a)

 

“Confidential Information” means information relating to the present or planned business of the Company or the Subsidiaries which has not been released publicly by authorized representatives of the Company or the Subsidiaries. The Executive understands that Confidential Information may include, for example, Trade Secrets, Inventions, know-how and products, customer, patient, supplier and competitor information, sales, pricing, cost, and financial data, research, development, marketing and sales programs and strategies, manufacturing, marketing and service techniques, processes and practices, and regulatory strategies. The Executive understands further that Confidential Information also includes all information received by the Company or the Subsidiaries under an obligation of confidentiality to a third party.

 

(b)

 

“Items” include documents, reports, drawings, photographs, designs, specifications, formulae, plans, samples, research or development information, prototypes, tools, equipment, proposals, marketing or sales plans, customer information, customer lists, patient lists, patient information, regulatory files, financial data, costs, pricing information, supplier information, written, printed or graphic matter, or other information and materials that concern the Company’s or the Subsidiaries’ business that come into his possession or about which the Executive has knowledge by reason of his employment.

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(c)

 

“Trade Secrets” include all information encompassed in all Items, and in all manufacturing processes, methods of production, concepts or ideas, to the extent that such information has not been released publicly by duly authorized representatives of the Company or the Subsidiaries.

     9. Non-Disparagement. The Executive agrees that, while he is employed by the Company, and after his Date of Termination, he shall not make any false, defamatory or disparaging statements about the Company, the Subsidiaries, or the officers or directors of the Company or the Subsidiaries that are reasonably likely to cause material damage to the Company, the Subsidiaries, or the officers or directors of the Company or the Subsidiaries. While the Executive is employed by the Company, and after his Date of Termination, the Company agrees, on behalf of itself and the Subsidiaries, that neither the officers nor the directors of the Company or the Subsidiaries shall make any false, defamatory or disparaging statements about the Executive that are reasonably likely to cause material damage to the Executive.

     10. Noncompetition. The Executive understands that any entrusting of Confidential Information to him by the Company is done in reliance on a confidential relationship arising out of his employment with the Company. The Executive further understands that Confidential Information that the Executive may acquire or to which the Executive may have access, especially with regard to research and development projects and findings, formulae, designs, formulation, processes, the identity of suppliers, customers and patients, methods of manufacture, and cost and pricing data is of great value to the Company. In consequence of such entrusting and such consideration, the Executive will not, directly or indirectly, for a period of two years after the Date of Termination: (i) render services to any Competing Organization in connection with any Competing Product within such geographic limits as the Company and such Competing Organization are, or would be, in actual competition when such rendering of services might potentially involve the disclosure or use of Confidential Information or Trade Secrets; or (ii) provide advice as to investment in a Competitive Business (including, without limitation, advice with respect to the purchase, sale, or operation of such business, or advice with respect to financing or other economic structuring of such business). The Executive understands that services described in the preceding sentence, including without limitation those rendered to such Competing Organization in an executive, scientific, administrative, or consulting capacity in connection with Competing Products are in support of actual competition in various geographic areas and thus fall within the prohibition of this Agreement regardless of where such services physically are rendered.

(a)

 

“Competing Products” means products, processes, or services of any person or organization other than the Company, in existence or under development, which are substantially the same, may be substituted for, or applied to substantially the same end use as the products, processes or services with which the Executive works during the time of his employment with the Company or about which the Executive acquires Confidential Information through his work with the Company.

 

(b)

 

“Competing Organization” means persons or organizations, including himself, engaged in, or about to become engaged in, research or development, production, distribution, marketing, providing or selling of a Competing Product.

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(c)

 

“Competitive Business” means any business in which the Company or any of the Subsidiaries was engaged during the 12-month period prior to the Executive’s Date of Termination, any business if the Company or any Subsidiary has devoted material resources to entering into such business during such 12-month period prior to the Date of Termination, and any business to the extent that it is engaged in the investing in or acquisition of all or a portion of the assets or stock of the Company or the Subsidiaries.

Executive has the right to pursue employment with any healthcare company or entity that he views as non-competitive within the definitions set forth above, subject to Company approval (which approval shall not be unreasonably withheld). Should the parties fail to mutually agree, arbitration will be undertaken under the provisions of Section 23.

     11. Solicitation of Customers, Suppliers and Employees. While he is employed by the Company, and for a period of 24 months after the Executive’s Date of Termination for any reason:

(a)

 

The Executive shall not solicit or attempt to solicit any party who is then or, during the 12-month period prior to such solicitation or attempt by the Executive was (or was solicited to become), a customer or supplier of the Company or Affiliate, provided that the restriction in this paragraph 11(a) shall not apply to any activity on behalf of a business that is not a Competing Organization.

 

(b)

 

The Executive shall not solicit, entice, persuade or induce any individual who is employed by the Company or the Subsidiaries (or was so employed within 90 days prior to the Executive’s action) to terminate or refrain from renewing or extending such employment or to become employed by or enter into contractual relations with any other individual or entity other than the Company or the Subsidiaries, and the Executive shall not approach any such employee for any such purpose or authorize or knowingly cooperate with the taking of any such actions by any other individual or entity.

     12. Inventions. With respect to Inventions and related matters, the Executive and the Company agree as follows:

(a)

 

All Inventions related to the present or planned business of the Company, which are conceived or reduced to practice by the Executive, either alone or with others, during the period of his employment or during a period of one hundred twenty (120) days after termination of such employment, whether or not done during his regular working hours, are the sole property of the Company. The provisions of this paragraph 12(a) shall not apply to an invention for which no equipment, supplies, facilities or trade secret information of the Company was used and which was developed entirely on his own time, unless (A) the invention relates (i) to the business of the Company, or (ii) to his actual or demonstrably anticipated research or development for the Company, or (B) the invention results from any work performed by the Executive for the Company.

 

(b)

 

The Executive will disclose promptly and in writing to the Company, through the General Counsel of the Company, all Inventions which are covered by this Agreement, and the Executive agree to assign to the Company or its nominee all his right, title, and interest in

20


 

 

 

and to such Inventions. The Executive agrees not to disclose any of these Inventions to others, without the express consent of the Company, except as required by his employment.

 

(c)

 

The Executive will, at any time during or after his employment, on request of the Company, execute specific assignments in favor of the Company or its nominee of his interest in and to any of the Inventions covered by this Agreement, as well as execute all papers, render all assistance, and perform all lawful acts which the Company considers necessary or advisable for the preparation, filing, prosecution, issuance, procurement, maintenance or enforcement of patent applications and patents of the United States and foreign countries for these Inventions, and for the transfer of any interest the Executive may have. The Executive will execute any and all papers and documents required to vest title in the Company or its nominee in the above Inventions, patent applications, patents, and interests.

 

(d)

 

The Executive understands that if the Executive is not employed by the Company at the time the Executive is requested to execute any document under paragraph 12(a), the Executive shall receive fifty dollars ($50.00) for the execution of each document, and one hundred fifty dollars ($150.00) per day of each day or portion thereof spent at the request of the Company in the performance of acts pursuant to paragraph 12(a), plus reimbursement for any out-of-pocket expenses incurred by the Executive at the Company’s request in such performance.

 

(e)

 

The Executive further understands that the absence of a request by the Company for information, or for the making of an oath, or for the execution of any document, shall in no way be construed to constitute a waiver of the Company’s rights under this Agreement.

 

(f)

 

The Executive has disclosed to the Company all continuing obligations which the Executive has with respect to the assignment of Inventions to any previous employers, and the Executive claims no previous unpatented Inventions as his own, except for those which have been reduced to practice and which are shown on a schedule, if any, attached to this Agreement. The Executive understands that the Company does not seek any confidential information which the Executive may have acquired from a previous employer, and the Executive will not disclose any such information to the Company.

 

(g)

 

“Invention” means procedures, systems, machines, methods, processes, uses, apparatuses, compositions of matter, designs or configurations, computer programs of any kind, or any improvements of the foregoing, discovered, conceived, reduced to practice, developed, made, or produced, and shall not be limited to the meaning of “Invention” under the United States patent laws.

     13. Copyright. All writings and other works which may be copyrighted (including computer programs) which are related to the present or planned business of the Company and are prepared by the Executive during his employment by the Company shall be, to the extent permitted by law, works made for hire, and the authorship and copyright of the work shall be in the Company’s name. To the extent that such writings and works are not works for hire, the

21


 

Executive agrees to the waiver of “moral rights” in such writings and works, and to assign to the Company all his right, title and interest in and to such writings and works, including copyright.

     14. Images. The Executive will permit the Company and its agents to use and distribute any pictorial images which are taken of him during his employment by the Company as often as desired for any lawful purpose. The Executive waives all rights of prior inspection or approval and releases the Company and its agents from any and all claims or demands which the Executive may have on account of the lawful use or publication of such pictorial images.

     15. Assistance with Claims. The Executive agrees that, for the period beginning on the Effective Date and continuing for a reasonable period, not less than two years after the Executive’s Date of Termination, the Executive will assist the Company and the Subsidiaries in the defense of any claims that may be made against the Company and the Subsidiaries, and will assist the Company and the Subsidiaries in the prosecution of any claims that may be made by the Company or the Subsidiaries, to the extent that such claims may relate to services performed by the Executive for the Company and the Subsidiaries. The Executive agrees to promptly inform the Company if he becomes aware of any lawsuits involving such claims that may be filed against the Company or any Subsidiary. The Company agrees to provide legal counsel to the Executive in connection with such assistance (to the extent legally permitted), and to reimburse the Executive for all of the Executive’s reasonable out-of-pocket expenses associated with such assistance, including travel expenses. For periods after the Executive’s employment with the Company terminates, the Company agrees to provide reasonable compensation to the Executive for such assistance. The Executive also agrees to promptly inform the Company if he is asked to assist in any investigation of the Company or the Subsidiaries (or their actions) that may relate to services performed by the Executive for the Company or the Subsidiaries, regardless of whether a lawsuit has then been filed against the Company or the Subsidiaries with respect to such investigation.

     16. Equitable Remedies. The Executive acknowledges that the Company would be irreparably injured by a violation of paragraph 8, paragraph 9, paragraph 10, and paragraph 11, and he agrees that the Company, in addition to any other remedies available to it for such breach or threatened breach, shall be entitled to a preliminary injunction, temporary restraining order, or other equivalent relief, restraining the Executive from any actual or threatened breach of paragraph 8, paragraph 9, paragraph 10, or paragraph 11. If a bond is required to be posted in order for the Company to secure an injunction or other equitable remedy, the parties agree that said bond need not be more than a nominal sum. The Company acknowledges that the Executive would be irreparably injured by a violation of paragraph 9, and it agrees that the Executive, in addition to any other remedies available to him for such breach or threatened breach, shall be entitled to a preliminary injunction, temporary restraining order, or other equivalent relief, restraining the Company from any actual or threatened breach of paragraph 9. If a bond is required to be posted in order for the Executive to secure an injunction or other equitable remedy, the parties agree that said bond need not be more than a nominal sum.

     17. Amendment. This Agreement may be amended or cancelled only by mutual agreement of the parties in writing without the consent of any other person. So long as the Executive lives, no person, other than the parties hereto, shall have any rights under or interest in this Agreement or the subject matter hereof.

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     18. Applicable Law. The provisions of this Agreement shall be construed in accordance with the laws of the State of Illinois, without regard to the conflict of law provisions of any state. All disputes shall be litigated or arbitrated (whichever is applicable) in Chicago, Illinois.

     19. Severability. The invalidity or unenforceability of any provision of this Agreement will not affect the validity or enforceability of any other provision of this Agreement, and this Agreement will be construed as if such invalid or unenforceable provision were omitted (but only to the extent that such provision cannot be appropriately reformed or modified).

     20. Waiver of Breach. No waiver by any party hereto of a breach of any provision of this Agreement by any other party, or of compliance with any condition or provision of this Agreement to be performed by such other party, will operate or be construed as a waiver of any subsequent breach by such other party of any similar or dissimilar provisions and conditions at the same or any prior or subsequent time. The failure of any party hereto to take any action by reason of such breach will not deprive such party of the right to take action at any time while such breach continues.

     21. Successors. This Agreement shall be binding upon, and inure to the benefit of, the Company and its successors and assigns and upon any person acquiring, whether by merger, consolidation, purchase of assets or otherwise, all or substantially all of the Company’s assets and business, and the successor shall be substituted for the Company under this Agreement. The Company will require any successor to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such assignment or succession had taken place.

     22. Notices. Notices and all other communications provided for in this Agreement shall be in writing and shall be delivered personally or sent by registered or certified mail, return receipt requested, postage prepaid (provided that international mail shall be sent via overnight or two-day delivery), or sent by facsimile or prepaid overnight courier to the parties at the addresses set forth below (or such other addresses as shall be specified by the parties by like notice). Such notices, demands, claims and other communications shall be deemed given:

(a)

 

in the case of delivery by overnight service with guaranteed next day delivery, the next day or the day designated for delivery;

 

(b)

 

in the case of certified or registered U.S. mail, five days after deposit in the U.S. mail; or

 

(c)

 

in the case of facsimile, the date upon which the transmitting party received confirmation of receipt by facsimile, telephone or otherwise;

provided, however, that in no event shall any such communications be deemed to be given later than the date they are actually received. Communications that are to be delivered by the U.S. mail or by overnight service or two-day delivery service are to be delivered to the addresses set forth below:

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to the Company:

Baxter International Inc.
One Baxter Parkway
DF2-1W
Deerfield, IL 60015
Attention: Lead Director

or to the Executive:

1332 Edgewood Lane
Northbrook, IL 60062

All notices to the Company shall be directed to the attention of General Counsel of the Company, with a copy to the Secretary of the Company. Each party, by written notice furnished to the other party, may modify the applicable delivery address, except that notice of change of address shall be effective only upon receipt.

