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EXHIBIT 99(b)
ALLEGIANCE CORPORATION
1996 INCENTIVE COMPENSATION PROGRAM
1. PURPOSE. The purpose of the Allegiance Corporation 1996 Incentive
Compensation Program ("Program") is to increase stockholder value and
to advance the interests of Allegiance Corporation ("Allegiance") and
its subsidiaries (collectively, the "Company") by providing a variety
of economic incentives designed to attract, retain, and motivate
officers and other key employees and by strengthening the mutuality of
interest between such employees and the Company's stockholders. As used
in this Program, the term "subsidiary" means any business, whether or
not incorporated, in which Allegiance has a direct or indirect
ownership interest.
2. ADMINISTRATION.
2.1 ADMINISTRATION BY COMMITTEE. The Program shall be administered
by the Compensation Committee of the Allegiance 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. The Chief Executive Officer
of the Company may 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 made to
or held by persons who, at the time of the exercise of such
authority, are not subject to Section 16(a) of the Exchange
Act.
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 12.7, and (d) 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 designate from time to time the employees of the
Company (including employees who are directors of Allegiance) who shall
receive incentives under the Program
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("Participants"). All officers and other full-time employees of the
Company are eligible to receive incentives under the Program.
Participation, the grant of incentives and any related performance
goals for persons subject to Section 16(a) of the Exchange Act must be
determined by the Committee.
4. SHARES SUBJECT TO THE PROGRAM
4.1 NUMBER OF SHARES RESERVED. Subject to adjustment in accordance
with subsections 4.2 and 4.3, the aggregate number of shares
of Allegiance Common Stock ("Common Stock") available for
incentives under the Program shall be 9,683,000 shares. All
shares of Common Stock issued under the Program may be
authorized and unissued shares or treasury shares. All of such
shares may, but need not, be issued pursuant to the exercise
of Incentive Stock Options. The maximum number of shares of
Common Stock which may be granted in the form of Restricted
Stock shall be 750,000. The maximum number of shares that may
be granted in the form of a Stock Option or Stock Appreciation
Right pursuant to any award granted in any fiscal year to a
Participant shall be 1,000,000 shares.
4.2 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
be available again for incentives under the Program.
(b) In the event that shares of Common Stock are
delivered under the Program and are thereafter
forfeited or reacquired by the Company pursuant to
rights reserved upon the award thereof, such
forfeited or reacquired shares shall be available
again for incentives under the Program.
4.3 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 and the terms of any outstanding incentives (including
the price at which shares of stock may be issued pursuant to
an outstanding incentive) 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.
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Each Stock Option shall expire not later than 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 Fair Market Value of a share of Common Stock on
the date the Stock Option is granted. 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".
5.2 MANNER OF EXERCISE. A Stock Option may be exercised by notice
to the Company specifying the number of shares of Common Stock
to be purchased and shall be accompanied by payment of the
Option Price by check or, in the discretion of the Committee,
by the delivery of shares of Common Stock then owned by the
Participant or certification of such ownership. In the
discretion of the Committee, payment may also be made by
delivering a properly executed exercise notice to the Company,
together with a copy of irrevocable instructions to a broker
to deliver promptly to the Company the amount of sale or loan
proceeds to pay the exercise price.
5.3 DIVIDEND EQUIVALENTS. The Committee may grant dividend
equivalents in connection with any option granted under this
Program. Such dividend equivalents may be payable in cash or
in shares of Common Stock upon such terms and conditions as
the Committee in its sole discretion deems appropriate.
6. STOCK APPRECIATION RIGHTS.
6.1 GRANT OF SARS. Subject to the terms and conditions of the
Program, the Committee shall designate the employees to whom
stock appreciation rights ("SARs") are to be awarded under the
Program and shall determine the number, type and terms of the
SARs to be awarded to each of them. An SAR may be granted in
tandem with a stock option granted under the Program, or the
SAR may be granted on a free-standing basis. Tandem SARs may
be granted either at or after the time of grant of a stock
option, provided that, in the case of an Incentive Stock
Option a tandem SAR may be granted only at the time of the
grant of such option. The grant price of a tandem SAR shall
equal the option price of the related option. The grant price
of a free-standing SAR shall be equal to the Fair Market Value
of a share of Common Stock on the date of grant of the SAR.
