EXHIBIT 10.27
BAXTER INTERNATIONAL INC.
2001 INCENTIVE COMPENSATION PROGRAM
1. Purpose. The purpose of the Baxter International Inc. 2001 Incentive
Compensation Program ("Program") is to increase stockholder value and to
advance the interests of Baxter International Inc. ("Baxter") and its
subsidiaries (collectively, the "Company") by providing a variety of economic
incentives designed to attract, retain and motivate directors, officers, other
employees, consultants, independent contractors and agents. As used in this
Program, the term "subsidiary" means any entity, whether or not incorporated,
in which Baxter has a direct or indirect interest in the equity of the entity.
2. Administration.
2.1 Administration by Committee. The Program shall be administered by the
Compensation Committee of the Baxter Board of Directors ("Committee"), which
shall consist of two or more non-employee directors within the meaning of Rule
16b-3 of the Securities Exchange Act of 1934, as amended ("Exchange Act") who
also qualify as outside directors within the meaning of Section 162(m) and the
related regulations under the Internal Revenue Code of 1986, as amended, except
as otherwise determined by the Board of Directors. The Board of Directors may
also exercise any or all authority otherwise delegated to the Committee under
the terms of the Program with respect to the grant or administration of
incentives.
2.2 Authority. Subject to the provisions of the Program, the Committee
shall have the authority to (a) interpret the provisions of the Program, and
prescribe, amend, and rescind rules and procedures relating to the Program, (b)
grant incentives under the Program, in such forms and amounts and subject to
such terms and conditions as it deems appropriate, including, without
limitation, incentives which are made in combination with or in tandem with
other incentives (whether or not contemporaneously granted) or compensation or
in lieu of current or deferred compensation, (c) modify the terms of, cancel
and reissue, or repurchase outstanding incentives, subject to subsection
11.9(b), (d) prescribe the form of agreement, certificate or other instrument
evidencing any incentive under the Program, (e) correct any defect or omission
and reconcile any inconsistency in the Program or in any incentive hereunder,
and (f) make all other determinations and take all other actions as it deems
necessary or desirable for the administration of the Program; provided,
however, that in no event shall the Committee cancel any outstanding stock
option for the purpose of reissuing an option to the option holder at a lower
exercise price. The determination of the Committee on matters within its
authority shall be conclusive and binding on the Company and all other persons.
The Committee shall comply with all applicable law in administering the Plan.
3. Participation. Subject to the terms and conditions of the Program, the
Committee shall determine and designate from time to time the directors
(including non-employee directors), officers and other employees of the
Company, persons expected to become directors, officers and other employees,
consultants, independent contractors and agents of the Company who shall
receive incentives under the Program ("Participants"). All employees of the
Company are eligible to receive incentives under the Program. Participation in
the Program, the grant of incentives, and any related performance goals for
persons subject to section 16(a) of the Exchange Act, must be approved by the
Committee. The Committee's authority with respect to participation, the grant
of incentives and related performance objectives for others (persons not
subject to section 16(a)) may be delegated. For purposes of the Program,
references to employment shall also mean service as a director of Baxter as
well as an agency or independent contractor relationship.
4. Shares Subject to the Program.
4.1 Number of Shares Reserved. Shares of common stock, $1.00 par value, of
Baxter ("Common Stock") shall be available for incentives under the Program. To
the extent provided by resolution of the Baxter Board of Directors, such shares
may be uncertificated. Subject to adjustment in accordance with subsections 4.3
and 4.4, the aggregate number of shares of Common Stock available for
incentives under the Program shall be 10,000,000 shares.
4.2 Type of Common Stock. Common Stock issued under the Program in
connection with Stock Options and Performance Shares may be authorized and
unissued shares or issued shares held as treasury shares.
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Common Stock issued under the Program in connection with Restricted Stock or
Stock Awards shall be issued shares held as treasury shares; provided, however,
that authorized and unissued shares may be issued in connection with Restricted
Stock or Stock Awards to the extent that the Committee determines that past
services of the Participant constitute adequate consideration for at least the
par value thereof.
4.3 Reusage of Shares.
(a) In the event of the exercise or termination (by reason of forfeiture,
expiration, cancellation, surrender or otherwise) of any incentive under the
Program, that number of shares of Common Stock that was subject to the
incentive but not delivered shall again be available for incentives under
the Program.
(b) In the event that shares of Common Stock are delivered under the
Program as Restricted Stock or pursuant to a Stock Award and are thereafter
forfeited or reacquired by the Company pursuant to rights reserved upon the
award thereof, such forfeited or reacquired shares shall again be available
for incentives under the Program.