     23. Arbitration of All Disputes. Any controversy or claim arising out of or relating to this Agreement (or the breach thereof) shall be settled by final, binding and non-appealable arbitration in Chicago, Illinois by three arbitrators. Except as otherwise expressly provided in this paragraph 23, the arbitration shall be conducted in accordance with the rules of the Center for Public Resources (“CPR”) then in effect. One of the arbitrators shall be appointed by the Company, one shall be appointed by the Executive, and the third shall be appointed by the first two arbitrators. If the first two arbitrators cannot agree on the third arbitrator within 30 days of the appointment of the second arbitrator, then the third arbitrator shall be appointed by CPR. Except as agreed upon by the Executive and the Company, each of the arbitrators shall be (i) an attorney with substantial experience representing executives and/or employers in employment matters; (ii) a former judge with substantial experience hearing employment matters involving executives and employers; or (iii) an individual with substantial human resources experience involving executive employment matters. The arbitrator appointed by the Executive and the arbitrator appointed by the Company shall each be described by any of clauses (i), (ii), and/or (iii) above. The third arbitrator appointed by the other two arbitrators (or by CPR), to the extent reasonably possible, shall be described by the clause(s) (i), (ii), and (iii) not applicable to the arbitrators appointed by the Executive and the Company.

     24. Survival of Agreement. Except as otherwise expressly provided in this Agreement, the rights and obligations of the parties to this Agreement shall survive the termination of the Executive’s employment with the Company.

     25. Entire Agreement. Except as otherwise provided herein, this Agreement constitutes the entire agreement between the parties concerning the subject matter hereof and supersedes all prior and contemporaneous agreements (including without limitation the 2004 Agreement) between the parties relating to the subject matter hereof; provided, however, that nothing in this Agreement shall be construed to limit the Company’s ability to establish and maintain policies (or require the Executive to enter into an agreement) relating to confidentiality, rights to inventions, copyrightable material, business and/or technical information, trade secrets,

24


 

solicitation of employees, interference with relationships with other businesses, competition, and other similar policies or agreement for the protection of the business and operations of the Company and the Subsidiaries.

     26. Counterparts. This Agreement may be executed in two or more counterparts, any one of which shall be deemed the original without reference to the others.

     27. Acknowledgment by Executive. Except as permitted under or pursuant to Section 1(h), the Executive represents and warrants that (i) he is not, and will not become a party to any agreement, contract, arrangement or understanding, whether of employment or otherwise, that would in any way restrict or prohibit him from undertaking or performing his duties in accordance with this Agreement or that restricts his ability to be employed by the Company in accordance with this Agreement; (ii) he is not presently engaged in, and will not during the Agreement Term enter into any employment or agency relationship with any third party whose interests might conflict with those of the Company or the Subsidiaries; and (iii) he does not and will not during the Agreement Term possess any significant interest, directly, through his family, or through organizations or trusts controlled by him, in any third party whose interests might conflict with those of the Company or its subsidiaries.

[Signature Page Follows]

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     The Executive has hereunto set his hand, and the Company has caused these presents to be executed in its name and on its behalf, all as of the date first stated above.

 

 

 

 

 

 

 

 

 

/s/ Robert L. Parkinson, Jr.  

 

 

Robert L. Parkinson, Jr. 

 

 

 

 

 

BAXTER INTERNATIONAL INC.
 

 

 

/s/ John D. Forsyth  

 

 

John D. Forsyth, Director 

 

 

 

 

 

26





FORM OF SEVERANCE AGREEMENT

 

Exhibit 10.1

SEVERANCE AGREEMENT

          THIS AGREEMENT, dated _______, 2006, is made by and between Baxter International Inc., a Delaware corporation (the “Company”), and _______(the “Executive”).

          WHEREAS, the Company considers it essential to the best interests of its stockholders to foster the continued employment of key management personnel; and

          WHEREAS, the Board recognizes that, as is the case with many publicly held corporations, the possibility of a Change in Control exists and that such possibility, and the uncertainty and questions which it may raise among management, may result in the departure or distraction of management personnel to the detriment of the Company and its stockholders; and

          WHEREAS, the Board has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of the Company’s management, including the Executive, to their assigned duties without distraction in the face of potentially disturbing circumstances arising from the possibility of a Change in Control;

          NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the Company and the Executive hereby agree as follows:

     1. Defined Terms. The definitions of capitalized terms used in this Agreement are provided in the last Section hereof.

     2. Term of Agreement. The Term of this Agreement shall commence on the date hereof and shall continue in effect through the second anniversary of the date hereof; provided, however, that commencing on the first anniversary of the date hereof and on each anniversary thereafter, the Term shall automatically be extended for one additional year unless, not later than one year before the end of the then-existing Term, the Company or the Executive shall have given notice not to extend the Term; and further provided, however, that if a Change in Control shall have occurred during the Term, the Term shall expire no earlier than twenty-four (24) months beyond the date on which such Change in Control occurred.

     3. Company’s Covenants Summarized. In order to induce the Executive to remain in the employ of the Company and in consideration of the Executive’s covenants set forth in Section 4 hereof, the Company agrees, under the conditions described herein, to pay the Executive the Severance Payments and the other

 


 

payments and benefits described herein. Except as provided in Section 10.1 hereof, no Severance Payments shall be payable under this Agreement unless there shall have been (or, under the terms of the second sentence of Section 6.1 hereof, there shall be deemed to have been) a termination of the Executive’s employment with the Company following a Change in Control and during the Term. This Agreement shall not be construed as creating an express or implied contract of employment and, except as otherwise agreed in writing between the Executive and the Company, the Executive shall not have any right to be retained in the employ of the Company.

     4. The Executive’s Covenants. The Executive agrees that, subject to the terms and conditions of this Agreement, in the event of a Potential Change in Control during the Term, the Executive will remain in the employ of the Company until the earliest of (i) the last day of the Potential Change in Control Period, (ii) the date of a Change in Control, (iii) the date of termination by the Executive of the Executive’s employment for Good Reason or by reason of death, Disability or Retirement, or (iv) the termination by the Company of the Executive’s employment for any reason.

     5. Compensation Other Than Severance Payments.

          5.1 Following a Change in Control and during the Term, during any period that the Executive fails to perform the Executive’s full-time duties with the Company as a result of incapacity due to physical or mental illness, the Company shall pay the Executive’s full salary to the Executive at the rate in effect at the commencement of any such period, together with all compensation and benefits payable to the Executive under the terms of any compensation or benefit plan, program or arrangement maintained by the Company during such period (other than any disability plan), until the Executive’s employment is terminated by the Company for Disability.

          5.2 If the Executive’s employment shall be terminated for any reason following a Change in Control and during the Term, the Company shall pay the Executive’s full salary to the Executive through the Date of Termination at the rate in effect immediately prior to the Date of Termination or, if higher, the rate in effect immediately prior to the first occurrence of an event or circumstance constituting Good Reason, together with all compensation and benefits payable to the Executive through the Date of Termination under the terms of the Company’s compensation and benefit plans, programs or arrangements as in effect immediately prior to the Date of Termination or, if more favorable to the Executive, as in effect immediately prior to the first occurrence of an event or circumstance constituting Good Reason.

          5.3 If the Executive’s employment shall be terminated for any reason following a Change in Control and during the Term, the Company shall pay

 


 

to the Executive the Executive’s normal post-termination compensation and benefits as such payments become due. Such post-termination compensation and benefits shall be determined under, and paid in accordance with, the Company’s retirement, insurance and other compensation or benefit plans, programs and arrangements as in effect immediately prior to the Date of Termination or, if more favorable to the Executive, as in effect immediately prior to the occurrence of the first event or circumstance constituting Good Reason.

          5.4 Upon the occurrence of a Change in Control, notwithstanding any provision of any non-qualified defined contribution deferred compensation plans to the contrary, in lieu of any other benefit under such plans, the Company shall pay to the Executive a lump sum amount, in cash, equal to the then present value of the deferred compensation otherwise payable to the Executive pursuant to the terms of such plans. The payments required by this Section 5.4 shall be made not later than the fifth day following the date of a Change in Control (or, if later, as soon as practicable following the earliest date that will avoid the imposition of a tax under section 409A of the Code).

     6. Severance Payments.

          6.1 Subject to Section 6.2 hereof, if the Executive’s employment is terminated following a Change in Control and during the Term, other than (A) by the Company for Cause, (B) by reason of death or Disability, or (C) by the Executive without Good Reason, then the Company shall pay the Executive the amounts, and provide the Executive the benefits, described in this Section 6.1 (“Severance Payments”) and Section 6.2 hereof, in addition to any payments and benefits to which the Executive is entitled under Section 5 hereof, provided that the Executive shall have properly executed and not revoked a customary release of claims in a form reasonably acceptable to the Company. For purposes of this Agreement, the Executive’s employment shall be deemed to have been terminated following a Change in Control by the Company without Cause or by the Executive with Good Reason, if (i) the Executive’s employment is terminated by the Company without Cause prior to a Change in Control (whether or not a Change in Control ever occurs) and such termination was at the request or direction of a Person who has entered into an agreement with the Company the consummation of which would constitute a Change in Control, (ii) the Executive terminates his employment for Good Reason prior to a Change in Control (whether or not a Change in Control ever occurs) and the circumstance or event which constitutes Good Reason occurs at the request or direction of such Person, or (iii) the Executive’s employment is terminated by the Company without Cause or by the Executive for Good Reason and such termination or the circumstance or event which constitutes Good Reason is otherwise in connection with or in anticipation of a Change in Control (whether or not a Change in Control ever occurs). For purposes of any determination regarding the

 


 

applicability of the immediately preceding sentence, any position taken by the Executive shall be presumed to be correct unless the Company establishes to the Board by clear and convincing evidence that such position is not correct.

               (A) In lieu of any further salary payments to the Executive for periods subsequent to the Date of Termination and in lieu of any severance benefit otherwise payable to the Executive, the Company shall pay to the Executive a lump sum severance payment, in cash, equal to two times the sum of (i) the Executive’s base salary as in effect immediately prior to the Date of Termination or, if higher, in effect immediately prior to the first occurrence of an event or circumstance constituting Good Reason, and (ii) the Executive’s target annual bonus under any annual bonus or incentive plan maintained by the Company in respect of the fiscal year in which occurs the Date of Termination or, if higher, the highest target annual bonus in respect of the fiscal year in which occurs the Change in Control or the first event or circumstance constituting Good Reason.

               (B) For the twenty-four (24) month period immediately following the Date of Termination (or such shorter period as may be required to avoid the imposition of a tax under section 409A of the Code), the Company shall arrange to provide the Executive and his dependents life, accident and health insurance benefits substantially similar to those provided to the Executive and his dependents immediately prior to the Date of Termination or, if more favorable to the Executive, those provided to the Executive and his dependents immediately prior to the first occurrence of an event or circumstance constituting Good Reason, at no greater after-tax cost to the Executive than the after-tax cost to the Executive immediately prior to such date or occurrence; provided, however, that, unless the Executive consents to a different method, such health insurance benefits shall be provided through a third-party insurer. Benefits otherwise receivable by the Executive pursuant to this Section 6.1(B) shall be eliminated if benefits of the same type are received by or made available to the Executive during the twenty-four (24) month period following the Executive’s termination of employment (and any such benefits received by or made available to the Executive shall be reported to the Company by the Executive). If the Severance Payments shall be decreased pursuant to Section 6.2 hereof, and the Section 6.1(B) benefits which remain payable after the application of Section 6.2 hereof are thereafter reduced pursuant to the immediately preceding sentence, the Company shall, no later than five (5) business days following such reduction, pay to the Executive the least of (a) the amount of the decrease made in the Severance Payments pursuant to Section 6.2 hereof, (b) the amount of the subsequent reduction in these Section 6.1(B) benefits, or (c) the maximum amount which can be paid to the Executive without being, or causing any other payment to be, nondeductible by reason of section 280G of the Code.

 


 

               (C) Notwithstanding any provision of any annual or long term incentive plan to the contrary, the Company shall pay to the Executive a lump sum amount, in cash, equal to the sum of (i) any unpaid incentive compensation which has been allocated or awarded to the Executive for a completed fiscal year or other measuring period preceding the Date of Termination under any such plan and which, as of the Date of Termination, is contingent only upon the continued employment of the Executive to a subsequent date, and (ii) a pro rata portion to the Date of Termination of the aggregate value of all contingent incentive compensation awards to the Executive for all then uncompleted periods under any such plan, calculated as to each such award by multiplying the award that the Executive would have earned on the last day of the performance award period, assuming the achievement, at the target level, of the individual and corporate performance goals established with respect to such award, by the fraction obtained by dividing the number of full months and any fractional portion of a month during such performance award period through the Date of Termination by the total number of months contained in such performance award period.

               (D) In addition to the retirement benefits to which the Executive is entitled under each DB Pension Plan or any successor plan thereto, the Company shall pay the Executive a lump sum amount, in cash, equal to the excess of (i) the actuarial equivalent of the aggregate retirement pension (taking into account any early retirement subsidies associated therewith and determined as a straight life annuity commencing at the date (but in no event earlier than the second anniversary of the Date of Termination) as of which the actuarial equivalent of such annuity is greatest) which the Executive would have accrued under the terms of all DB Pension Plans (without regard to any amendment to any DB Pension Plan made subsequent to a Change in Control and on or prior to the Date of Termination, which amendment adversely affects in any manner the computation of retirement benefits thereunder), determined as if the Executive were fully vested thereunder and had accumulated (after the Date of Termination) twenty-four (24) additional months of age and service credit thereunder and had been credited under each DB Pension Plan during such period with compensation equal to the Executive’s compensation (as defined in such DB Pension Plan) during the twelve (12) months immediately preceding Date of Termination or, if higher, during the twelve months immediately prior to the first occurrence of an event or circumstance constituting Good Reason, over (ii) the actuarial equivalent of the aggregate retirement pension (taking into account any early retirement subsidies associated therewith and determined as a straight life annuity commencing at the date (but in no event earlier than the Date of Termination) as of which the actuarial equivalent of such annuity is greatest) which the Executive had accrued pursuant to the provisions of the DB Pension Plans as of the Date of Termination. For purposes of this Section 6.1(D), “actuarial equivalent” shall be determined using the same assumptions utilized under the Baxter International Inc. and Subsidiaries Pension Plan immediately prior to the Date of

 


 

Termination or, if more favorable to the Executive, immediately prior to the first occurrence of an event or circumstance constituting Good Reason. In addition to the benefits to which the Executive is entitled under each DC Pension Plan, the Company shall pay the Executive a lump sum amount, in cash, equal to the sum of (i) the amount that would have been contributed thereto by the Company on the Executive’s behalf during the two years immediately following the Date of Termination, determined (x) as if the Executive made the maximum permissible contributions thereto during such period, (y) as if the Executive earned compensation during such period at a rate equal to the Executive’s compensation (as defined in the DC Pension Plan) during the twelve (12) months immediately preceding the Date of Termination or, if higher, during the twelve months immediately prior to the first occurrence of an event or circumstance constituting Good Reason, and (z) without regard to any amendment to the DC Pension Plan made subsequent to a Change in Control and on or prior to the Date of Termination, which amendment adversely affects in any manner the computation of benefits thereunder, and (ii) the excess, if any, of (x) the Executive’s account balance under the DC Pension Plan as of the Date of Termination over (y) the portion of such account balance that is nonforfeitable under the terms of the DC Pension Plan.

