UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No.)
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Baxter International Inc.
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(Name of Registrant as Specified In Its Charter)
N/A
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Letter to Stockholders
Baxter International Inc. 847.948.2000
One Baxter Parkway
Deerfield, Illinois 60015
[LOGO] Baxter
March 22, 2002
To our Stockholders:
The Board of Directors joins me in inviting you to attend the 2002 Annual
Meeting of Stockholders. The meeting will be held at the Drury Lane Theatre
in Oakbrook Terrace, Illinois, on Tuesday, May 7, 2002. The meeting will
begin at 10:30 a.m. Central time. Registration will begin at 9:00 a.m. and
refreshments will be provided.
At the meeting, in addition to covering matters in the proxy statement, I
will report on Baxter's business and our achievements during 2001. As I
stated in my letter to shareholders in the enclosed Annual Report, I
believe that you can be proud, excited and confident to be a shareholder of
Baxter. I look forward to discussing our plans for Baxter's future at the
Annual Meeting, and I hope to see you there.
Please note that admittance to the Annual Meeting will be limited to
stockholders eligible to vote or their authorized representatives. Please
follow the instructions on page 29 of the proxy statement under the heading
''Attending the Annual Meeting'' if you wish to attend. If your shares are
held in the name of a broker or bank, you will need to bring proof of
ownership, such as your most recent account statement.
We hope you will be able to attend the meeting.
Sincerely,
/s/ Harry M. Jansen Kraemer, Jr.
HARRY M. JANSEN KRAEMER, JR.
Chairman of the Board and
Chief Executive Officer
[GRAPHIC]
Recycled Printed on Recycled Paper
Notice of Annual Meeting
Baxter International Inc.
One Baxter Parkway
Deerfield, Illinois 60015
[LOGO] Baxter
March 22, 2002
Notice of Annual Meeting of Stockholders
The 2002 Annual Meeting of Stockholders of Baxter International Inc. will
be held at the Drury Lane Theatre in Oakbrook Terrace, Illinois, on
Tuesday, May 7, 2002 at 10:30 a.m. Central time, for the following purposes:
1. To elect four directors to hold office for three years;
2. To ratify the appointment of PricewaterhouseCoopers LLP as independent
accountants for Baxter in 2002;
3. To approve a proposal to amend Baxter's Restated Certificate of
Incorporation, as amended, to increase the number of authorized shares
of common stock;
4. To approve Baxter's Officer Incentive Compensation Plan;
5. To act on a stockholder proposal relating to cumulative voting in the
election of directors; and
6. To transact any other business which is properly presented at the
meeting.
Stockholders of record at the close of business on March 8, 2002 will be
entitled to vote at the meeting. A list of these stockholders will be made
available to any stockholder, for any purpose germane to the meeting, at
Baxter's Corporate Headquarters located at One Baxter Parkway, Deerfield,
Illinois for the 10-day period prior to the meeting.
Even if you plan to attend the Annual Meeting in person, please read these
proxy materials and cast your vote on the matters that will be presented at
the meeting. You have the option of voting your shares through the
Internet, by telephone or by mailing the enclosed proxy card. Instructions
for our registered stockholders are described under the question ''How do I
vote?'' on page 2 of the proxy statement.
Finally, if you receive more than one of these mailings at the same
address, or if you wish to receive future mailings electronically, please
follow the instructions on page 29 of the proxy statement under the heading
''Reducing Mailing Expenses.''
By order of the Board of Directors,
/s/ Jan Stern Reed
JAN STERN REED
Corporate Secretary and
Associate General Counsel
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[LOGO] Baxter
Baxter International Inc., One Baxter Parkway, Deerfield, Illinois 60015,
847.948.2000
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This Proxy Statement and the accompanying proxy card are being mailed,
beginning on or about March 22, 2002, to owners of shares of Baxter common
stock in connection with the solicitation of proxies by the Board of Directors
for the 2002 Annual Meeting of Stockholders.