(c) Notwithstanding the provisions of paragraphs (a) or (b), the
following shares of Common Stock shall not be available for reissuance under
the Program: (1) shares which are withheld from any award or payment under
the Program to satisfy tax withholding obligations (as described in
subsection 11.5(e)); (2) shares which are surrendered to fulfill tax
obligations (as described in subsection 11.5(e)); and (3) shares which are
surrendered in payment of the Option Price (as defined in subsection 5.1)
upon the exercise of a Stock Option.
4.4 Adjustments to Shares Reserved. In the event of any merger,
consolidation, reorganization, recapitalization, spinoff, stock dividend, stock
split, reverse stock split, exchange, or other distribution with respect to
shares of Common Stock or other change in the corporate structure or
capitalization affecting the Common Stock, the type and number of shares of
stock which are or may be subject to incentives under the Program, the terms of
any outstanding incentives (including the price at which shares of stock may be
issued pursuant to an outstanding incentive) and the limitations set forth in
Sections 5.1, 6, 7.1, and 8.1 shall be equitably adjusted by the Committee, in
its sole discretion, to preserve the value of incentives awarded or to be
awarded to Participants under the Program.
5. Stock Options.
5.1 Awards. Subject to the terms and conditions of the Program, the
Committee shall designate the employees to whom options to purchase shares of
Common Stock ("Stock Options") are to be awarded under the Program and shall
determine the number, type, and terms of the Stock Options to be awarded to
each of them. Stock Option awards are subject to the following specific
limitations. Each Stock Option shall expire on the earlier of the date provided
by the option terms or the date which is 10 years and one day after the date of
grant. The option price per share ("Option Price") for any Stock Option awarded
shall not be less than the greater of par value or the Fair Market Value of a
share of Common Stock on the date the Stock Option is awarded. Each Stock
Option awarded under the Program shall be a "nonqualified stock option" for tax
purposes unless the Stock Option satisfies all of the requirements of section
422 of the Internal Revenue Code of 1986, as amended, and the Committee
designates such Stock Option as an "Incentive Stock Option". No person shall
receive, in any calendar year, Stock Options which, in the aggregate, represent
more than 500,000 shares of Common Stock, subject to adjustment as set forth in
Section 4.4.
5.2 Manner of Exercise. A Stock Option may be exercised, in whole or in
part, by giving written notice to Baxter prior to the date on which the Stock
Option expires; provided, however, that a Stock Option may only be exercised
with respect to whole shares of Common Stock. Such notice shall specify the
number of shares of Common Stock to be purchased and shall be accompanied by
payment of the Option Price for such shares in such form and manner as the
Committee may from time to time approve, provided, however, that shares of
Common Stock may not be used to pay any portion of the Option Price unless such
shares are shares of Common Stock for which the holder thereof has good title,
free and clear of all liens and encumbrances and which such holder either (i)
has held for at least six months or (ii) has purchased on the open market. The
Committee may establish attestation procedures to be used in lieu of the actual
delivery of shares in payment of the Option Price.
5.3 Substitution of Cash. Notwithstanding any provision in this Program to
the contrary, or any provision in any agreement evidencing a Stock Option
awarded hereunder to the contrary, in the event of a
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Change in Control pursuant to paragraph (1) or (2) of subsection 11.10, or in
the event of a Change in Control pursuant to paragraph (3) or (4) of subsection
11.10 in connection with which the holders of Common Stock receive
consideration other than shares of Common Stock that are registered under
Section 12 of the Exchange Act, the Committee shall have the authority to
require that any outstanding Stock Option be surrendered to the Company by the
holder thereof for cancellation by the Company, and the holder thereof shall
receive, within ten days of the occurrence of such Change in Control, a cash
payment from the Company in an amount equal to the number of shares of Common
Stock then subject to such Stock Option, multiplied by the excess, if any, of
the greater of (A) the highest per share price offered to stockholders of
Baxter in any transaction whereby the Change in Control takes place or (B) the
Fair Market Value of a share of Common Stock on the date of occurrence of the
Change in Control, over the purchase price per share of Common Stock subject to
the Stock Option.
6. Stock Awards. Subject to the terms and conditions of the Program, the
Committee shall designate the employees who shall be awarded shares of Common
Stock without restrictions ("Stock Awards"), under the Program and shall
determine the number and terms of the Stock Awards to be awarded to each of
them. Stock Awards are subject to the following specific limitations. No person
subject to section 16(a) of the Exchange Act may receive a Stock Award, and no
person eligible to receive a Stock Award may receive a Stock Award representing
more than 2,500 shares of Common Stock in any calendar year, subject to
adjustment as set forth in Section 4.4.