               (E) If the Executive would have become entitled to benefits under the Company’s post-retirement health care or life insurance plans, as in effect immediately prior to the Date of Termination or, if more favorable to the Executive, as in effect immediately prior to the first occurrence of an event or circumstance constituting Good Reason, had the Executive’s employment terminated at any time during the period of twenty-four (24) months after the Date of Termination, the Company shall provide such post-retirement health care or life insurance benefits to the Executive and the Executive’s dependents commencing on the later of (i) the date on which such coverage would have first become available and (ii) the date on which benefits described in subsection (B) of this Section 6.1 terminate.

               (F) The Company shall provide the Executive with outplacement services suitable to the Executive’s position for a period of two years or, if earlier, until the first acceptance by the Executive of an offer of employment, in an aggregate amount not exceeding $50,000.

The lump-sum cash payments required pursuant to the preceding provisions of this Section 6.1 hereof shall be made not later than the fifth day following the Date of Termination (or on the earliest date that will avoid the imposition of a tax under section 409A of the Code).

 


 

          6.2 The following special payment provisions shall apply:

               (A) Whether or not the Executive becomes entitled to the Severance Payments, if any payment or benefit received or to be received by the Executive in connection with a Change in Control or the termination of the Executive’s employment (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Company, any Person whose actions result in a Change in Control or any Person affiliated with the Company or such Person) (all such payments and benefits, including the Severance Payments, being hereinafter called “Total Payments”) will be subject (in whole or part) to the Excise Tax, then, subject to the provisions of subsection (B) of this Section 6.2, the Company shall pay to the Executive an additional amount (the “Gross-Up Payment”) such that the net amount retained by the Executive, after deduction of any Excise Tax on the Total Payments and any federal, state and local income and employment taxes and Excise Tax upon the Gross-Up Payment, shall be equal to the Total Payments. For purposes of determining the amount of the Gross-Up Payment, the Executive shall be deemed to pay federal income taxes at the highest marginal rate of federal income taxation in the calendar year in which the Gross-Up Payment is to be made and state and local income taxes at the highest marginal rate of taxation in the state and locality of the Executive’s residence on the Date of Termination (or if there is no Date of Termination, then the date on which the Gross-up Payment is calculated for purposes of this Section 6.2), net of the maximum reduction in federal income tax which could be obtained from deduction of such state and local taxes.

               (B) In the event that the amount of the Total Payments does not exceed 110% of the largest amount that would result in no portion of the Total Payments being subject to the Excise Tax (the “Safe Harbor”), then subsection (A) of this Section 6.2 shall not apply and the noncash Severance Payments shall first be reduced (if necessary, to zero), and the cash Severance Benefits shall thereafter be reduced (if necessary, to zero) so that the amount of the Total Payments is equal to the Safe Harbor; provided, however, that the Executive may elect to have the cash Severance Payments reduced (or eliminated) prior to any reduction of the noncash Severance Payments.

               (C) For purposes of determining whether any of the Total Payments will be subject to the Excise Tax and the amount of such Excise Tax, (i) all of the Total Payments shall be treated as “parachute payments” within the meaning of section 280G(b)(2) of the Code, unless in the opinion of tax counsel (“Tax Counsel”) reasonably acceptable to the Executive and selected by the accounting firm which was, immediately prior to the Change in Control, the Company’s independent auditor (the “Auditor”), such other payments or benefits (in whole or in part) do not constitute parachute payments, including by reason of section 280G(b)(4)(A)

 


 

of the Code, (ii) all “excess parachute payments” within the meaning of section 280G(b)(l) of the Code shall be treated as subject to the Excise Tax unless, in the opinion of Tax Counsel, such excess parachute payments (in whole or in part) represent reasonable compensation for services actually rendered, within the meaning of section 280G(b)(4)(B) of the Code, in excess of the Base Amount allocable to such reasonable compensation, or are otherwise not subject to the Excise Tax, and (iii) the value of any noncash benefits or any deferred payment or benefit shall be determined by the Auditor in accordance with the principles of sections 280G(d)(3) and (4) of the Code. Prior to the payment date set forth in Section 6.3 hereof, the Company shall provide the Executive with its calculation of the amounts referred to in this Section 6.2(C) and such supporting materials as are reasonably necessary for the Executive to evaluate the Company’s calculations. If the Executive disputes the Company’s calculations (in whole or in part), the reasonable opinion of Tax Counsel with respect to the matter in dispute shall prevail.

               (D) (I) In the event that (1) amounts are paid to the Executive pursuant to Section 6.2(A) hereof, (2) there is a Final Determination that the Excise Tax is less than the amount taken into account hereunder in calculating the Gross-Up Payment, and (3) after giving effect to such Final Determination, the Severance Payments are to be reduced pursuant to Section 6.2(B) hereof, the Executive shall repay to the Company, within five (5) business days following the date of the Final Determination, the Gross-Up Payment, the amount of the reduction in the Severance Payments, plus interest on the amount of such repayments at 120% of the rate provided in section 1274(b)(2)(B) of the Code.

                         (II) In the event that (1) amounts are paid to the Executive pursuant to Section 6.2(A) hereof, (2) there is a Final Determination that the Excise Tax is less than the amount taken into account hereunder in calculating the Gross-Up Payment, and (3) after giving effect to such Final Determination, the Severance Payments are not to be reduced pursuant to Section 6.2(B) hereof, the Executive shall repay to the Company, within five (5) business days following the date of the Final Determination, the portion of the Gross-Up Payment attributable to such reduction (plus that portion of the Gross-Up Payment attributable to the Excise Tax and federal, state and local income and employment taxes imposed on the Gross-Up Payment being repaid by the Executive), to the extent that such repayment results in a reduction in the Excise Tax and a dollar-for-dollar reduction in the Executive’s taxable income and wages for purposes of federal, state and local income and employment taxes, plus interest on the amount of such repayment at 120% of the rate provided in section 1274(b)(2)(B) of the Code.

                         (III) Except as otherwise provided in clause (IV) below, in the event there is a Final Determination that the Excise Tax exceeds the

 


 

amount taken into account hereunder in determining the Gross-Up Payment (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-Up Payment), the Company shall pay to the Executive, within five (5) business days following the date of the Final Determination, the sum of (1) a Gross-Up Payment in respect of such excess and in respect of any portion of the Excise Tax with respect to which the Company had not previously made a Gross-Up Payment, including a Gross-Up Payment in respect of any Excise Tax attributable to amounts payable under clauses (2) and (3) of this paragraph (III) (plus any interest, penalties or additions payable by the Executive with respect to such excess and such portion), (2) if Severance Payments were reduced pursuant to Section 6.2(B) hereof but after giving effect to such Final Determination, the Severance Payments should not have been reduced pursuant to Section 6.2(B), the amount by which the Severance Payments were reduced pursuant to Section 6.2(B) hereof, and (3) interest on such amounts at 120% of the rate provided in section 1274(b)(2)(B) of the Code.

                         (IV) In the event that (1) Severance Payments were reduced pursuant to Section 6.2(B) hereof and (2) the aggregate value of Total Payments which are considered “parachute payments” within the meaning of section 280G(b)(2) of the Code is subsequently redetermined in a Final Determination, but such redetermined value still does not exceed 110% of the Safe Harbor, then, within five (5) business days following such Final Determination, (x) the Company shall pay to the Executive the amount (if any) by which the reduced Severance Payments (after taking the Final Determination into account) exceeds the amount of the reduced Severance Payments actually paid to the Executive, plus interest on the amount of such repayment at 120% of the rate provided in section 1274(b)(2)(B) of the Code, or (y) the Executive shall pay to the Company the amount (if any) by which the reduced Severance Payments actually paid to the Executive exceeds the amount of the reduced Severance Payments (after taking the Final Determination into account), plus interest on the amount of such repayment at 120% of the rate provided in section 1274(b)(2)(B) of the Code.

          6.3 The payments provided in subsections (A) (C) and (D) of Section 6.1 hereof and in Section 6.2 hereof shall be made not later than the fifth day following the Date of Termination (or if there is no Date of Termination, then the date on which the Gross-Up Payment is calculated for purposes of Section 6.2 hereof); provided, however, that if the amounts of such payments, and the limitation on such payments set forth in Section 6.2 hereof, cannot be finally determined on or before such day, the Company shall pay to the Executive on such day an estimate, as determined in good faith by the Executive or, in the case of payments under Section 6.2 hereof, in accordance with Section 6.2 hereof, of the minimum amount of such payments to which the Executive is clearly entitled and shall pay the remainder of such payments (together with interest on the unpaid remainder (or on all such

 


 

payments to the extent the Company fails to make such payments when due) at 120% of the rate provided in section 1274(b)(2)(B) of the Code) as soon as the amount thereof can be determined but in no event later than the thirtieth (30th) day after the Date of Termination. In the event that the amount of the estimated payments exceeds the amount subsequently determined to have been due, such excess shall be paid by the Executive to the Company on the fifth (5th) business day after demand by the Company (together with interest at 120% of the rate provided in section 1274(b)(2)(B) of the Code). At the time that payments are made under this Agreement, the Company shall provide the Executive with a written statement setting forth the manner in which such payments were calculated and the basis for such calculations including, without limitation, any opinions or other advice the Company has received from Tax Counsel, the Auditor or other advisors or consultants (and any such opinions or advice which are in writing shall be attached to the statement).

          6.4 The Company also shall pay to the Executive all legal fees and expenses incurred by the Executive in disputing any issue hereunder relating to the termination of the Executive’s employment (provided the Executive shall prevail in such dispute), in seeking to obtain or enforce any benefit or right provided by this Agreement (provided the Executive shall obtain or successfully enforce such benefit or right) or in connection with any tax audit or proceeding to the extent attributable to the application of section 409A or section 4999 of the Code to any payment or benefit provided hereunder. Such payments shall be made within five (5) business days after delivery of the Executive’s written requests for payment accompanied with such evidence of fees and expenses incurred as the Company reasonably may require.

     7. Termination Procedures and Compensation During Dispute.

          7.1 Notice of Termination. After a Change in Control and during the Term, any purported termination of the Executive’s employment (other than by reason of death) shall be communicated by written Notice of Termination from one party hereto to the other party hereto in accordance with Section 11 hereof. For purposes of this Agreement, a “Notice of Termination” shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated. Further, a Notice of Termination for Cause is required to include a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters (3/4) of the entire membership of the Board at a meeting of the Board which was called and held for the purpose of considering such termination (after reasonable notice to the Executive and an opportunity for the Executive, together with the Executive’s counsel, to be heard before the Board) finding that, in the good faith

 


 

opinion of the Board, the Executive was guilty of conduct set forth in clause (i) or (ii) of the definition of Cause herein, and specifying the particulars thereof in detail.

          7.2 Date of Termination. “Date of Termination,” with respect to any purported termination of the Executive’s employment after a Change in Control and during the Term, shall mean (i) if the Executive’s employment is terminated for Disability, thirty (30) days after Notice of Termination is given (provided that the Executive shall not have returned to the full-time performance of the Executive’s duties during such thirty (30) day period), and (ii) if the Executive’s employment is terminated for any other reason, the date specified in the Notice of Termination (which, in the case of a termination by the Company, shall not be less than thirty (30) days (except in the case of a termination for Cause) and, in the case of a termination by the Executive, shall not be less than fifteen (15) days nor more than sixty (60) days, respectively, from the date such Notice of Termination is given).

          7.3 Dispute Concerning Termination. If within fifteen (15) days after any Notice of Termination is given, or, if later, prior to the Date of Termination (as determined without regard to this Section 7.3), the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the termination, the Date of Termination shall be extended until the earlier of (i) the date on which the Term ends or (ii) the date on which the dispute is finally resolved, either by mutual written agreement of the parties or by a final judgment, order or decree of an arbitrator or a court of competent jurisdiction (which is not appealable or with respect to which the time for appeal therefrom has expired and no appeal has been perfected); provided, however, that the Date of Termination shall be extended by a notice of dispute given by the Executive only if such notice is given in good faith and the Executive pursues the resolution of such dispute with reasonable diligence.

          7.4 Compensation During Dispute. If a purported termination occurs following a Change in Control and during the Term and the Date of Termination is extended in accordance with Section 7.3 hereof, the Company shall continue to pay the Executive the full compensation in effect when the notice giving rise to the dispute was given (including, but not limited to, salary) and continue the Executive as a participant in all compensation, benefit and insurance plans in which the Executive was participating when the notice giving rise to the dispute was given, until the Date of Termination, as determined in accordance with Section 7.3 hereof. Amounts paid under this Section 7.4 are in addition to all other amounts due under this Agreement (other than those due under Section 5.2 hereof) and shall not be offset against or reduce any other amounts due under this Agreement.