6.2 EXERCISE OF TANDEM SARS. Tandem SARs may be exercised for all
or part of the shares subject to the related option upon the
surrender of the right to exercise the equivalent portion of
the related option. A tandem SAR shall terminate and no longer
be exercisable upon termination or exercise of the related
stock option. A tandem SAR may be exercised only with respect
to the shares for which its related option is then
exercisable.
6.3 EXERCISE OF FREE-STANDING SARS. Free-standing SARs may be
exercised upon such terms and conditions as the Committee, in
its sole discretion, determines.
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6.4 TERM OF SARS. The term of an SAR granted under the Program
shall be determined by the Committee in its sole discretion;
provided, however, that such term shall not exceed the option
term in the case of a tandem SAP, or ten years in the case of
a free-standing SAR.
6.5 PAYMENT OF SAR AMOUNT. Upon exercise of an SAR, a Participant
shall be entitled to receive payment from the Company in an
amount determined by multiplying:
(a) The excess of the Fair Market Value of a share of
Common Stock on the date of exercise over the grant
price of the SAR by
(b) The number of shares with respect to which the SAR is
exercised.
At the discretion of the Committee, the payment to be made
upon an SAR exercise may be in cash, in shares of Common Stock
of equivalent value, or in some combination thereof.
7. 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. 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.
8. RESTRICTED STOCK.
8.1 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 or sold under the Program and determine the
number of shares and the terms and conditions of each such
award.
8.2 RESTRICTIONS. All shares of Restricted Stock shall be subject
to such restrictions as the Committee may determine,
including, without limitation, any of the following:
(a) a prohibition against the sale, assignment, transfer,
pledge, hypothecation, or other encumbrance of the
shares of Restricted Stock for a specified period;
(b) 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) such shares in the event of termination of his
or her employment during any period in which such
shares are subject to restrictions; or
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(c) a prohibition against employment of the holder by any
competitor of the Company or against such holder's
dissemination of any confidential information
belonging to the Company.
All restrictions shall expire at such time as the Committee
shall specify.
8.3 STOCKHOLDER RIGHTS. Shares of Restricted Stock shall be
registered in the name of the Participant. Each Participant
who has been awarded shares of Restricted Stock shall have
such rights of a stockholder with respect to such shares as
the Committee may designate at the time of the award,
including the right to vote such shares and the right to
receive dividends paid on such shares. Unless otherwise
provided by the Committee, stock dividends or non-cash
dividends and any other securities distributed with respect to
Restricted Stock shall be subject to the same restrictions and
other terms and conditions as the Restricted Stock to which
they are attributable.
8.4 LAPSE OF RESTRICTIONS. Shares of Restricted Stock will be
delivered free of all restrictions to the Participant (or to
the Participant's legal representative, beneficiary, or heir)
when the shares are no longer subject to forfeiture or
restrictions on transfer.
9. PERFORMANCE SHARES.
9.1 AWARDS. Subject to the terms and conditions of the Program,
the Committee shall designate the employees to whom
Performance Shares are to be awarded and determine the number
of shares and the terms and conditions of each such award.
Each Performance Share shall entitle the Participant to a
payment in the form of one share of Common Stock upon the
attainment of performance goals and other terms and conditions
specified by the Committee.
9.2 NO ADJUSTMENTS. Except as otherwise provided by the Committee
or in section 4.3 hereof, 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 performance
period.
9.3 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
hereunder.
10. OTHER INCENTIVES. In addition to the incentives described in Sections 5
through 9 above and subject to the terms and conditions of the Program,
the Committee may grant other incentives ("Other Incentives"), payable
in cash or in stock, under the Program as it determines to be in the
best interest of the Company.
11. PERFORMANCE GOALS. Awards of Restricted Stock, Performance Shares and
other incentives under the Program may be made subject to the
attainment of performance
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goals relating to one or more business criteria within the meaning of
Section 162(m) of the Internal Revenue Code of 1986, as amended,
including, but not limited to, stock price, market share, sales,
earnings per share, return on equity, costs and cash flow, as
determined by the Committee from time to time.
12. GENERAL
12.1 EFFECTIVE DATE. The Program will become effective upon its
approval by Baxter International, Inc., Allegiance's sole
stockholder.