7. Restricted Stock.
7.1 Awards. Subject to the terms and conditions of the Program, the
Committee shall designate the employees to whom shares of Common Stock, subject
to restrictions ("Restricted Stock"), shall be awarded under the Program and
determine the number of shares and the terms and conditions of each such award.
Each Restricted Stock award shall entitle the Participant to receive shares of
Common Stock upon the terms and conditions specified by the Committee and
subject to the following provisions of this Section 7 and the provisions of
Section 10, and no person eligible to receive Restricted Stock may receive more
than 50,000 shares in any calendar year, subject to adjustment as set forth in
Section 4.4.
7.2 Restrictions. All shares of Restricted Stock transferred or sold
hereunder shall be subject to such restrictions as the Committee may determine,
including, without limitation, any or all of the following:
(a) a required period of employment with the Company, as determined by
the Committee, prior to the vesting of the shares of Restricted Stock;
(b) a prohibition against the sale, assignment, transfer, pledge,
hypothecation or other encumbrance of the shares of Restricted Stock for a
specified period as determined by the Committee;
(c) a requirement that the holder of shares of Restricted Stock forfeit
(or in the case of shares sold to a Participant, resell to the Company at
his or her cost) all or a part of such shares in the event of termination of
his or her employment during any period in which such shares are subject to
restrictions; or
(d) a prohibition against employment of the holder of such Restricted
Stock by any competitor of the Company or against such holder's
dissemination of any secret or confidential information belonging to the
Company.
All restrictions on shares of Restricted Stock awarded pursuant to the
Program shall expire at such time or times as the Committee shall specify.
7.3 Registration of Shares. Shares of Restricted Stock awarded pursuant to
the Program shall be registered in the name of the Participant and, if such
shares are certificated, in the discretion of the Committee, may be deposited
in a bank designated by the Committee or with Baxter. The Committee may require
a stock power endorsed in blank with respect to shares of Restricted Stock
whether or not certificated.
7.4 Stockholder Rights. Subject to the terms and conditions of the Program,
during any period in which shares of Restricted Stock are subject to forfeiture
or restrictions on transfer, each Participant who has been awarded shares of
Restricted Stock shall have such rights of a stockholder with respect to such
shares as the
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Committee may designate at the time of the award, including the right to vote
such shares and the right to receive all dividends paid on such shares. Unless
otherwise provided by the Committee, stock dividends or non-cash dividends and,
except as otherwise provided by subsection 11.10, any other securities
distributed with respect to Restricted Stock shall be restricted to the same
extent and subject to the same terms and conditions as the Restricted Stock to
which they are attributable.
7.5 Lapse of Restrictions. Subject to the terms and conditions of the
Program, at the end of any time period during which the shares of Restricted
Stock are subject to forfeiture or restrictions on transfer, such shares will
be delivered free of all restrictions to the Participant (or to the
Participant's legal representative, beneficiary or heir).
7.6 Substitution of Cash. The Committee may, in its sole discretion,
substitute cash equal to the Fair Market Value (determined as of the date of
the distribution) of shares of Common Stock otherwise required to be
distributed to a Participant in accordance with this Section 7.
8. Performance Shares.
8.1 Awards. A performance share is an award which shall be paid in shares
of Common Stock, as described below. Subject to the terms and conditions of the
Program, the Committee shall designate the employees to whom Performance Shares
are to be awarded in accordance with this Section 8 and the number of shares
subject to the award and the terms and conditions of such awards. No person
eligible for a Performance Share Award shall receive more than 50,000 shares in
any calendar year, subject to adjustment as set forth in Section 4.4. Each
Performance Share awarded pursuant to this Section 8 shall entitle the
Participant to a payment in the form of one share of Common Stock upon the
attainment of such performance goals and other terms and conditions as may be
specified by the Committee.
8.2 No Adjustments. Except as otherwise provided by the Committee, no
adjustment shall be made in Performance Shares awarded on account of cash
dividends which may be paid or other rights which may be provided to the
holders of Common Stock prior to the end of any period for which performance
goals were established.
8.3 Substitution of Cash. The Committee may, in its sole discretion,
substitute cash equal to the Fair Market Value (determined as of the date of
the issuance) of shares of Common Stock otherwise required to be issued to a
Participant in accordance with this Section 8.
9. Other Incentives. In addition to the incentives described in Sections 5
through 8 above and subject to the terms and conditions of the Program, the
Committee may grant other incentives ("Other Incentives"), payable in cash or
in kind, under the Program as it determines to be in the best interest of the
Company.