     8. No Mitigation. The Company agrees that, if the Executive’s employment with the Company terminates during the Term, the Executive is not required to seek other employment or to attempt in any way to reduce any amounts payable to the

 


 

Executive by the Company pursuant to Section 6 hereof or Section 7.4 hereof. Further, except as specifically provided in Section 6.1(B) hereof, no payment or benefit provided for in this Agreement shall be reduced by any compensation earned by the Executive as the result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by the Executive to the Company, or otherwise.

     9. Certain Restrictive Covenants.

          9.1 Noncompetition. The Executive understands that any entrusting of Confidential Information to him by the Company is done in reliance on a confidential relationship arising out of his employment with the Company. The Executive understands that Confidential Information may include, for example, Trade Secrets, inventions, know-how and products, customer, patient, supplier and competitor information, sales, pricing, cost, and financial data, research, development, marketing and sales programs and strategies, manufacturing, marketing and service techniques, processes and practices, and regulatory strategies. The Executive understands that Confidential Information also includes all information received by the Company or the Subsidiaries under an obligation of confidentiality to a third party. The Executive further understands that Confidential Information that the Executive may acquire or to which the Executive may have access, especially with regard to research and development projects and findings, formulae, designs, formulation, processes, the identity of suppliers, customers and patients, methods of manufacture, and cost and pricing data is of great value to the Company. In consequence of such entrusting and such consideration, the Executive shall not, directly or indirectly, for a period of two years after the Date of Termination: (i) render services to any Competing Organization in connection with any Competing Product within such geographic limits as the Company and such Competing Organization are, or would be, in actual competition when such rendering of services might potentially involve the disclosure or use of confidential information or trade secrets; or (ii) provide advice as to investment in a Competitive Business (including, without limitation, advice with respect to the purchase, sale, or operation of such business, or advice with respect to financing or other economic structuring of such business). The Executive understands that services described in the preceding sentence, including without limitation those rendered to such Competing Organization in an executive, scientific, administrative, or consulting capacity in connection with Competing Products are in support of actual competition in various geographic areas and thus fall within the prohibition of this Agreement regardless of where such services physically are rendered.

          9.2 Solicitation of Customers, Suppliers and Employees. While Executive is employed by the Company, and for a period of twenty-four (24) months after the Date of Termination for any reason:

 


 

               (A) The Executive shall not solicit or attempt to solicit any party who is then or, during the 12-month period prior to such solicitation or attempt by the Executive was (or was solicited to become), a customer or supplier of the Company or Affiliate, provided that the restriction in this Section 9.2 shall not apply to any activity on behalf of a business that is not a Competing Organization.

               (B) The Executive shall not solicit, entice, persuade or induce any individual who is employed by the Company or the Subsidiaries (or was so employed within 90 days prior to the Executive’s action) to terminate or refrain from renewing or extending such employment or to become employed by or enter into contractual relations with any other individual or entity other than the Company or the Subsidiaries, and the Executive shall not approach any such employee for any such purpose or authorize or knowingly cooperate with the taking of any such actions by any other individual or entity.

          9.3 Nondisparagement. The Executive agrees that, while he is employed by the Company, and after his Date of Termination, he shall not make any false, defamatory or disparaging statements about the Company, the Subsidiaries, or the officers or directors of the Company or the Subsidiaries that are reasonably likely to cause material damage to the Company, the Subsidiaries, or the officers or directors of the Company or the Subsidiaries. While the Executive is employed by the Company, and after his Date of Termination, the Company agrees, on behalf of itself and the Subsidiaries, that neither the officers nor the directors of the Company or the Subsidiaries shall make any false, defamatory or disparaging statements about the Executive that are reasonably likely to cause material damage to the Executive. Notwithstanding the foregoing, nothing in this paragraph will prevent either the Company or any Executive from (i) responding to incorrect, disparaging or derogatory public statement by the other to the extent necessary to correct or refute such public statement or (ii) making any truthful statement to the extent (x) necessary in connection with any litigation, arbitration or mediation involving this Agreement or (y) required by law, by any court order or by any arbitrator or mediator in a legal proceeding.

     10. Successors; Binding Agreement.

          10.1 In addition to any obligations imposed by law upon any successor to the Company, the Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such assumption and agreement prior to the

 


 

effectiveness of any such succession shall be a breach of this Agreement and shall entitle the Executive to compensation from the Company in the same amount and on the same terms as the Executive would be entitled to hereunder if the Executive were to terminate the Executive’s employment for Good Reason after a Change in Control, except that, for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination.

          10.2 This Agreement shall inure to the benefit of and be enforceable by the Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive shall die while any amount would still be payable to the Executive hereunder (other than amounts which, by their terms, terminate upon the death of the Executive) if the Executive had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the executors, personal representatives or administrators of the Executive’s estate.

     11. Notices. For the purpose of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered mail, return receipt requested, postage prepaid, addressed, if to the Executive, to the address inserted below the Executive’s signature on the final page hereof and, if to the Company, to the address set forth below, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon actual receipt:

To the Company:

Baxter International Inc.
One Baxter Parkway
Deerfield, Illinois
60015
Attention: General Counsel

     12. Miscellaneous. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by the Executive and such officer as may be specifically designated by the Board. No waiver by either party hereto at any time of any breach by the other party hereto of, or of any lack of compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. This Agreement supersedes any other agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof which have been made by either party; provided, however, that this Agreement shall supersede

 


 

any agreement setting forth the terms and conditions of the Executive’s employment with the Company only in the event that the Executive’s employment with the Company is terminated on or following a Change in Control, by the Company other than for Cause or by the Executive for Good Reason. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Illinois. All references to sections of the Exchange Act or the Code shall be deemed also to refer to any successor provisions to such sections. Any payments provided for hereunder shall be paid net of any applicable withholding required under federal, state or local law and any additional withholding to which the Executive has agreed. The obligations of the Company and the Executive under this Agreement which by their nature may require either partial or total performance after the expiration of the Term (including, without limitation, those under Sections 6, 7 and 9 hereof) shall survive such expiration.

     13. Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

     14. Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.

     15. Settlement of Disputes; Arbitration.

          15.1 All claims by the Executive for benefits under this Agreement shall be directed to and determined by the Board and shall be in writing. Any denial by the Board of a claim for benefits under this Agreement shall be delivered to the Executive in writing and shall set forth the specific reasons for the denial and the specific provisions of this Agreement relied upon. The Board shall afford a reasonable opportunity to the Executive for a review of the decision denying a claim and shall further allow the Executive to appeal to the Board a decision of the Board within sixty (60) days after notification by the Board that the Executive’s claim has been denied. Notwithstanding the above, in the event of any dispute, any decision by the Board hereunder shall be subject to a de novo review by the arbitrator in accordance with Section 15.2 hereof.

          15.2 Any further dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration in Chicago, Illinois in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator’s award in any court having jurisdiction. Notwithstanding any provision of this Agreement to the contrary, the Executive shall be entitled to seek specific performance of the

 


 

Executive’s right to be paid until the Date of Termination during the pendency of any dispute or controversy arising under or in connection with this Agreement.

          15.3 The Executive acknowledges that the Company would be irreparably injured by a violation of Section 9 hereof, and he agrees that the Company, notwithstanding the foregoing provisions of this Section 15 and in addition to any other remedies available to it for such breach or threatened breach, shall be entitled to a preliminary injunction, temporary restraining order, or other equivalent relief, restraining the Executive from any actual or threatened breach of Section 9. If a bond is required to be posted in order for the Company to secure an injunction or other equitable remedy, the parties agree that said bond need not be more than a nominal sum.

     16. Definitions. For purposes of this Agreement, the following terms shall have the meanings indicated below:

               (A) “Affiliate” shall have the meaning set forth in Rule 12b-2 promulgated under Section 12 of the Exchange Act.

               (B) “Auditor” shall have the meaning set forth in Section 6.2 hereof.

               (C) “Base Amount” shall have the meaning set forth in section 280G(b)(3) of the Code.

               (D) “Beneficial Owner” shall have the meaning set forth in Rule 13d-3 under the Exchange Act.

               (E) “Board” shall mean the Board of Directors of the Company.

               (F) “Cause” for termination by the Company of the Executive’s employment shall mean (i) the willful and continued failure by the Executive to substantially perform the Executive’s duties with the Company (other than any such failure resulting from the Executive’s incapacity due to physical or mental illness or any such actual or anticipated failure after the issuance of a Notice of Termination for Good Reason by the Executive pursuant to Section 7.1 hereof) that has not been cured within 30 days after a written demand for substantial performance is delivered to the Executive by the Board, which demand specifically identifies the manner in which the Board believes that the Executive has not substantially performed the Executive’s duties or (ii) the willful engaging by the Executive in conduct which is demonstrably and materially injurious to the Company or its subsidiaries, monetarily or otherwise. For purposes of clauses (i) and (ii) of

 


 

this definition, (x) no act, or failure to act, on the Executive’s part shall be deemed “willful” unless done, or omitted to be done, by the Executive not in good faith and without reasonable belief that the Executive’s act, or failure to act, was in the best interest of the Company and (y) in the event of a dispute concerning the application of this provision, no claim by the Company that Cause exists shall be given effect unless the Company establishes to the Board by clear and convincing evidence that Cause exists.

               (G) A “Change in Control” shall be deemed to have occurred if the event set forth in any one of the following paragraphs shall have occurred:

                    (I) any Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such Person any securities acquired directly from the Company or its Affiliates) representing 30% or more of the combined voting power of the Company’s then outstanding securities, excluding any Person who becomes such a Beneficial Owner in connection with a merger or consolidation of the Company or any direct or indirect subsidiary of the Company with any other corporation immediately following which the individuals who comprise the Board immediately prior thereto constitute at least a majority of the board of directors of (a) any parent of the Company or the entity surviving such merger or consolidation (b) if there is no such parent, of the Company or such surviving entity;

                    (II) the following individuals cease for any reason to constitute a majority of the number of directors then serving: individuals who, on the date hereof, constitute the Board and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of directors of the Company) whose appointment or election by the Board or nomination for election by the Company’s stockholders was approved or recommended by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors on the date hereof or whose appointment, election or nomination for election was previously so approved or recommended;

                    (III) there is consummated a merger or consolidation of the Company or any direct or indirect subsidiary of the Company with any other corporation or other entity, other than a merger or consolidation immediately following which the individuals who comprise the Board immediately prior thereto constitute at least a majority of the board of directors of (a) any parent of the Company or the entity surviving such

 


 

merger or consolidation or (b) if there is no such parent, of the Company or such surviving entity; or

                    (IV) the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company or there is consummated an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets, other than a sale or disposition by the Company of all or substantially all of the Company’s assets immediately following which the individuals who comprise the Board immediately prior thereto constitute at least a majority of the board of directors of (a) any parent of the Company or of the entity to which such assets are sold or disposed or (b) if there is no such parent, of the Company or such entity.

Notwithstanding the foregoing, a “Change in Control” shall not be deemed to have occurred by virtue of the consummation of any transaction or series of integrated transactions immediately following which the record holders of the common stock of the Company immediately prior to such transaction or series of transactions continue to have substantially the same proportionate ownership in an entity which owns all or substantially all of the assets of the Company immediately following such transaction or series of transactions.

               (H) “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time.

               (I) “Company” shall mean Baxter International Inc. and, except in determining under Section 16(G) hereof whether or not any Change in Control of the Company has occurred, shall include any successor to its business and/or assets which assumes this Agreement by operation of law, or otherwise.

               (J) “Competing Products” shall mean products, processes, or services of any person or organization other than the Company, in existence or under development, which are substantially the same, may be substituted for, or applied to substantially the same end use as the products, processes or services with which the Executive works during the time of his employment with the Company or about which the Executive acquires Confidential Information through his work with the Company.

               (K) “Competing Organization” shall mean persons or organizations engaged in, or about to become engaged in, research or development, production, distribution, marketing, providing or selling of a Competing Product.

 


 

               (L) “Competitive Business” means any business in which the Company or any of the Subsidiaries was engaged during the 12-month period prior to the Executive’s Date of Termination, any business if the Company or any Subsidiary has devoted material resources to entering into such business during such 12-month period prior to the Date of Termination, and any business to the extent that it is engaged in the investing in or acquisition of all or a portion of the assets or stock of the Company or the Subsidiaries.

               (M) “Confidential Information” means information relating to the present or planned business of the Company or the Subsidiaries which has not been released publicly by authorized representatives of the Company or the Subsidiaries.

               (N) “DB Pension Plan” shall mean any tax-qualified, supplemental or excess defined benefit pension plan maintained by the Company and any other defined benefit plan or agreement entered into between the Executive and the Company which is designed to provide the Executive with supplemental retirement benefits.

               (O) “DC Pension Plan” shall mean any tax-qualified, supplemental or excess defined contribution plan maintained by the Company and any other defined contribution plan or agreement entered into between the Executive and the Company which is designed to provide the Executive with supplemental retirement benefits.

               (P) “Date of Termination” shall have the meaning set forth in Section 7.2 hereof.

               (Q) “Disability” shall be deemed the reason for the termination by the Company of the Executive’s employment, if, as a result of the Executive’s incapacity due to physical or mental illness, the Executive shall have been absent from the full-time performance of the Executive’s duties with the Company for a period of six (6) consecutive months, the Company shall have given the Executive a Notice of Termination for Disability, and, within thirty (30) days after such Notice of Termination is given, the Executive shall not have returned to the full-time performance of the Executive’s duties.

               (R) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended from time to time.

               (S) “Excise Tax” shall mean any excise tax imposed under section 4999 of the Code.

 


 

               (T) “Executive” shall mean the individual named in the first paragraph of this Agreement.