12.2 DURATION. The Program shall remain in effect until all
incentives granted under the Program have been satisfied by
the issuance of shares of Common Stock, lapse of restrictions
or the payment of cash, or have been terminated in accordance
with the terms of the Program or the incentive. No incentive
may be granted under the Program after the tenth anniversary
of its effective date.
12.3 NON-TRANSFERABILITY OF INCENTIVES. No incentive granted under
the Program may be transferred, pledged, or assigned by the
employee except by will or the laws of descent and
distribution in the event of death, and the Company shall not
be required to recognize any attempted assignment of such
rights by any Participant. During a Participant's lifetime,
awards may be exercised only by the Participant or by the
Participant's guardian or legal representative.
Notwithstanding the foregoing, at the discretion of the
Committee, a grant of an award may permit the transfer of the
award by the Participant solely to members of the
Participant's immediate family or trusts or family
partnerships for the benefit of such persons, subject to such
terms and conditions as may be established by the Committee.
12.4 COMPLIANCE WITH APPLICABLE LAW AND WITHHOLDING.
(a) The award of any benefit under the Program may also
be made subject to such other provisions as the
Committee determines appropriate, including, without
limitation, provisions to comply with federal and
state securities laws or stock exchange requirements.
(b) If, at any time, the Company, in its sole discretion,
determines that the listing, registration, or
qualification 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, the
issuance of shares of Common Stock pursuant to any
incentive, or the removal of any restrictions imposed
on shares subject to an incentive, may be delayed
until such listing, registration, qualification,
consent, or approval is effected.
(c) 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
permitted by the Committee, a Participant may elect
to have any
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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.
12.5 NO CONTINUED EMPLOYMENT. Participation in the Program will not
give any Participant the right to be retained in the employ 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 any incentive under the Program.
12.6 TREATMENT AS A STOCKHOLDER. No incentive granted to a
Participant under the Program shall create any rights in such
Participant as a stockholder of the Company until shares of
Common Stock related to the incentive are registered in the
name of the Participant.
12.7 AMENDMENT OR DISCONTINUATION OF THE PROGRAM. The Board of
Directors may amend, suspend, or discontinue the Program at
any time; provided, however, that no amendment, suspension or
discontinuance shall adversely affect any outstanding benefit
and if any law, agreement or exchange on which Common Stock of
Allegiance is traded requires stockholder approval for an
amendment to become effective, no such amendment shall become
effective unless approved by vote of Allegiance's
stockholders.
12.8 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 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 Allegiance,
any corporation owned, directly or indirectly, by the
stockholders of Allegiance in substantially the same
proportions as their ownership of stock of
Allegiance, and any trustee or other fiduciary,
holding securities under an employee benefit plan of
Allegiance or such proportionately owned
corporation), is or becomes the "beneficial owner"
(as defined in Rule l3d-3 under the Exchange Act),
directly or indirectly, of securities of Allegiance
representing 20% or more of the combined voting power
of Allegiance'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
Allegiance, and any new director (other than a
director designated by a Person who has entered into
an agreement with Allegiance to effect a transaction
described in paragraph (1), (3), or (4) of this
subsection 13.8) whose election by the board or
nomination for election by Allegiance'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
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or nomination for election as previously so approved,
cease for any reason to constitute at least a
majority thereof,
(3) the stockholders of Allegiance approve a merger or
consolidation of Allegiance with any other
corporation, other than (A) a merger or consolidation
which would result in the voting securities of
Allegiance 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
Allegiance or such surviving entity outstanding
immediately after such merger or consolidation, or (B)
a merger or consolidation effected to implement a
recapitalization of Allegiance (or similar
transaction) in which no Person acquires more than 20%
of the combined voting power of Allegiance's then
outstanding securities; or
(4) the stockholders of Allegiance approve a plan of
complete liquidation of Allegiance or an agreement
for the sale or disposition by Allegiance of all or
substantially all of its assets (or any transaction
having a similar effect).
The Committee may also determine, in its discretion, that a
sale of a substantial portion of Allegiance's assets or one of
its businesses constitutes a "Change of Control" with respect
to incentives held by Participants employed in the affected
operation.
12.9 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 on that date as reported
on the New York Stock Exchange Composite Reporting Tape.
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