10. Performance Goals and Application of Tax Deduction Limitations.
Compensation attributable to a Stock Option awarded to a Participant is
intended to satisfy the requirements of the exception for qualified
performance-based compensation within the meaning of section 162(m) and the
related regulations under the Internal Revenue Code of 1986, as amended. All
awards of Restricted Stock, Performance Shares, and Other Incentives under the
Program, to persons subject to section 16(a) of the Exchange Act, shall be made
subject to the attainment of performance goals relating to one or more of the
business criteria within the meaning of section 162(m) identified above,
including but not limited to, stock price, market share, sales, net earnings,
earnings per share, return on equity, costs, and cash flow, as determined by
the Committee from time to time.
11. General.
11.1 Effective Date. The Program will become effective upon its approval by
the affirmative vote of the holders of a majority of the voting stock of Baxter
present in person or represented by proxy and entitled to vote thereon at a
meeting of Baxter's stockholders. Unless approved within one year after the
date of the Program's adoption by the Board of Directors, the Program shall not
be effective for any purpose. Prior to the approval of the Program by Baxter's
stockholders, the Committee may award incentives, but if such approval is not
received in the specified period, then such awards shall be of no effect.
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11.2 Duration. The Program shall remain in effect until all incentives
granted under the Program have either been satisfied by the issuance of shares
of Common Stock or the payment of cash or been terminated in accordance with
the terms of the Program or the incentive and until all restrictions imposed on
shares of Common Stock issued under the Program have lapsed. No incentive may
be granted under the Program after the tenth anniversary of the date the
Program is approved by Baxter's stockholders.
11.3 Non-transferability of Incentives. No share of Restricted Stock,
Performance Share, or Other Incentive under the Program may be transferred,
pledged, or assigned by the holder thereof (except, in the event of the
holder's death, by will or the laws of descent and distribution to the limited
extent provided in the Program or in the terms of the incentive), and the
Company shall not be required to recognize any attempted assignment of such
rights by any Participant. Stock Options may be transferred by the holder
thereof to the limited extent authorized by rules and procedures established by
the Committee from time to time.
11.4 Effect of Termination of Employment or Death. If a Participant ceases
to be an employee of the Company for any reason, including death, any
incentives then outstanding may be exercised or shall expire in accordance with
the terms of the incentive.
11.5 Compliance with Applicable Law and Withholding.
(a) Notwithstanding any other provision of the Program, Baxter shall have
no obligation to issue any shares of Common Stock under the Program if such
issuance would violate any applicable law or any applicable regulation or
requirement of any securities exchange or similar entity.
(b) Prior to the issuance of any shares of Common Stock under the
Program, Baxter or the Company may require a written statement that the
recipient is acquiring the shares for investment and not for the purpose or
with the intention of distributing the shares and that the recipient will
not dispose of them in violation of the registration requirements of the
Securities Act of 1933.
(c) With respect to any person who is subject to section 16(a) of the
Exchange Act, the Committee may, at any time, add such conditions and
limitations to any incentive or payment under the Program or implement
procedures for the administration of the Program which it deems necessary or
desirable to comply with the requirements of Rule 16b-3 of the Exchange Act.
(d) If, at any time, Baxter, in its sole discretion, determines that the
listing, registration, or qualification (or any updating of any such
document) of any type of incentive, or the shares of Common Stock issuable
pursuant thereto, is necessary on any securities exchange or under any
federal or state securities or blue sky law, or that the consent or approval
of any governmental regulatory body is necessary or desirable as a condition
of, or in connection with, any incentive, the issuance of shares of Common
Stock pursuant to any incentive, or the removal of any restrictions imposed
on shares subject to an incentive, such incentive shall not be granted and
the shares of Common Stock shall not be issued or such restrictions shall
not be removed, as the case may be, in whole or in part, unless such
listing, registration, qualification, consent, or approval shall have been
effected or obtained free of any conditions not acceptable to Baxter.
(e) All incentives and payments under the Program are subject to
withholding of all applicable taxes and the Company shall have the right to
withhold from any award under the Program or to collect as a condition of
any payment under the Program, as applicable, any taxes required by law to
be withheld. To the extent provided by the Committee, a Participant may
elect to have any distribution, or a portion thereof, otherwise required to
be made under the Program to be withheld or to surrender to the Company
previously owned shares of Common Stock to fulfill any tax withholding
obligation.