               (U) “Good Reason” for termination by the Executive of the Executive’s employment shall mean the occurrence (without the Executive’s express written consent which specifically references this Agreement) after any Change in Control, or prior to a Change in Control under the circumstances described in clauses (ii) and (iii) of the second sentence of Section 6.1 hereof (treating all references in paragraphs (I) through (VII) below to a “Change in Control” as references to a “Potential Change in Control”), of any one of the following acts by the Company, or failures by the Company to act, unless, in the case of any act or failure to act described in paragraph (I), (V), (VI) or (VII) below, such act or failure to act is corrected prior to the Date of Termination specified in the Notice of Termination given in respect thereof:

                    (I) the assignment to the Executive of any duties inconsistent with the Executive’s status as a senior executive officer of the Company or a substantial adverse alteration in the nature or status of the Executive’s responsibilities from those in effect immediately prior to the Change in Control;

                    (II) a reduction by the Company in the Executive’s annual base salary as in effect on the date hereof or as the same may be increased from time to time;

                    (III) the relocation of the Executive’s principal place of employment to a location more than fifty (50) miles from the Executive’s principal place of employment immediately prior to the Change in Control or the Company’s requiring the Executive to be based anywhere other than such principal place of employment (or permitted relocation thereof) except for required travel on the Company’s business to an extent substantially consistent with the Executive’s present business travel obligations;

                    (IV) the failure by the Company to pay to the Executive any portion of the Executive’s current compensation or to pay to the Executive any portion of an installment of deferred compensation under any deferred compensation program of the Company, within seven (7) days of the date such compensation is due;

                    (V) the failure by the Company to continue in effect any compensation plan in which the Executive participates immediately prior to the Change in Control which is material to the

 


 

Executive’s total compensation, including but not limited to the Company’s equity-based long term incentive plans and annual incentive plans, or any substitute plans adopted prior to the Change in Control, unless an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or the failure by the Company to continue the Executive’s participation therein (or in such substitute or alternative plan) on a basis not materially less favorable, both in terms of the amount or timing of payment of benefits provided and the level of the Executive’s participation relative to other participants, as existed immediately prior to the Change in Control;

                    (VI) the failure by the Company to continue to provide the Executive with benefits substantially similar to those enjoyed by the Executive under any of the Company’s pension, savings, life insurance, medical, health and accident, or disability plans in which the Executive was participating immediately prior to the Change in Control (except for across the board changes similarly affecting all senior executives of the Company and all senior executives of any Person in control of the Company), the taking of any other action by the Company which would directly or indirectly materially reduce any of such benefits or deprive the Executive of any material fringe benefit enjoyed by the Executive at the time of the Change in Control, or the failure by the Company to provide the Executive with the number of paid vacation days to which the Executive is entitled on the basis of years of service with the Company in accordance with the Company’s normal vacation policy in effect at the time of the Change in Control; or

                    (VII) any purported termination of the Executive’s employment which is not effected pursuant to a Notice of Termination satisfying the requirements of Section 7.1 hereof; for purposes of this Agreement, no such purported termination shall be effective.

The Executive’s right to terminate the Executive’s employment for Good Reason shall not be affected by the Executive’s incapacity due to physical or mental illness. The Executive’s continued employment shall not constitute consent to, or a waiver of rights with respect to, any act or failure to act constituting Good Reason hereunder. For purposes of any determination regarding the existence of Good Reason, any claim by the Executive that Good Reason exists shall be presumed to be correct unless the Company establishes to the Board by clear and convincing evidence that Good Reason does not exist.

               (V) “Gross-Up Payment” shall have the meaning set forth in Section 6.2 hereof.

 


 

               (W) “Items” include documents, reports, drawings, photographs, designs, specifications, formulae, plans, samples, research or development information, prototypes, tools, equipment, proposals, marketing or sales plans, customer information, customer lists, patient lists, patient information, regulatory files, financial data, costs, pricing information, supplier information, written, printed or graphic matter, or other information and materials that concern the Company’s or the Subsidiaries’ business that come into his possession or about which the Executive has knowledge by reason of his employment.

               (X) “Notice of Termination” shall have the meaning set forth in Section 7.1 hereof.

               (Y) “Person” shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except that such term shall not include (i) the Company or any of its subsidiaries, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its Affiliates, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities, or (iv) a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company.

               (Z) “Potential Change in Control Period” shall mean the period commencing on the occurrence of a Potential Change in Control and ending upon the occurrence of a Change in Control or, if earlier (I) with respect to a Potential Change in Control occurring pursuant to Section 16(AA)(I) hereof, immediately upon the abandonment or termination of the applicable agreement, (ii) with respect to a Potential Change in Control occurring pursuant to Section 16(AA)(II) hereof, immediately upon a public announcement by the applicable party that such party has abandoned its intention to take or consider taking actions which if consummated would result in a Change in Control or (iii) with respect to a Potential Change in Control occurring pursuant to Section 16(AA)(III) or (IV) hereof, upon the eighteen month anniversary of the occurrence of such Potential Change in Control (or such earlier date as may be determined by the Board).

               (AA) “Potential Change in Control” shall be deemed to have occurred if the event set forth in any one of the following paragraphs shall have occurred:

                    (I) the Company enters into an agreement, the consummation of which would result in the occurrence of a Change in Control;

 


 

                    (II) the Company or any Person publicly announces an intention to take or to consider taking actions which, if consummated, would constitute a Change in Control;

                    (III) any Person becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing 15% or more of either the then outstanding shares of common stock of the Company or the combined voting power of the Company’s then outstanding securities (not including in the securities beneficially owned by such Person any securities acquired directly from the Company or its affiliates); or

                    (IV) the Board adopts a resolution to the effect that, for purposes of this Agreement, a Potential Change in Control has occurred.

               (BB) “Retirement” shall be deemed the reason for the termination by the Executive of the Executive’s employment if such employment is terminated in accordance with the Company’s retirement policy, including early retirement, generally applicable to its salaried employees.

               (CC) “Severance Payments” shall have the meaning set forth in Section 6.1 hereof.

               (DD) “Subsidiary,” for purposes of Section 9 hereof, shall mean any corporation, partnership, joint venture or other entity during any period in which at least fifty percent in such entity is owned, directly or indirectly, by the Company.

               (EE) “Tax Counsel” shall have the meaning set forth in Section 6.2 hereof.

               (FF) “Term” shall mean the period of time described in Section 2 hereof (including any extension, continuation or termination described therein).

               (GG) “Total Payments” shall mean those payments so described in Section 6.2 hereof.

               (HH) “Trade Secrets” include all information encompassed in all Items, and in all manufacturing processes, methods of production, concepts or ideas, to the extent that such information has not been released publicly by duly authorized representatives of the Company or the Subsidiaries.

 


 

          IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

 

 

 

 

 

 

BAXTER INTERNATIONAL INC.
 

 

 

 

 

 

 

 

By:  

 

 

 

Name:  

 

 

 

Title:  

 

 

 

 

 

 

 

 

 

 

EXECUTIVE 

 

 

 

 

 

 

 

 

Address:
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Please print carefully) 

 

 

 

 

 

 

 

 

EX-10.17 3 c48741exv10w17.htm FORM OF SEVERANCE AGREEMENT

Exhibit 10.17

AMENDED AND RESTATED SEVERANCE AGREEMENT

          THIS AGREEMENT, dated December 19, 2006 (the “Effective Date”), as amended and restated as of December 18, 2008, is made by and between Baxter International Inc., a Delaware corporation (the “Company”), and                      (the “Executive”).

          WHEREAS, the Company considers it essential to the best interests of its stockholders to foster the continued employment of key management personnel; and

          WHEREAS, the Board recognizes that, as is the case with many publicly held corporations, the possibility of a Change in Control exists and that such possibility, and the uncertainty and questions which it may raise among management, may result in the departure or distraction of management personnel to the detriment of the Company and its stockholders;

          WHEREAS, the Board has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of the Company’s management, including the Executive, to their assigned duties without distraction in the face of potentially disturbing circumstances arising from the possibility of a Change in Control; and

          NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the Company and the Executive hereby agree as follows:

     1. Defined Terms. The definitions of capitalized terms used in this Agreement are provided in the last Section hereof.

     2. Term of Agreement. The Term of this Agreement shall commence on the Effective Date and shall continue in effect through the second anniversary of the Effective Date; provided, however, that commencing on the first anniversary of the Effective Date and on each anniversary thereafter, the Term shall automatically be extended for one additional year unless, not later than one year before the end of the then-existing Term, the Company or the Executive shall have given notice not to extend the Term; and further provided, however, that if a Change in Control shall have occurred during the Term, the Term shall expire no earlier than twenty-four (24) months beyond the date on which such Change in Control occurred.

     3. Company’s Covenants Summarized. In order to induce the Executive to remain in the employ of the Company and in consideration of the Executive’s covenants set forth in Section 4 hereof, the Company agrees, under the conditions described herein, to pay the Executive the Severance Payments and the other

 


 

payments and benefits described herein. No Severance Payments shall be payable under this Agreement unless there shall have been (or, under the terms of the second sentence of Section 6.1 hereof, there shall be deemed to have been) a termination of the Executive’s employment with the Company following a Change in Control and during the Term, all subject to the terms and conditions set forth herein and provided that such termination of employment constitutes a “separation from service” for purposes of Section 409A of the Code. This Agreement shall not be construed as creating an express or implied contract of employment and, except as otherwise agreed in writing between the Executive and the Company, the Executive shall not have any right to be retained in the employ of the Company.

     4. The Executive’s Covenants. The Executive agrees that, subject to the terms and conditions of this Agreement, in the event of a Potential Change in Control during the Term, the Executive will remain in the employ of the Company until the earliest of (i) the last day of the Potential Change in Control Period, (ii) the date of a Change in Control, (iii) the date of termination by the Executive of the Executive’s employment for Good Reason or by reason of death, Disability or Retirement, or (iv) the termination by the Company of the Executive’s employment for any reason.

     5. Compensation Other Than Severance Payments.

          5.1 Following a Change in Control and during the Term, during any period that the Executive fails to perform the Executive’s full-time duties with the Company as a result of incapacity due to physical or mental illness, the Company shall pay the Executive’s full salary to the Executive at the rate in effect at the commencement of any such period, together with all compensation and benefits payable to the Executive under the terms of any compensation or benefit plan, program or arrangement maintained by the Company during such period (other than any disability plan), until the Executive’s employment is terminated by the Company for Disability.

          5.2 If the Executive’s employment shall be terminated for any reason following a Change in Control and during the Term, the Company shall pay the Executive’s full salary to the Executive through the Date of Termination at the rate in effect immediately prior to the Date of Termination or, if higher, the rate in effect immediately prior to the first occurrence of an event or circumstance constituting Good Reason, together with all compensation and benefits payable to the Executive through the Date of Termination under the terms of the Company’s compensation and benefit plans, programs or arrangements as in effect immediately prior to the Date of Termination or, if more favorable to the Executive, as in effect immediately prior to the first occurrence of an event or circumstance constituting Good Reason.

 


 

          5.3 If the Executive’s employment shall be terminated for any reason following a Change in Control and during the Term, the Company shall pay to the Executive the Executive’s normal post-termination compensation and benefits as such payments become due. Such post-termination compensation and benefits shall be determined under, and paid in accordance with, the Company’s retirement, insurance and other compensation or benefit plans, programs and arrangements as in effect immediately prior to the Date of Termination or, if more favorable to the Executive, as in effect immediately prior to the occurrence of the first event or circumstance constituting Good Reason.

          5.4 Upon the occurrence of a change in the ownership or effective control of the Company or in the ownership of a substantial portion of the assets of the Company (in any case within the meaning of Section 409A of the Code), notwithstanding any provision of any non-qualified defined contribution deferred compensation plans to the contrary, in lieu of any other benefit under such plans attributable to the period before 2009 or for a year commencing after the date of this Agreement, the Company shall pay to the Executive a lump sum amount, in cash, equal to the then present value of the deferred compensation otherwise payable to the Executive pursuant to the terms of such plans. The payments required by this Section 5.4 shall be made not later than the fifth day following the date of such change in ownership or control of the Company or change in asset ownership. The provisions of this Section 5.4 shall survive the termination of this Agreement.

          5.5 For the two-year period commencing immediately following a Change in Control, the Company agrees: (A) to continue in effect any compensation plan in which the Executive participates immediately prior to the Change in Control which is material to the Executive’s total compensation, including but not limited to the Company’s equity-based long term incentive plans and annual incentive plans, or any substitute plans adopted prior to the Change in Control, unless an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan; (B) to continue the Executive’s participation in the plans described in the foregoing paragraph (A) (or in such substitute or alternative plan) on a basis not materially less favorable, both in terms of the amount or timing of payment of benefits provided and the level of the Executive’s participation relative to other participants, as existed immediately prior to the Change in Control; and (C) to continue to provide the Executive with benefits substantially similar to those enjoyed by the Executive under any of the Company’s pension, savings, life insurance, medical, health and accident, or disability plans in which the Executive was participating immediately prior to the Change in Control (except for across the board changes similarly affecting all senior executives of the Company and all senior executives of any Person in control of the Company), not to take any other action which would directly or indirectly materially reduce any of such benefits or deprive the Executive of any material fringe benefit enjoyed by the Executive at the time of

 


 

the Change in Control, and to provide the Executive with the number of paid vacation days to which the Executive is entitled on the basis of years of service with the Company in accordance with the Company’s normal vacation policy in effect at the time of the Change in Control.

     6. Severance Payments.

          6.1 Subject to Section 6.2 hereof, if the Executive’s employment is terminated following a Change in Control and during the Term (provided that such termination of employment constitutes a “separation from service” within the meaning of Section 409A of the Code), other than (A) by the Company for Cause, (B) by reason of death or Disability, or (C) by the Executive without Good Reason, then the Company shall pay the Executive the amounts, and provide the Executive the benefits, described in this Section 6.1 (“Severance Payments”) and Section 6.2 hereof, in addition to any payments and benefits to which the Executive is entitled under Section 5 hereof, provided that the Executive shall have properly executed, within forty-seven (45) days of his Date of Termination, and not revoked a customary release of claims in a form reasonably acceptable to the Company. For purposes of this Agreement, the Executive’s employment shall be deemed to have been terminated following a Change in Control by the Company without Cause or by the Executive with Good Reason, if (i) the Executive’s employment is terminated by the Company without Cause prior to a Change in Control (whether or not a Change in Control ever occurs) and such termination was at the request or direction of a Person who has entered into an agreement with the Company the consummation of which would constitute a Change in Control, (ii) the Executive terminates his employment for Good Reason prior to a Change in Control (whether or not a Change in Control ever occurs) and the circumstance or event which constitutes Good Reason occurs at the request or direction of such Person, or (iii) the Executive’s employment is terminated by the Company without Cause or by the Executive for Good Reason and such termination or the circumstance or event which constitutes Good Reason is otherwise in connection with or in anticipation of a Change in Control (whether or not a Change in Control ever occurs). For purposes of any determination regarding the applicability of the immediately preceding sentence, any position taken by the Executive shall be presumed to be correct unless the Company establishes to the Board by clear and convincing evidence that such position is not correct.