Table of Contents
Questions and Answers about Voting......................................................... 2
Management Proposals:
Election of Directors--Proposal 1 on the Proxy Card..................................... 4
Ratification of Appointment of Independent Accountants--Proposal 2 on the Proxy Card.... 4
Approval of Increase in Authorized Shares of Common Stock--Proposal 3 on the Proxy Card. 5
Approval of Officer Incentive Compensation Plan--Proposal 4 on the Proxy Card........... 7
Board of Directors:
Director Biographies.................................................................... 9
Corporate Governance.................................................................... 12
Committees of the Board................................................................. 12
Compensation of Directors............................................................... 13
Audit Committee Report..................................................................... 15
Compensation Committee Report.............................................................. 16
Executive Compensation:
Summary................................................................................. 19
Stock Option Grants..................................................................... 21
Stock Option Exercises.................................................................. 22
Pension Plan, Excess Plans and Supplemental Plans....................................... 22
Ownership of Baxter Stock:
Stock Ownership of Directors and Officers............................................... 24
Section 16(a) Beneficial Ownership Reporting Compliance................................. 25
Baxter's Financial Performance............................................................. 26
Minority Stockholder Proposal:
Cumulative Voting in the Election of Directors--Proposal 5 on the Proxy Card............ 27
Other Information:
Attending the Annual Meeting............................................................ 29
Reducing Mailing Expenses............................................................... 29
Cost of Proxy Solicitation.............................................................. 29
Future Stockholder Proposals and Nominations............................................ 30
Directions to the Annual Meeting........................................................ Back Cover
1
Questions and Answers about Voting
Your shares can be voted at the Annual Meeting only if you vote by proxy or
if you are present and vote in person. Even if you expect to attend the Annual
Meeting, we encourage you to vote by proxy to assure that your shares will be
represented. If you wish to attend the Annual Meeting, please follow the
instructions on page 29 under the heading ''Attending the Annual Meeting.''
Q: Who is entitled to vote?
A: All record holders of Baxter common stock (Common Stock) as of the close of
business on March 8, 2002 are entitled to vote. On that day, approximately
599,948,592 shares were issued and outstanding and eligible to vote. Each
share is entitled to one vote on each matter presented at the Annual
Meeting.
Q: How do I vote?
A: Once again, we offer our registered stockholders three ways to vote, other
than by attending the Annual Meeting and voting in person:
. By mail, using the enclosed proxy card and return envelope;
. By telephone, using the telephone number printed on the proxy card and
following the instructions on the proxy card; or
. Through the Internet, using a unique password printed on your proxy
card and following the instructions on the proxy card.
Q: What does it mean to vote by proxy?
A: It means that you give someone else the right to vote your shares in
accordance with your instructions. In this case, we are asking you to give
your proxy to our Chief Executive Officer and our General Counsel (the
''Proxyholders''). In this way, you assure that your vote will be counted
even if you are unable to attend the Annual Meeting. If you give your proxy
but do not include specific instructions on how to vote, the Proxyholders
will vote your shares for the election of the board's nominees, for the
ratification of the appointment of the independent accountants, for the
approval of the increase in authorized shares of Common Stock, for the
approval of Baxter's Officer Incentive Compensation Plan, and against the
minority stockholder proposal.
Q: On what am I voting?
A: There are five items on the agenda: (1) election of four directors, (2)
ratification of the appointment of the independent accountants, (3)
approval of an increase in the number of authorized shares of Common Stock,
(4) approval of Baxter's Officer Incentive Compensation Plan, all of which
are supported by management, and (5) one minority stockholder proposal
relating to cumulative voting in the election of directors, which is
opposed by management.
Q: What happens if other matters are raised at the meeting?
A: Although we are not aware of any matters to be presented at the Annual
Meeting other than those contained in the Notice of Annual Meeting, if
other matters are properly raised at the meeting in accordance with the
procedures specified in Baxter's bylaws, any proxies given will be voted by
the Proxyholders in accordance with their best judgment, unless you have
indicated otherwise.
Q: Is my vote confidential?
A: Whether voting in person, by mail, by telephone or through the Internet,
you will be given the opportunity to request that your vote be treated as
confidential. If you request confidential treatment, only the inspectors of
election and the proxy tabulator will have access to your vote.