11.6 No Continued Employment. The Program does not constitute a contract of
employment or continued service, and participation in the Program will not give
any employee or Participant the right to be retained in the employ of the
Company or the right to continue as a director of the Company or any right or
claim to any benefit under the Program unless such right or claim has
specifically accrued under the terms of the Program or the terms of any
incentive under the Program.
11.7 Treatment as a Stockholder. No incentive granted to a Participant
under the Program shall create any rights in such Participant as a stockholder
of Baxter until shares of Common Stock related to the incentive are registered
in the name of the Participant.
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11.8 Deferral Permitted. Payment of cash to a Participant or distribution
of any shares of Common Stock to which a Participant is entitled under any
incentive shall be made as provided in the terms of the incentive. Payment may
be deferred at the request of the Participant to the extent provided in the
incentive.
11.9 Amendment of the Program. The Board may, at any time and in any
manner, amend, suspend, or terminate the Program or any incentive outstanding
under the Program; provided, however, that no such amendment or discontinuance
shall:
(a) be made without stockholder approval to the extent such approval is
required by law, agreement or the rules of any exchange or automated
quotation system upon which the Common Stock is listed or quoted;
(b) alter or impair the rights of Participants with respect to incentives
previously made under the Program without the consent of the holder thereof;
or
(c) make any change that would disqualify awards made under the Program,
intended to be so qualified, from the exemption provided by Rule 16b-3 of
the Exchange Act.
11.10 Acceleration of Incentives. Notwithstanding any provision in this
Program to the contrary or the normal terms of vesting in any incentive, (a)
the restrictions on all shares of Restricted Stock awarded shall lapse
immediately, (b) all outstanding Stock Options will become exercisable
immediately, and (c) all performance goals shall be deemed to be met and
payment made immediately if a Change in Control occurs. For purposes of this
Program, a "Change in Control" shall have occurred if:
(1) any "Person", as such term is used in Section 13(d) and 14(d) of the
Exchange Act (other than Baxter, any corporation owned, directly or
indirectly, by the stockholders of Baxter in substantially the same
proportions as their ownership of stock of Baxter, and any trustee or other
fiduciary holding securities under an employee benefit plan of Baxter or
such proportionately owned corporation), is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of Baxter representing 30% or more of the combined
voting power of Baxter's then outstanding securities;
(2) during any period of not more than 24 months, individuals who at the
beginning of such period constitute the Board of Directors of Baxter, and
any new director (other than a director designated by a Person who has
entered into an agreement with Baxter to effect a transaction described in
paragraph (1), (3) or (4) of this subsection 11.10) whose election by the
board or nomination for election by Baxter's stockholders was approved by a
vote of at least two-thirds of the directors then still in office who either
were directors at the beginning of the period or whose election or
nomination for election was previously so approved, cease for any reason to
constitute at least a majority thereof;
(3) a merger or consolidation of Baxter with any other corporation shall
be consummated, other than (A) a merger or consolidation which would result
in the voting securities of Baxter outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) more than 60% of
the combined voting power of the voting securities of Baxter or such
surviving entity outstanding immediately after such merger or consolidation,
or (B) a merger or consolidation effected to implement a recapitalization of
Baxter (or similar transaction) in which no Person acquires more than 30% of
the combined voting power of Baxter's then outstanding securities; or
(4) a plan of complete liquidation or dissolution of Baxter or an
agreement for the sale or disposition by Baxter of all or substantially all
of Baxter's assets (or any transaction having a similar effect) shall be
consummated.
11.11 Definition of Fair Market Value. Except as otherwise determined by
the Committee, the "Fair Market Value" of a share of Common Stock as of any
date shall be equal to the closing sale price of a share of Common Stock as
reported on The National Association of Securities Dealers' New York Stock
Exchange Composite Reporting Tape (or if the Common Stock is not traded on the
New York Stock Exchange, the closing sale price on the exchange on which it is
traded or as reported by an applicable automated quotation system) ("Composite
Tape") on the applicable date or, if no sales of Common Stock are reported on
such date, the closing sale price of a share of Common Stock on the date the
Common Stock was last reported on the Composite Tape (or such other exchange or
automated quotation system, if applicable).
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Amendment No. 1
to
Baxter International Inc.
2001 Incentive Compensation Program
Effective as of February 26, 2002, the third sentence of Section 5.1 of the
Baxter International Inc. 2001 Incentive Compensation Program is amended to
read in its entirety as follows:
Each Stock Option shall expire on (i) the date provided by the option
terms, which date shall be no later than 11 years after the date of
grant or, (ii) if the option terms do not provide for an expiration
date, the date which is 10 years and one day after the date of grant.
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