               (A) In lieu of any further salary payments to the Executive for periods subsequent to the Date of Termination and in lieu of any severance benefit otherwise payable to the Executive, the Company shall pay to the Executive a lump sum severance payment, in cash, equal to two times the sum of (i) the Executive’s base salary as in effect immediately prior to the Date of Termination or, if higher, in effect immediately prior to the first occurrence of an event or

 


 

circumstance constituting Good Reason, and (ii) the Executive’s target annual bonus under any annual bonus or incentive plan maintained by the Company in respect of the fiscal year in which occurs the Date of Termination or, if higher, the highest target annual bonus in respect of the fiscal year in which occurs the Change in Control or the first event or circumstance constituting Good Reason.

               (B) (I) For the twenty-four (24) month period immediately following the Date of Termination, the Company shall arrange to provide the Executive and his dependents life, accident and health insurance benefits substantially similar to those provided to the Executive and his dependents immediately prior to the Date of Termination or, if more favorable to the Executive, those provided to the Executive and his dependents immediately prior to the first occurrence of an event or circumstance constituting Good Reason, at no greater after-tax cost to the Executive than the after-tax cost to the Executive immediately prior to such date or occurrence; provided, however, that such health and welfare benefits shall be provided, as applicable, through an arrangement that satisfies the requirements of Section 105 or 106 of the Code and, to the extent the payments represent a reimbursement of expenses incurred by the Participant, shall be paid not later than the last day of the year following the year in which the underlying expenses were incurred. Benefits otherwise receivable by the Executive pursuant to this Section 6.1(B) shall be eliminated if benefits of the same type are received by or made available to the Executive during the twenty-four (24) month period following the Executive’s termination of employment (and any such benefits received by or made available to the Executive shall be reported to the Company by the Executive). If the Severance Payments shall be decreased pursuant to Section 6.2 hereof, and the Section 6.1(B) benefits which remain payable after the application of Section 6.2 hereof are thereafter reduced pursuant to the immediately preceding sentence, the Company shall, no later than five (5) business days following such reduction, pay to the Executive the least of (a) the amount of the decrease made in the Severance Payments pursuant to Section 6.2 hereof, (b) the amount of the subsequent reduction in these Section 6.1(B) benefits, or (c) the maximum amount which can be paid to the Executive without being, or causing any other payment to be, nondeductible by reason of section 280G of the Code.

                    (II) In addition, if the Executive would have become entitled to benefits under the Company’s post-retirement health care or life insurance plans, as in effect immediately prior to the Date of Termination or, if more favorable to the Executive, as in effect immediately prior to the first occurrence of an event or circumstance constituting Good Reason, had the Executive’s employment terminated at any time during the period of twenty-four (24) months after the Date of Termination, the Company shall provide such post-retirement health care or life insurance benefits to the Executive and the Executive’s dependents commencing on

 


 

the later of (i) the date on which such coverage would have first become available and (ii) the date on which benefits described in subsection (I) terminate.

                    (III) To the extent the benefits to be made available under this subsection 6.1(B) are not medical expenses within the meaning of Treas. Reg. § 1.409A-1(b)(9)(v)(B) and are not short-term deferrals within the meaning of Section 409A of the Code, then during the first six months following the Date of Termination the Executive shall pay to the Company, at the time such benefits are provided, the fair market value of such benefits, and the Company shall reimburse the Executive for any such payment not later than the fifth day following the expiration of such six-month period unless the Company reasonably determines, based on the advice of counsel, that the benefits can be provided during such six-month period without causing the Executive to be subject to an “additional tax” under Section 409A(a)(2) of the Code.

               (C) Notwithstanding any provision of any annual or long term incentive plan to the contrary, the Company shall pay to the Executive a lump sum amount, in cash, equal to the sum of (i) any unpaid incentive compensation which has been allocated or awarded to the Executive for a completed fiscal year or other measuring period preceding the Date of Termination under any such plan and which, as of the Date of Termination, is contingent only upon the continued employment of the Executive to a subsequent date, and (ii) a pro rata portion to the Date of Termination of the aggregate value of all contingent incentive compensation awards to the Executive for all then uncompleted periods under any such plan, calculated as to each such award by multiplying the award that the Executive would have earned on the last day of the performance award period, assuming the achievement, at the target level, of the individual and corporate performance goals established with respect to such award, by the fraction obtained by dividing the number of full months and any fractional portion of a month during such performance award period through the Date of Termination by the total number of months contained in such performance award period. The provisions of this Section 6.1(C) shall survive the termination of this Agreement in respect of awards granted under any such annual or long-term incentive plans before the date of such termination.

               (D) In addition to the retirement benefits to which the Executive is entitled under each DB Pension Plan or any successor plan thereto, the Company shall pay the Executive a lump sum amount, in cash, equal to the excess of (i) the actuarial equivalent of the aggregate retirement pension (taking into account any early retirement subsidies associated therewith and determined as a straight life annuity commencing at the date (but in no event earlier than the second anniversary of the Date of Termination) as of which the actuarial equivalent of such annuity is greatest) which the Executive would have accrued under the terms of all DB Pension

 


 

Plans (without regard to any amendment to any DB Pension Plan made subsequent to a Change in Control and on or prior to the Date of Termination, which amendment adversely affects in any manner the computation of retirement benefits thereunder), determined as if the Executive were fully vested thereunder and had accumulated (after the Date of Termination) twenty-four (24) additional months of age and service credit thereunder and had been credited under each DB Pension Plan during such period with compensation equal to the Executive’s compensation (as defined in such DB Pension Plan) during the twelve (12) months immediately preceding Date of Termination or, if higher, during the twelve months immediately prior to the first occurrence of an event or circumstance constituting Good Reason, over (ii) the actuarial equivalent of the aggregate retirement pension (taking into account any early retirement subsidies associated therewith and determined as a straight life annuity commencing at the date (but in no event earlier than the Date of Termination) as of which the actuarial equivalent of such annuity is greatest) which the Executive had accrued pursuant to the provisions of the DB Pension Plans as of the Date of Termination. For purposes of this Section 6.1(D), “actuarial equivalent” shall be determined using the same assumptions utilized under the Baxter International Inc. and Subsidiaries Pension Plan immediately prior to the Date of Termination or, if more favorable to the Executive, immediately prior to the first occurrence of an event or circumstance constituting Good Reason. In addition to the benefits to which the Executive is entitled under each DC Pension Plan, the Company shall pay the Executive a lump sum amount, in cash, equal to the sum of (i) the amount that would have been contributed thereto by the Company on the Executive’s behalf during the two years immediately following the Date of Termination, determined (x) as if the Executive made the maximum permissible contributions thereto during such period, (y) as if the Executive earned compensation during such period at a rate equal to the Executive’s compensation (as defined in the DC Pension Plan) during the twelve (12) months immediately preceding the Date of Termination or, if higher, during the twelve months immediately prior to the first occurrence of an event or circumstance constituting Good Reason, and (z) without regard to any amendment to the DC Pension Plan made subsequent to a Change in Control and on or prior to the Date of Termination, which amendment adversely affects in any manner the computation of benefits thereunder, and (ii) the excess, if any, of (x) the Executive’s account balance under the DC Pension Plan as of the Date of Termination over (y) the portion of such account balance that is nonforfeitable under the terms of the DC Pension Plan.

               (E) The Company shall provide the Executive with outplacement services suitable to the Executive’s position for a period of two years or, if earlier, until the first acceptance by the Executive of an offer of employment, in an aggregate amount not exceeding $50,000. Subject to the foregoing, in no event shall any payment described in this Section 6.1(E) be made after the end of the calendar year following the calendar year in which the services were provided.

 


 

               (F) The lump-sum cash payments required pursuant to the preceding provisions of this Section 6.1 hereof shall be made not later than the fifth day following the Date of Termination. Notwithstanding the above, the Executive shall not be considered to have terminated employment with the Company for purposes of this Agreement and no payments shall be due to the Executive under this Agreement unless the Executive would be considered to have incurred a “separation from service” from the Company within the meaning of Section 409A of the Code. Each amount to be paid or benefit to be provided under this Agreement shall be construed as a separate identified payment for purposes of Section 409A of the Code. Any payments described in this Agreement that are due within the “short term deferral period” within the meaning of Section 409A of the Code or that are otherwise exempt from application of Section 409A of the Code, shall not be treated as deferred compensation unless applicable law requires otherwise. If the Executive, at the Date of Termination, is a “specified employee” as defined in the Baxter International Inc. and Subsidiaries Deferred Compensation Plan, amounts that would otherwise be payable and benefits that would otherwise be provided pursuant to this Agreement during the six-month period immediately following the Executive’s termination of employment shall instead be paid on the first business day after the date that is six months following the Executive’s termination of employment (or upon the Executive’s death, if earlier) unless the Company reasonably determines, based on the advice of counsel, that such delayed commencement is not required to avoid an “additional tax” under Section 409A(a)(2) of the Code. In addition, to the extent required in order to avoid accelerated taxation and/or tax penalties under Section 409A of the Code, in the event that the Executive’s termination of employment occurs within fifty-five (55) days prior to the end of a calendar year, amounts that would otherwise be payable and benefits that would otherwise be provided pursuant to this Agreement on or before December 31 of the year in which the termination of employment occurs shall, subject to the previous sentence of this section, instead be paid on the first business day following January 1 of the first calendar year beginning after the Executive’s termination of employment.

 


 

          6.2 The following special payment provisions shall apply:

               (A) Whether or not the Executive becomes entitled to the Severance Payments, if any payment or benefit received or to be received by the Executive in connection with a Change in Control or the termination of the Executive’s employment (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Company, any Person whose actions result in a Change in Control or any Person affiliated with the Company or such Person) (all such payments and benefits, including the Severance Payments, being hereinafter called “Total Payments”) will be subject (in whole or part) to the Excise Tax, then, subject to the provisions of subsection (B) of this Section 6.2, the Company shall pay to the Executive an additional amount (the “Gross-Up Payment”) such that the net amount retained by the Executive, after deduction of any Excise Tax on the Total Payments and any federal, state and local income and employment taxes and Excise Tax upon the Gross-Up Payment, shall be equal to the Total Payments. For purposes of determining the amount of the Gross-Up Payment, the Executive shall be deemed to pay federal income taxes at the highest marginal rate of federal income taxation in the calendar year in which the Gross-Up Payment is to be made and state and local income taxes at the highest marginal rate of taxation in the state and locality of the Executive’s residence on the Date of Termination (or if there is no Date of Termination, then the date on which the Gross-up Payment is calculated for purposes of this Section 6.2), net of the maximum reduction in federal income tax which could be obtained from deduction of such state and local taxes.

               (B) In the event that the amount of the Total Payments does not exceed 110% of the largest amount that would result in no portion of the Total Payments being subject to the Excise Tax (the “Safe Harbor”), then subsection (A) of this Section 6.2 shall not apply and the noncash Severance Payments shall first be reduced (if necessary, to zero), and the cash Severance Benefits shall thereafter be reduced (if necessary, to zero) so that the amount of the Total Payments is equal to the Safe Harbor; provided, however, that, to the extent it would not result in the imposition of an additional tax under Section 409A of the Code, the Executive may elect to have the cash Severance Payments reduced (or eliminated) prior to any reduction of the noncash Severance Payments.

               (C) For purposes of determining whether any of the Total Payments will be subject to the Excise Tax and the amount of such Excise Tax, (i) all of the Total Payments shall be treated as “parachute payments” within the meaning of section 280G(b)(2) of the Code, unless in the opinion of tax counsel (“Tax Counsel”) reasonably acceptable to the Executive and selected by the accounting firm which was, immediately prior to the Change in Control, the Company’s independent auditor (the “Auditor”), such other payments or benefits (in whole or in part)

 


 

do not constitute parachute payments, including by reason of section 280G(b)(4)(A) of the Code, (ii) all “excess parachute payments” within the meaning of section 280G(b)(l) of the Code shall be treated as subject to the Excise Tax unless, in the opinion of Tax Counsel, such excess parachute payments (in whole or in part) represent reasonable compensation for services actually rendered, within the meaning of section 280G(b)(4)(B) of the Code, in excess of the Base Amount allocable to such reasonable compensation, or are otherwise not subject to the Excise Tax, and (iii) the value of any noncash benefits or any deferred payment or benefit shall be determined by the Auditor in accordance with the principles of sections 280G(d)(3) and (4) of the Code. Prior to the payment date set forth in Section 6.3 hereof, the Company shall provide the Executive with its calculation of the amounts referred to in this Section 6.2(C) and such supporting materials as are reasonably necessary for the Executive to evaluate the Company’s calculations. If the Executive disputes the Company’s calculations (in whole or in part), the reasonable opinion of Tax Counsel with respect to the matter in dispute shall prevail.

               (D) (I) In the event that (1) amounts are paid to the Executive pursuant to Section 6.2(A) hereof, (2) there is a Final Determination that the Excise Tax is less than the amount taken into account hereunder in calculating the Gross-Up Payment, and (3) after giving effect to such Final Determination, the Severance Payments are to be reduced pursuant to Section 6.2(B) hereof, the Executive shall repay to the Company, within five (5) business days following the date of the Final Determination, the Gross-Up Payment, the amount of the reduction in the Severance Payments, plus interest on the amount of such repayments at 120% of the rate provided in section 1274(b)(2)(B) of the Code.