2
Questions and Answers about Voting
Q: What if I submit a proxy and later change my mind?
A: If you have given your proxy and later wish to revoke it, you may do so by
either: giving written notice to the Corporate Secretary; submitting
another proxy bearing a later date (in any of the permitted forms); or
casting a ballot in person at the Annual Meeting.
Q: Who will count the votes?
A: Baxter's transfer agent, EquiServe, will serve as proxy tabulator and count
the votes, and the results will be certified by the inspectors of election.
Q: How is it determined whether a matter has been approved?
A: Assuming a quorum is present, the approval of the matters specified in the
Notice of Annual Meeting will be determined as follows. The four people
receiving the largest number of votes cast at the Annual Meeting will be
elected as directors. Approval of the proposal to increase the number of
authorized shares of Common Stock requires the affirmative vote of a
majority of the outstanding shares entitled to vote on the proposal. For
each other matter, the affirmative vote of a majority of the shares present
or represented by proxy and entitled to vote is required for approval.
Q: What constitutes a quorum?
A: A quorum is present if a majority of the outstanding shares of Common Stock
entitled to vote is represented. Broker non-votes and abstentions will be
counted for purposes of determining whether a quorum is present.
Q: What are broker non-votes?
A: Broker non-votes occur when nominees, such as banks and brokers holding
shares on behalf of beneficial owners, do not receive voting instructions
from the beneficial holders at least ten days before the meeting. If that
happens, the nominees may vote those shares only on matters deemed
''routine'' by the New York Stock Exchange, such as the election of
directors, ratification of the appointment of independent accountants,
adoption of the increase in authorized shares of Common Stock, and approval
of Baxter's Officer Incentive Compensation Plan. On non-routine matters,
such as the minority stockholder proposal, nominees cannot vote unless they
receive voting instructions from beneficial holders, resulting in so-called
''broker non-votes.'' Broker non-votes have no effect on the outcome of any
of the matters specified in the Notice of Annual Meeting, except with
respect to approval of the proposal to increase the number of authorized
shares, for which a broker non-vote will have the effect of a vote against
the proposal.
Q: What effect does an abstention have?
A: Abstentions or directions to withhold authority will have no effect on the
outcome of the election of directors. Abstentions will have the same effect
as a vote against any of the other matters specified in the Notice of
Annual Meeting.
Q: What shares are covered by the proxy card?
A: The proxy card covers all shares held by you of record (i.e., registered in
your name), including those held in Baxter's Dividend Reinvestment Plan,
Shared Investment Plan, executive compensation plans, Employee Stock
Purchase Plan, and shares credited to your Incentive Investment Plan
account held in custody by the plan trustee, CitiStreet.
Q: What if I am a beneficial holder rather than an owner of record?
A: If you hold your shares through a broker, bank, or other nominee, you will
receive separate instructions from the nominee describing how to vote your
shares.
3
Management Proposals
Election of Directors--Proposal 1 on the Proxy Card
Baxter's Board of Directors currently consists of twelve members and is
divided into three classes. Each year, the directors in one of the three
classes are elected to serve a three-year term. At the Annual Meeting, four
directors are proposed for election for a three-year term expiring in 2005.
Martha R. Ingram, whose current term expires on May 7, 2002, has decided not to
run for re-election. In February 2002, the Board elected Joseph B. Martin,
M.D., Ph.D. to serve as a director until the 2002 Annual Meeting of
Stockholders, and Arnold J. Levine, Ph.D. resigned as a member of Baxter's
Board of Directors. The Board has nominated the following persons for election,
all of whom are currently directors of Baxter:
Harry M. Jansen Kraemer, Jr.
Joseph B. Martin, M.D., Ph.D.
Thomas T. Stallkamp
Fred L. Turner
Information regarding each of the nominees follows on page 9. If any
nominee for director becomes unavailable for election, the number of directors
will be reduced. No nominations for directors were received from stockholders,
and no other candidates are eligible for election as directors at the Annual
Meeting.
The Proxyholders intend to vote the shares represented by proxy in favor of
all of the Board's nominees, except to the extent a stockholder withholds
authority to vote for the nominees.
The Board of Directors recommends a vote FOR the election of all of the
nominees for director.
Ratification of Appointment of Independent Accountants--Proposal 2 on the Proxy
Card
The Board of Directors, acting on the recommendation of the Audit
Committee, has appointed PricewaterhouseCoopers LLP (PWC) as independent
accountants for Baxter in 2002. The Board of Directors requests that the
stockholders ratify the appointment. If the stockholders do not ratify the
appointment, the Board of Directors will consider the selection of another
public accounting firm for 2002 and future years.
One or more representatives of PWC will attend the Annual Meeting. They
will have an opportunity to make a statement if they so desire, and they will
be available to answer questions.
Audit Fees
Fees for services performed by PWC during 2001 relating to the audit of the
consolidated annual financial statements, including statutory audits of foreign
subsidiaries, aggregated approximately $4.6 million.
4
Management Proposals
Financial Information Systems Design and Implementation Fees
Fees for professional services performed by PWC during 2001 in connection
with financial information systems design and implementation aggregated
approximately $17.9 million.
All Other Fees
Fees for all other services performed by PWC, including tax assistance and
other consulting services (both audit and non-audit related), during 2001
aggregated approximately $21.6 million.
PWC has recently indicated that it intends to separate its consulting
business into a separate publicly-traded entity in the near future. The Audit
Committee, with the endorsement of the full Board of Directors, has revised its
guidelines with respect to financial systems and management consulting services
provided by PWC. Specifically, the revised guidelines preclude the use of PWC
for any new financial systems and management consulting services until the
separation of PWC's consulting business is complete, but permit the completion
of current projects.
The Proxyholders intend to vote the shares represented by proxy in favor of
the ratification of the appointment of PWC as independent accountants, except
to the extent a stockholder votes against or abstains from voting on this
proposal.
The Board of Directors recommends a vote FOR the ratification of the
appointment of PWC as independent accountants for Baxter in 2002.
Approval of Proposal to Amend Baxter's Restated Certificate of Incorporation,
as Amended, to Increase the Number of Authorized Shares of Common
Stock--Proposal 3 on the Proxy Card
The Board of Directors has proposed that stockholders approve an amendment
to Baxter's Restated Certificate of Incorporation, as amended, to increase the
number of shares of authorized Common Stock of Baxter to two billion shares
from the currently authorized number of one billion shares. The Board of
Directors has declared the proposed amendment to be advisable and has submitted
it to a vote by the stockholders at the Annual Meeting.
If the proposed amendment is approved by the stockholders, Baxter plans to
file a Certificate of Amendment to the Restated Certificate of Incorporation,
as amended, as soon as practicable following the Annual Meeting to increase the
number of shares of authorized Common Stock to two billion.
On March 1, 2002, of the one billion authorized shares of Common Stock, a
total of 608,817,449 shares were outstanding, approximately 8,933,090 shares
were held in treasury and approximately 283,790,754 shares were reserved for
potential issuance in connection with Baxter's obligations to issue stock under
employee compensation plans, including stock options and employee stock
purchase plans, and equity forward arrangements.
The additional shares will enhance Baxter's flexibility in connection with
possible future actions, such as stock splits, stock dividends, acquisitions of
property and securities of other companies, financings, and other corporate
purposes. The Board of Directors will determine whether, when and on what terms
the issuance of shares of Common Stock may be warranted in connection with any
of the foregoing purposes. The Board of Directors believes that it is
beneficial to Baxter to have the additional shares available for such purposes
without delay or the necessity of a special meeting of stockholders. Other than
the obligations referred to above for which shares of Common Stock have already
been reserved, Baxter has no immediate plans, arrangements, commitments or
understandings
5
Management Proposals
with respect to the issuance of any of the additional shares of Common Stock
which would be authorized by the proposed amendment.
At the 2001 Annual Meeting of Stockholders, Baxter's stockholders approved
an amendment to Baxter's Restated Certificate of Incorporation, as amended, to
increase the number of shares of authorized Common Stock to one billion shares.
That increase in the authorized shares of Common Stock enabled Baxter to
proceed with the two-for-one split of its Common Stock effected in May 2001.