                    (II) In the event that (1) amounts are paid to the Executive pursuant to Section 6.2(A) hereof, (2) there is a Final Determination that the Excise Tax is less than the amount taken into account hereunder in calculating the Gross-Up Payment, and (3) after giving effect to such Final Determination, the Severance Payments are not to be reduced pursuant to Section 6.2(B) hereof, the Executive shall repay to the Company, within five (5) business days following the date of the Final Determination, the portion of the Gross-Up Payment attributable to such reduction (plus that portion of the Gross-Up Payment attributable to the Excise Tax and federal, state and local income and employment taxes imposed on the Gross-Up Payment being repaid by the Executive), to the extent that such repayment results in a reduction in the Excise Tax and a dollar-for-dollar reduction in the Executive’s taxable income and wages for purposes of federal, state and local income and employment taxes, plus interest on the amount of such repayment at 120% of the rate provided in section 1274(b)(2)(B) of the Code.

 


 

                    (III) Except as otherwise provided in clause (IV) below, in the event there is a Final Determination that the Excise Tax exceeds the amount taken into account hereunder in determining the Gross-Up Payment (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-Up Payment), the Company shall pay to the Executive, within five (5) business days following the date of the Final Determination, the sum of (1) a Gross-Up Payment in respect of such excess and in respect of any portion of the Excise Tax with respect to which the Company had not previously made a Gross-Up Payment, including a Gross-Up Payment in respect of any Excise Tax attributable to amounts payable under clauses (2) and (3) of this paragraph (III) (plus any interest, penalties or additions payable by the Executive with respect to such excess and such portion), (2) if Severance Payments were reduced pursuant to Section 6.2(B) hereof but after giving effect to such Final Determination, the Severance Payments should not have been reduced pursuant to Section 6.2(B), the amount by which the Severance Payments were reduced pursuant to Section 6.2(B) hereof, and (3) interest on such amounts at 120% of the rate provided in section 1274(b)(2)(B) of the Code.

                    (IV) In the event that (1) Severance Payments were reduced pursuant to Section 6.2(B) hereof and (2) the aggregate value of Total Payments which are considered “parachute payments” within the meaning of section 280G(b)(2) of the Code is subsequently redetermined in a Final Determination, but such redetermined value still does not exceed 110% of the Safe Harbor, then, within five (5) business days following such Final Determination, (x) the Company shall pay to the Executive the amount (if any) by which the reduced Severance Payments (after taking the Final Determination into account) exceeds the amount of the reduced Severance Payments actually paid to the Executive, plus interest on the amount of such repayment at 120% of the rate provided in section 1274(b)(2)(B) of the Code, or (y) the Executive shall pay to the Company the amount (if any) by which the reduced Severance Payments actually paid to the Executive exceeds the amount of the reduced Severance Payments (after taking the Final Determination into account), plus interest on the amount of such repayment at 120% of the rate provided in section 1274(b)(2)(B) of the Code.

          6.3 The payments provided in subsections (A) (C) and (D) of Section 6.1 hereof and in Section 6.2 hereof shall be made not later than the fifth day following the Date of Termination (or if there is no Date of Termination, then the date on which the Gross-Up Payment is calculated for purposes of Section 6.2 hereof), but in any event not later than the end of the taxable year following the year in which the Excise Tax is incurred; provided, however, that if the amounts of such payments, and the limitation on such payments set forth in Section 6.2 hereof, cannot be finally determined on or before such day, the Company shall pay to the Executive on such day an estimate, as determined in good faith by the Executive or, in the case

 


 

of payments under Section 6.2 hereof, in accordance with Section 6.2 hereof, of the minimum amount of such payments to which the Executive is clearly entitled and shall pay the remainder of such payments (together with interest on the unpaid remainder (or on all such payments to the extent the Company fails to make such payments when due) at 120% of the rate provided in section 1274(b)(2)(B) of the Code) as soon as the amount thereof can be determined but in no event later than the thirtieth (30th) day after the Date of Termination. In the event that the amount of the estimated payments exceeds the amount subsequently determined to have been due, such excess shall be paid by the Executive to the Company on the fifth (5th) business day after demand by the Company (together with interest at 120% of the rate provided in section 1274(b)(2)(B) of the Code). At the time that payments are made under this Agreement, the Company shall provide the Executive with a written statement setting forth the manner in which such payments were calculated and the basis for such calculations including, without limitation, any opinions or other advice the Company has received from Tax Counsel, the Auditor or other advisors or consultants (and any such opinions or advice which are in writing shall be attached to the statement). If the Executive at the time of such separation from service is a “specified employee” as defined in the Baxter International Inc. and Subsidiaries Deferred Compensation Plan, no payments shall be made to the Executive prior to the earlier of (a) the expiration of the six (6) month period measured from the date of the Executive’s “separation from service” (as such term is defined in Section 409A of the Code), or (b) the date of the Executive’s death unless the Company reasonably determines, based on the advice of counsel, that such delayed commencement is not required to avoid an “additional tax” under Section 409A(a)(2) of the Code.

          6.4 The Company also shall pay to the Executive all legal fees and expenses incurred by the Executive in disputing any issue hereunder relating to the termination of the Executive’s employment (provided the Executive shall prevail in such dispute), in seeking to obtain or enforce any benefit or right provided by this Agreement (provided the Executive shall obtain or successfully enforce such benefit or right) or in connection with any tax audit or proceeding to the extent attributable to the application of Section 409A of the Code or Section 4999 of the Code to any payment or benefit provided hereunder. Such payments shall be made within five (5) business days after delivery of the Executive’s written requests for payment accompanied with such evidence of fees and expenses incurred as the Company reasonably may require; provided that no such payment shall be made in respect of fees or expenses incurred by the Executive after the later of the tenth anniversary of the Date of Termination or the Executive’s death, and provided further, that, upon the Executive’s separation from service with the Company, in no event shall any additional such payments be made prior to the date that is six months after the date of the Executive’s separation from service unless the Company reasonably determines, based on the advice of counsel, that such delay is not required to avoid an “additional tax” under Section 409A(a)(2) of the Code.

 


 

     7. Termination Procedures.

          7.1 Notice of Termination. After a Change in Control and during the Term, any purported termination of the Executive’s employment (other than by reason of death) shall be communicated by written Notice of Termination from one party hereto to the other party hereto in accordance with Section 11 hereof. For purposes of this Agreement, a “Notice of Termination” shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated. Further, a Notice of Termination for Cause is required to include a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters (3/4) of the entire membership of the Board at a meeting of the Board which was called and held for the purpose of considering such termination (after reasonable notice to the Executive and an opportunity for the Executive, together with the Executive’s counsel, to be heard before the Board) finding that, in the good faith opinion of the Board, the Executive was guilty of conduct set forth in clause (i) or (ii) of the definition of Cause herein, and specifying the particulars thereof in detail.

          7.2 Date of Termination. “Date of Termination,” with respect to any purported termination of the Executive’s employment after a Change in Control and during the Term, shall mean (i) if the Executive’s employment is terminated for Disability, thirty (30) days after Notice of Termination is given (provided that the Executive shall not have returned to the full-time performance of the Executive’s duties during such thirty (30) day period), and (ii) if the Executive’s employment is terminated for any other reason, the date specified in the Notice of Termination (which, in the case of a termination by the Company, shall not be less than thirty (30) days (except in the case of a termination for Cause) and, in the case of a termination by the Executive, shall not be less than fifteen (15) days nor more than sixty (60) days, respectively, from the date such Notice of Termination is given); provided that Executive shall not be considered to have terminated employment with the Company for purposes of this Agreement and no payments shall be due to the Executive under this Agreement unless the Executive would be considered to have incurred a “separation from service” from the Company within the meaning of Section 409A of the Code.

          7.3 Dispute Concerning Termination. If within fifteen (15) days after any Notice of Termination is given, or, if later, prior to the Date of Termination (as determined without regard to this Section 7.3), the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the termination, the Date of Termination shall be extended until the earlier of (i) the date on which the Term ends or (ii) the date on which the dispute is finally resolved, either by

 


 

mutual written agreement of the parties or by a final judgment, order or decree of an arbitrator or a court of competent jurisdiction (which is not appealable or with respect to which the time for appeal therefrom has expired and no appeal has been perfected); provided, however, that the Date of Termination shall be extended by a notice of dispute given by the Executive only if such notice is given in good faith and the Executive pursues the resolution of such dispute with reasonable diligence; and further provided, however, that the provisions of this Section 7.3 shall apply only to the extent that, pursuant to Treas. Reg. § 1.409A-3(g), they will not cause an additional tax under Section 409A of the Code.

     8. No Mitigation. The Company agrees that, if the Executive’s employment with the Company terminates during the Term, the Executive is not required to seek other employment or to attempt in any way to reduce any amounts payable to the Executive by the Company pursuant to Section 6 hereof or Section 7.4 hereof. Further, except as specifically provided in Section 6.1(B) hereof, no payment or benefit provided for in this Agreement shall be reduced by any compensation earned by the Executive as the result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by the Executive to the Company, or otherwise.

     9. Certain Restrictive Covenants.

          9.1 Noncompetition. The Executive understands that any entrusting of Confidential Information to him by the Company is done in reliance on a confidential relationship arising out of his employment with the Company. The Executive understands that Confidential Information may include, for example, Trade Secrets, inventions, know-how and products, customer, patient, supplier and competitor information, sales, pricing, cost, and financial data, research, development, marketing and sales programs and strategies, manufacturing, marketing and service techniques, processes and practices, and regulatory strategies. The Executive understands that Confidential Information also includes all information received by the Company or the Subsidiaries under an obligation of confidentiality to a third party. The Executive further understands that Confidential Information that the Executive may acquire or to which the Executive may have access, especially with regard to research and development projects and findings, formulae, designs, formulation, processes, the identity of suppliers, customers and patients, methods of manufacture, and cost and pricing data is of great value to the Company. In consequence of such entrusting and such consideration, the Executive shall not, directly or indirectly, for a period of two years after the Date of Termination: (i) render services to any Competing Organization in connection with any Competing Product within such geographic limits as the Company and such Competing Organization are, or would be, in actual competition when such rendering of services might potentially involve the disclosure or use of confidential information

 


 

or trade secrets; or (ii) provide advice as to investment in a Competitive Business (including, without limitation, advice with respect to the purchase, sale, or operation of such business, or advice with respect to financing or other economic structuring of such business). The Executive understands that services described in the preceding sentence, including without limitation those rendered to such Competing Organization in an executive, scientific, administrative, or consulting capacity in connection with Competing Products are in support of actual competition in various geographic areas and thus fall within the prohibition of this Agreement regardless of where such services physically are rendered.

          9.2 Solicitation of Customers, Suppliers and Employees. While Executive is employed by the Company, and for a period of twenty-four (24) months after the Date of Termination for any reason:

               (A) The Executive shall not solicit or attempt to solicit any party who is then or, during the 12-month period prior to such solicitation or attempt by the Executive was (or was solicited to become), a customer or supplier of the Company or Affiliate, provided that the restriction in this Section 9.2 shall not apply to any activity on behalf of a business that is not a Competing Organization.

               (B) The Executive shall not solicit, entice, persuade or induce any individual who is employed by the Company or the Subsidiaries (or was so employed within 90 days prior to the Executive’s action) to terminate or refrain from renewing or extending such employment or to become employed by or enter into contractual relations with any other individual or entity other than the Company or the Subsidiaries, and the Executive shall not approach any such employee for any such purpose or authorize or knowingly cooperate with the taking of any such actions by any other individual or entity.

          9.3 Nondisparagement. The Executive agrees that, while he is employed by the Company, and after his Date of Termination, he shall not make any false, defamatory or disparaging statements about the Company, the Subsidiaries, or the officers or directors of the Company or the Subsidiaries that are reasonably likely to cause material damage to the Company, the Subsidiaries, or the officers or directors of the Company or the Subsidiaries. While the Executive is employed by the Company, and after his Date of Termination, the Company agrees, on behalf of itself and the Subsidiaries, that neither the officers nor the directors of the Company or the Subsidiaries shall make any false, defamatory or disparaging statements about the Executive that are reasonably likely to cause material damage to the Executive. Notwithstanding the foregoing, nothing in this paragraph will prevent either the Company or any Executive from (i) responding to incorrect, disparaging or derogatory public statement by the other to the extent necessary to correct or refute such public statement or (ii) making any truthful statement to the extent (x)

 


 

necessary in connection with any litigation, arbitration or mediation involving this Agreement or (y) required by law, by any court order or by any arbitrator or mediator in a legal proceeding.

     10. Successors; Binding Agreement.

          10.1 In addition to any obligations imposed by law upon any successor to the Company, the Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place.

          10.2 This Agreement shall inure to the benefit of and be enforceable by the Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive shall die while any amount would still be payable to the Executive hereunder (other than amounts which, by their terms, terminate upon the death of the Executive) if the Executive had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the executors, personal representatives or administrators of the Executive’s estate.

     11. Notices. For the purpose of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered mail, return receipt requested, postage prepaid, addressed, if to the Executive, to the address inserted below the Executive’s signature on the final page hereof and, if to the Company, to the address set forth below, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon actual receipt:

To the Company:

Baxter International Inc.
One Baxter Parkway
Deerfield, Illinois 60015
Attention: General Counsel

     12. Miscellaneous. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by the Executive and such officer as may be specifically designated by the Board. No waiver by either party hereto at any time of any breach by the other

 


 

party hereto of, or of any lack of compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. This Agreement supersedes any other agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof which have been made by either party; provided, however, that this Agreement shall supersede any agreement setting forth the terms and conditions of the Executive’s employment with the Company only in the event that the Executive’s employment with the Company is terminated on or following a Change in Control, by the Company other than for Cause or by the Executive for Good Reason. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Illinois. All references to sections of the Exchange Act or the Code shall be deemed also to refer to any successor provisions to such sections. Any payments provided for hereunder shall be paid net of any applicable withholding required under federal, state or local law and any additional withholding to which the Executive has agreed. The obligations of the Company and the Executive under this Agreement which by their nature may require either partial or total performance after the expiration of the Term (including, without limitation, those under Sections 6, 7 and 9 hereof) shall survive such expiration. To the extent applicable, it is intended that the Agreement comply with the provisions of Section 409A of the Code. The Agreement will be administered and interpreted in a manner consistent with this intent, and any provision that would cause the Agreement to fail to satisfy Section 409A of the Code will have no force and effect until amended to comply therewith (which amendment may be retroactive to the extent permitted by Section 409A of the Code).