If the proposed amendment is approved by the stockholders, the additional
shares will be available for issuance from time to time without further action
by the stockholders (unless required by applicable law, regulatory agencies or
by the rules of any stock exchange on which Baxter's securities may then be
listed) and without first offering those shares to the stockholders.
Stockholders do not have preemptive rights with respect to the Common Stock.
The issuance of Common Stock, or securities convertible into Common Stock, on
other than a pro-rata basis would result in the dilution of a present
stockholder's interest in Baxter.
Baxter has not proposed the increase in the authorized number of shares
with the intention of using the additional shares for anti-takeover purposes,
although Baxter could theoretically use the additional shares to make it more
difficult or to discourage an attempt to acquire control of Baxter. As of this
date, Baxter is unaware of any pending or threatened efforts to acquire control
of Baxter.
The affirmative vote of a majority of the shares of Baxter Common Stock
outstanding as of the close of business on the record date for the Annual
Meeting is required for the approval of the proposed amendment to Baxter's
Restated Certificate of Incorporation, as amended.
At the Annual Meeting, the following resolution will be introduced:
RESOLVED, that the Restated Certificate of Incorporation, as amended,
of this Corporation, be amended by deleting the first sentence of Article
Fourth in its entirety and inserting, in lieu thereof, the following new
first sentence of Article Fourth, providing in its entirety as follows:
FOURTH: The total number of shares of stock which the corporation shall
have authority to issue is two billion, one hundred million (2,100,000,000)
shares, of which one hundred million (100,000,000) shares of no par value
shall be preference stock (the "Preference Stock") and of which two billion
(2,000,000,000) shares, of the par value of U.S. one dollar (U.S. $1.00)
each, amounting in the aggregate to U.S. two billion dollars (U.S.
$2,000,000,000), shall be common stock (the "Common Stock").
The Proxyholders intend to vote the shares represented by proxy in favor of
the proposed amendment, except to the extent a stockholder votes against or
abstains from voting on this proposal.
The Board of Directors recommends a vote FOR the approval of the proposed
amendment to the Restated Certificate of Incorporation, as amended, to increase
the number of authorized shares of Common Stock.
6
Management Proposals
Approval of Officer Incentive Compensation Plan--Proposal 4 on the Proxy Card
The Compensation Committee adopted the Officer Incentive Compensation Plan
(the "Bonus Plan"), a cash bonus plan in which all of Baxter's executive
officers are eligible to participate, in February 2002, subject to stockholder
approval in compliance with Section 162(m) of the Internal Revenue Code.
Section 162(m) generally prevents a publicly held corporation from taking a tax
deduction for compensation in excess of $1 million per year which it pays to
the chief executive officer or any of the four next most highly compensated
executive officers for whom proxy disclosure is required. (These five
executives are referred to as the "named executive officers" throughout this
proxy statement.) However, "qualified performance-based compensation" is not
subject to the $1 million deduction limit. To qualify for the qualified
performance-based compensation exemption, compensation must be payable only
upon the attainment of preestablished performance goals. In addition, the
employees eligible to receive compensation, the business criteria on which the
performance goals are based and the maximum amount of compensation that may be
paid to a named executive officer, must be approved by the stockholders before
the payments are made.
The principal features of the Bonus Plan are described below. The Bonus
Plan was adopted pursuant to the Baxter International Inc. 2001 Incentive
Compensation Program, which was approved by Baxter's stockholders at the 2001
Annual Meeting of Stockholders. If the Bonus Plan is not approved by Baxter's
stockholders, the Bonus Plan will be terminated and no payments under the Bonus
Plan will be made to any executive officers. Previous bonus payments have been
made to the executive officers for the past five years under a bonus plan
approved by the stockholders in 1997 that is similar to the new Bonus Plan. The
regulations under Section 162(m) require that the material terms of the
company's bonus plan be approved by stockholders every five years.
Principal Features of the Bonus Plan
Each year, the Compensation Committee establishes a cash bonus range for
each executive officer participating in the Bonus Plan. The bonus range is
established based on compensation data from comparable companies. Please refer
to the Compensation Committee report on page 16 for more information on the
comparable companies. No named executive officer may receive a bonus under the
Bonus Plan in any year in excess of $3 million.
At the same time, the Compensation Committee also establishes performance
goals for Baxter based on one or more of the following business criteria: net
income, operational cash flow, sales, Common Stock price, earnings per share,
total shareholder return, gross profit ratio, economic value added, return on
assets and return on equity. After results are reported, the Compensation
Committee certifies the extent to which Baxter achieved its performance goals.
The Compensation Committee has the discretion to reduce the amount of the bonus
that would otherwise be payable to an executive officer based solely on
achievement of the specified financial performance goals. Specifically, the
Committee determines the amount of the bonus that is payable to each Bonus Plan
participant based on achievement of Baxter's performance goals and each
officer's individual performance level.
In February 2002, the Compensation Committee adopted 2002 performance goals
for Baxter under the Bonus Plan. It also established a bonus range for 2002 for
each participant in the Bonus Plan. The 2002 performance goals for Baxter are
based on sales, earnings per share, gross profit ratio, and operational cash
flow. The named executive officers' 2002 bonus ranges are as follows:
7
Management Proposals
Mr. Kraemer--$0-$2,081,200; Mr. Heller--$0-$1,350,000;
Mr. Anderson--$0-$1,058,400; Mr. Glanzmann--$0-$982,800; and Mr. del
Salto--$0-$961,200. There are a total of 20 executive officer participants in
the Bonus Plan for 2002, including the named executive officers. The aggregate
2002 bonus range for all 20 executive officer participants is $0-$16,643,800.
For 2003 and future years, the Compensation Committee will establish
performance goals for Baxter, select executive officers for participation and
establish bonus ranges for participants under the Bonus Plan within the first
90 days of each year. Currently, it is not possible to determine the number of
executive officer participants or participant bonus ranges under the Bonus Plan
for 2003 and future years.
The Compensation Committee may amend or terminate the Bonus Plan at any
time. No amendment which requires stockholder approval to maintain the Bonus
Plan's compliance with Section 162(m) will be effective unless the necessary
stockholder approval is received.
The Board of Directors recommends a vote FOR approval of the Officer
Incentive Compensation Plan.
8
Board of Directors
Director Biographies
Nominees for Election as Directors (Term Expires 2005)
[PHOTO] Harry M. Jansen Kraemer, Jr., age 47, has been a director of Baxter
since 1995 and chairman of the board since January 1, 2000. Mr.
Kraemer has been president of Baxter since 1997 and chief executive
officer since January 1, 1999. From 1993 to 1997, he served as senior
vice president and chief financial officer of Baxter. Mr. Kraemer also
serves as a director of Comdisco Inc. and Science Applications
International Corporation.
[PHOTO] Joseph B. Martin, M.D., Ph.D., age 63, was elected as a director of
Baxter in February 2002. Dr. Martin has served as the Dean of the
Harvard Faculty of Medicine since July 1997. He was Chancellor of the
University of California, San Francisco from 1993 to 1997 and Dean of
the University of California, San Francisco School of Medicine from
1989 to 1993. Dr. Martin serves as a director of Cytyc Corporation and
Scientific Learning Corp.
[PHOTO] Mr. Stallkamp is vice chairman and chief executive officer of MSX
International, Inc., a global provider of technology-driven
engineering, business and specialized staffing services. From 1980
through 1999, Mr. Stallkamp held various positions with
DaimlerChrysler Corporation and its predecessor Chrysler Corporation,
the most recent of which were vice chairman and president. Mr.
Stallkamp also serves as a director of Kmart Corporation and Metaldyne
Corp.
[PHOTO] Fred L. Turner, age 69, has been a director of Baxter since 1982. Mr.
Turner is senior chairman of McDonald's Corporation, a restaurant
licensor. Mr. Turner previously was chairman of the board and chief
executive officer of McDonald's Corporation. He joined McDonald's in
1956. Mr. Turner is a Life Trustee of Ronald McDonald House Charities,
Inc., a not-for-profit corporation. Mr. Turner also serves as a
director of Aon Corporation and W. W. Grainger, Inc.