     13. Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

     14. Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.

     15. Settlement of Disputes; Arbitration.

          15.1 All claims by the Executive for benefits under this Agreement shall be directed to and determined by the Board and shall be in writing. Any denial by the Board of a claim for benefits under this Agreement shall be delivered to the Executive in writing and shall set forth the specific reasons for the denial and the specific provisions of this Agreement relied upon. The Board shall afford a reasonable opportunity to the Executive for a review of the decision denying a claim and shall further allow the Executive to appeal to the Board a decision of the Board

 


 

within sixty (60) days after notification by the Board that the Executive’s claim has been denied. Notwithstanding the above, in the event of any dispute, any decision by the Board hereunder shall be subject to a de novo review by the arbitrator in accordance with Section 15.2 hereof.

          15.2 Any further dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration in Chicago, Illinois in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator’s award in any court having jurisdiction. Notwithstanding any provision of this Agreement to the contrary, the Executive shall be entitled to seek specific performance of the Executive’s right to be paid until the Date of Termination during the pendency of any dispute or controversy arising under or in connection with this Agreement.

          15.3 The Executive acknowledges that the Company would be irreparably injured by a violation of Section 9 hereof, and he agrees that the Company, notwithstanding the foregoing provisions of this Section 15 and in addition to any other remedies available to it for such breach or threatened breach, shall be entitled to a preliminary injunction, temporary restraining order, or other equivalent relief, restraining the Executive from any actual or threatened breach of Section 9. If a bond is required to be posted in order for the Company to secure an injunction or other equitable remedy, the parties agree that said bond need not be more than a nominal sum.

     16. Definitions. For purposes of this Agreement, the following terms shall have the meanings indicated below:

               (A) “Affiliate” shall have the meaning set forth in Rule 12b-2 promulgated under Section 12 of the Exchange Act.

               (B) “Auditor” shall have the meaning set forth in Section 6.2 hereof.

               (C) “Base Amount” shall have the meaning set forth in section 280G(b)(3) of the Code.

               (D) “Beneficial Owner” shall have the meaning set forth in Rule 13d-3 under the Exchange Act.

               (E) “Board” shall mean the Board of Directors of the Company.

 


 

               (F) “Cause” for termination by the Company of the Executive’s employment shall mean (i) the willful and continued failure by the Executive to substantially perform the Executive’s duties with the Company (other than any such failure resulting from the Executive’s incapacity due to physical or mental illness or any such actual or anticipated failure after the issuance of a Notice of Termination for Good Reason by the Executive pursuant to Section 7.1 hereof) that has not been cured within 30 days after a written demand for substantial performance is delivered to the Executive by the Board, which demand specifically identifies the manner in which the Board believes that the Executive has not substantially performed the Executive’s duties or (ii) the willful engaging by the Executive in conduct which is demonstrably and materially injurious to the Company or its subsidiaries, monetarily or otherwise. For purposes of clauses (i) and (ii) of this definition, (x) no act, or failure to act, on the Executive’s part shall be deemed “willful” unless done, or omitted to be done, by the Executive not in good faith and without reasonable belief that the Executive’s act, or failure to act, was in the best interest of the Company and (y) in the event of a dispute concerning the application of this provision, no claim by the Company that Cause exists shall be given effect unless the Company establishes to the Board by clear and convincing evidence that Cause exists.

               (G) A “Change in Control” shall be deemed to have occurred if the event set forth in any one of the following paragraphs shall have occurred:

               (I) any Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such Person any securities acquired directly from the Company or its Affiliates) representing 30% or more of the combined voting power of the Company’s then outstanding securities, excluding any Person who becomes such a Beneficial Owner in connection with a merger or consolidation of the Company or any direct or indirect subsidiary of the Company with any other corporation immediately following which the individuals who comprise the Board immediately prior thereto constitute at least a majority of the board of directors of (a) any parent of the Company or the entity surviving such merger or consolidation (b) if there is no such parent, of the Company or such surviving entity;

               (II) the following individuals cease for any reason to constitute a majority of the number of directors then serving: individuals who, on the date hereof, constitute the Board and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of directors of the

 


 

Company) whose appointment or election by the Board or nomination for election by the Company’s stockholders was approved or recommended by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors on the date hereof or whose appointment, election or nomination for election was previously so approved or recommended;

               (III) there is consummated a merger or consolidation of the Company or any direct or indirect subsidiary of the Company with any other corporation or other entity, other than a merger or consolidation immediately following which the individuals who comprise the Board immediately prior thereto constitute at least a majority of the board of directors of (a) any parent of the Company or the entity surviving such merger or consolidation or (b) if there is no such parent, of the Company or such surviving entity; or

               (IV) the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company or there is consummated an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets, other than a sale or disposition by the Company of all or substantially all of the Company’s assets immediately following which the individuals who comprise the Board immediately prior thereto constitute at least a majority of the board of directors of (a) any parent of the Company or of the entity to which such assets are sold or disposed or (b) if there is no such parent, of the Company or such entity.

Notwithstanding the foregoing, a “Change in Control” shall not be deemed to have occurred by virtue of the consummation of any transaction or series of integrated transactions immediately following which the record holders of the common stock of the Company immediately prior to such transaction or series of transactions continue to have substantially the same proportionate ownership in an entity which owns all or substantially all of the assets of the Company immediately following such transaction or series of transactions.

               (H) “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time.

               (I) “Company” shall mean Baxter International Inc. and, except in determining under Section 16(G) hereof whether or not any Change in Control of the Company has occurred, shall include any successor to its business and/or assets which assumes this Agreement by operation of law, or otherwise.

 


 

               (J) “Competing Products” shall mean products, processes, or services of any person or organization other than the Company, in existence or under development, which are substantially the same, may be substituted for, or applied to substantially the same end use as the products, processes or services with which the Executive works during the time of his employment with the Company or about which the Executive acquires Confidential Information through his work with the Company.

               (K) “Competing Organization” shall mean persons or organizations engaged in, or about to become engaged in, research or development, production, distribution, marketing, providing or selling of a Competing Product.

               (L) “Competitive Business” means any business in which the Company or any of the Subsidiaries was engaged during the 12-month period prior to the Executive’s Date of Termination, any business if the Company or any Subsidiary has devoted material resources to entering into such business during such 12-month period prior to the Date of Termination, and any business to the extent that it is engaged in the investing in or acquisition of all or a portion of the assets or stock of the Company or the Subsidiaries.

               (M) “Confidential Information” means information relating to the present or planned business of the Company or the Subsidiaries which has not been released publicly by authorized representatives of the Company or the Subsidiaries.

               (N) “DB Pension Plan” shall mean any tax-qualified, supplemental or excess defined benefit pension plan maintained by the Company and any other defined benefit plan or agreement entered into between the Executive and the Company which is designed to provide the Executive with supplemental retirement benefits.

               (O) “DC Pension Plan” shall mean any tax-qualified, supplemental or excess defined contribution plan maintained by the Company and any other defined contribution plan or agreement entered into between the Executive and the Company which is designed to provide the Executive with supplemental retirement benefits.

               (P) “Date of Termination” shall have the meaning set forth in Section 7.2 hereof.

               (Q) “Disability” shall be deemed the reason for the termination by the Company of the Executive’s employment, if, as a result of the Executive’s incapacity due to physical or mental illness, the Executive shall have

 


 

been absent from the full-time performance of the Executive’s duties with the Company for a period of six (6) consecutive months, the Company shall have given the Executive a Notice of Termination for Disability, and, within thirty (30) days after such Notice of Termination is given, the Executive shall not have returned to the full-time performance of the Executive’s duties.

               (R) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended from time to time.

               (S) “Excise Tax” shall mean any excise tax imposed under section 4999 of the Code.

               (T) “Executive” shall mean the individual named in the first paragraph of this Agreement.

               (U) “Good Reason” for termination by the Executive of the Executive’s employment shall mean the occurrence (without the Executive’s express written consent which specifically references this Agreement) after any Change in Control, or prior to a Change in Control under the circumstances described in clauses (ii) and (iii) of the second sentence of Section 6.1 hereof (treating all references in paragraphs (I) through (V) below to a “Change in Control” as references to a “Potential Change in Control”), of any one of the following acts by the Company, or failures by the Company to act, unless such act or failure to act is corrected prior to the Date of Termination specified in the Notice of Termination given in respect thereof:

                    (I) the assignment to the Executive of any duties inconsistent with the Executive’s status as a senior executive officer of the Company or a substantial adverse alteration in the nature or status of the Executive’s responsibilities from those in effect immediately prior to the Change in Control;

                    (II) a material reduction by the Company in the Executive’s annual base salary as in effect on the date hereof or as the same may be increased from time to time;

                    (III) a material change in the location of the Executive’s principal place of employment, including for this purpose any relocation more than fifty (50) miles from the Executive’s principal place of employment immediately prior to the Change in Control or the Company’s requiring the Executive to be based anywhere other than such principal place of employment (or permitted relocation thereof) except for required travel on

 


 

the Company’s business to an extent substantially consistent with the Executive’s present business travel obligations; or

                    (IV) the failure by the Company to pay to the Executive any portion of the Executive’s current compensation, or to pay to the Executive any portion of an installment of deferred compensation under any deferred compensation program of the Company, within seven (7) days of the date such compensation is due;

                    (V) any other action or inaction that constitutes a material breach of this Agreement, including without limitation Sections 5.5 and 10.1.

The Executive’s right to terminate the Executive’s employment for Good Reason shall not be affected by the Executive’s incapacity due to physical or mental illness. The Executive’s continued employment shall not constitute consent to, or a waiver of rights with respect to, any act or failure to act constituting Good Reason hereunder. For purposes of any determination regarding the existence of Good Reason, any claim by the Executive that Good Reason exists shall be presumed to be correct unless the Company establishes to the Board by clear and convincing evidence that Good Reason does not exist.

               (V) “Gross-Up Payment” shall have the meaning set forth in Section 6.2 hereof.

               (W) “Items” include documents, reports, drawings, photographs, designs, specifications, formulae, plans, samples, research or development information, prototypes, tools, equipment, proposals, marketing or sales plans, customer information, customer lists, patient lists, patient information, regulatory files, financial data, costs, pricing information, supplier information, written, printed or graphic matter, or other information and materials that concern the Company’s or the Subsidiaries’ business that come into his possession or about which the Executive has knowledge by reason of his employment.

               (X) “Notice of Termination” shall have the meaning set forth in Section 7.1 hereof.

               (Y) “Person” shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except that such term shall not include (i) the Company or any of its subsidiaries, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its Affiliates, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities, or (iv) a corporation

 


 

owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company.

               (Z) “Potential Change in Control Period” shall mean the period commencing on the occurrence of a Potential Change in Control and ending upon the occurrence of a Change in Control or, if earlier (I) with respect to a Potential Change in Control occurring pursuant to Section 16(AA)(I) hereof, immediately upon the abandonment or termination of the applicable agreement, (ii) with respect to a Potential Change in Control occurring pursuant to Section 16(AA)(II) hereof, immediately upon a public announcement by the applicable party that such party has abandoned its intention to take or consider taking actions which if consummated would result in a Change in Control or (iii) with respect to a Potential Change in Control occurring pursuant to Section 16(AA)(III) or (IV) hereof, upon the eighteen month anniversary of the occurrence of such Potential Change in Control (or such earlier date as may be determined by the Board).

               (AA) “Potential Change in Control” shall be deemed to have occurred if the event set forth in any one of the following paragraphs shall have occurred:

               (I) the Company enters into an agreement, the consummation of which would result in the occurrence of a Change in Control;

               (II) the Company or any Person publicly announces an intention to take or to consider taking actions which, if consummated, would constitute a Change in Control;

               (III) any Person becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing 15% or more of either the then outstanding shares of common stock of the Company or the combined voting power of the Company’s then outstanding securities (not including in the securities beneficially owned by such Person any securities acquired directly from the Company or its affiliates); or

               (IV) the Board adopts a resolution to the effect that, for purposes of this Agreement, a Potential Change in Control has occurred.

               (BB) “Retirement” shall be deemed the reason for the termination by the Executive of the Executive’s employment if such employment is terminated in accordance with the Company’s retirement policy, including early retirement, generally applicable to its salaried employees.

 


 

               (CC) “Severance Payments” shall have the meaning set forth in Section 6.1 hereof.

               (DD) “Subsidiary,” for purposes of Section 9 hereof, shall mean any corporation, partnership, joint venture or other entity during any period in which at least fifty percent in such entity is owned, directly or indirectly, by the Company.

               (EE) “Tax Counsel” shall have the meaning set forth in Section 6.2 hereof.

               (FF) “Term” shall mean the period of time described in Section 2 hereof (including any extension, continuation or termination described therein).

               (GG) “Total Payments” shall mean those payments so described in Section 6.2 hereof.

               (HH) “Trade Secrets” include all information encompassed in all Items, and in all manufacturing processes, methods of production, concepts or ideas, to the extent that such information has not been released publicly by duly authorized representatives of the Company or the Subsidiaries.

 


 

          IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

 

 

 

 

 

 

 

 

 

BAXTER INTERNATIONAL INC.

 

 

 

 

 

 

 

 

 

 

 

By:

 

 

 

 

 

 

Name:

 

 

Robert L. Parkinson, Jr.

 

 

 

 

Title:

 

Chairman and Chief Executive Officer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EXECUTIVE

 

 

 

 

 

 

 

 

 

 

 

Address:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Please print carefully)