9
Board of Directors
Directors Continuing in Office (Term Expires 2003)
[PHOTO] Walter E. Boomer, age 63, has been a director of Baxter since 1997. Since
March 1997, General Boomer has served as president and chief executive officer
of Rogers Corporation, a manufacturer of specialty materials for use in the
communication, transportation, imaging and computer markets. From 1994
through 1996, he served as executive vice president of McDermott International
Inc. and president of the Babcock & Wilcox Power Generation Group. In 1994,
General Boomer retired as a general and assistant commandant of the United
States Marine Corps after 34 years of service. General Boomer also serves as a
director of Cytyc Corporation and Taylor Energy Company.
[PHOTO] John W. Colloton, age 71, has been a director of Baxter since 1989. From 1971
to 1993, Mr. Colloton served as the director of the University of Iowa Hospitals
and Clinics, and from 1993 through the year 2000 he was vice president of the
University of Iowa for Statewide Health Services. He is currently Director
Emeritus of the University of Iowa Hospitals and Clinics. Mr. Colloton also
serves as a director of Wellmark Inc. (Iowa-South Dakota Blue Cross & Blue
Shield), Iowa State Bank & Trust Company and Radiologix Inc.
[PHOTO] Susan Crown, age 43, has been a director of Baxter since 1993. Since 1984, Ms.
Crown has been a vice president of Henry Crown and Company, a company
which owns and operates diversified manufacturing operations, real estate and
securities. Ms. Crown also serves as a director of Illinois Tool Works, Inc. and
The Northern Trust Corporation.
[PHOTO] Brian D. Finn, age 41, has been a director of Baxter since 2000. Since 1997, Mr.
Finn has been a partner in Clayton, Dubilier & Rice, Inc., a private equity firm.
Prior to that, he was managing director and co-head of mergers and acquisitions
for Credit Suisse First Boston. Mr. Finn also serves as a director of ICO Global
Communications (Holdings) Limited and Acterna Corporation.
10
Board of Directors
Directors Continuing in Office (Term Expires 2004)
[PHOTO] Pei-yuan Chia, age 63, has served as a director of Baxter since 1996. Mr. Chia
was vice chairman of Citicorp and Citibank, N.A., its principal subsidiary, from
1994 to 1996 when he retired. From 1993 to 1996, he served as a director of
Citicorp and Citibank, N.A., and assumed responsibility for their global
consumer business in 1992. Between 1974 and 1992, Mr. Chia held various
senior management positions in Citicorp and Citibank, N.A. and was Citibank,
N.A.'s senior customer contact for corporate banking activities in Asia. Mr. Chia
also serves as a director of American International Group, Inc. and Bank of
China (Hong Kong), Limited.
[PHOTO] Gail D. Fosler, age 54, was elected as a director of Baxter in July 2001. Since
1989, Ms. Fosler has held several positions with The Conference Board, a
research and business membership organization. Ms. Fosler is currently senior
vice president and chief economist of The Conference Board and directs its
Economics Research Program, which produces economic indicators and
analyses. Ms. Fosler is also a director of Unisys Corporation, H.B. Fuller
Company, DBS Holdings (Singapore) and acts as a Trustee of the John Hancock
Mutual Funds.
[PHOTO] Monroe E. Trout, M.D., age 70, has served as a director of Baxter since 1995.
Dr. Trout was chairman of the board, president and chief executive officer of
American Healthcare Systems, a network of integrated health care systems, from
1987 until he retired in 1994. He was elected president and chief executive
officer of American Healthcare Systems in 1986. Dr. Trout also serves as
chairman of the board of Cytyc Corporation and as a director of Science
Applications International Corporation and West Pharmaceutical Services, Inc.
11
Board of Directors
Corporate Governance
The Board of Directors recognizes the importance of good corporate
governance as a means of addressing the needs of Baxter's stockholders,
employees, customers and community. Baxter first adopted formal corporate
governance principles in 1995. In 1998, the Board of Directors adopted new
Corporate Governance Guidelines which serve as principles addressing the role
of the Board of Directors in the areas of executive compensation, fiduciary
oversight, strategic and succession planning, social responsibility and board
elections. The Corporate Governance Guidelines also set standards relating to
the composition and operation of the Board of Directors and its committees,
including standards relating to the selection, qualification and evaluation of
directors. The Corporate Governance Guidelines are reviewed annually and
revised, as necessary and appropriate, by the Planning and Organization
Committee of the Board. The Guidelines are available upon request from Baxter's
Corporate Secretary.
Pursuant to the Delaware General Corporation Law, under which Baxter is
organized, the business, property and affairs of Baxter are managed under the
direction of the Board of Directors. Members of the Board are kept informed of
Baxter's business through discussions with the Chairman and officers, by
reviewing materials prepared for them by management and by participating in
meetings of the Board and its committees. During 2001, the Board held six
meetings and the committees held a total of 18 meetings. The aggregate
attendance of all current directors at the total number of Board and committee
meetings was over 94 percent.
Committees of the Board
The Board of Directors has six committees. Each committee consists solely
of directors who are not Baxter employees, except the Executive Committee as
noted below. Baxter's bylaws contain a complete description of the duties of
each committee.
The Executive Committee consists of three directors. The committee may
exercise most of the powers of the Board, except those reserved to the Board by
Baxter's bylaws or Delaware law. The Executive Committee did not meet in 2001.
The current members of the Executive Committee are Harry M. Jansen Kraemer, Jr.
(chairman), John W. Colloton and Susan Crown.
The Audit Committee consists of four directors. The committee assists the
Board in fulfilling its responsibility for Baxter's accounting and financial
reporting practices and provides a channel of communication between the Board
and Baxter's internal auditors and independent accountants. The committee also
reviews with the internal auditors and independent accountants the scope of the
annual and interim examinations and examines the effectiveness of Baxter's
accounting and internal control functions through discussions with the internal
auditors, independent accountants and appropriate officers of Baxter. The Audit
Committee met four times in 2001. The current members of the Audit Committee
are Thomas T. Stallkamp (chairman), Pei-yuan Chia, Gail D. Fosler and Fred L.
Turner.
The Compensation Committee consists of four directors. The committee
determines compensation for officers and makes recommendations to the Board
concerning compensation for the Chairman of the Board and Chief Executive
Officer. It also exercises the authority of the Board relating to Baxter's
employee benefit plans. The Compensation Committee met four times in 2001. The
current members of the Compensation Committee are Pei-yuan Chia (chairman),
Walter E. Boomer, Susan Crown and Brian D. Finn.
12
Board of Directors
The Finance Committee consists of four directors. Within limits established
in Baxter's bylaws, the committee exercises the authority of the Board in
connection with financial transactions and assists and advises the Board
regarding Baxter's financial affairs. The Finance Committee met four times in
2001. The current members of the Finance Committee are Brian D. Finn
(chairman), John W. Colloton, Gail D. Fosler and Monroe E. Trout, M.D.
The Planning and Organization Committee consists of five directors. The
committee assists and advises the Board in connection with Board membership,
Board committee structure and membership, general organization and planning
matters and corporate governance issues such as CEO succession planning and CEO
performance evaluations. The committee also considers director candidates.
Pursuant to principles set forth in the Corporate Governance Guidelines, the
committee seeks candidates with high integrity, good judgment and breadth of
experience, among other criteria. The Planning and Organization Committee met
three times in 2001. The current members of the Planning and Organization
Committee are John W. Colloton (chairman), Martha R. Ingram, Thomas T.
Stallkamp, Monroe E. Trout, M.D. and Fred L. Turner.
The Public Policy Committee consists of three directors. The committee
reviews the policies and practices of Baxter to ensure that they are consistent
with its social responsibility to employees, customers and society. In that
regard, the committee reviews the company's annual Sustainability Report, which
addresses Baxter's performance in the areas of economic prosperity, social
responsibility and environmental quality. The Public Policy Committee met three
times in 2001. The current members of the Public Policy Committee are Susan
Crown (chairperson), Walter E. Boomer and Martha R. Ingram.
Compensation of Directors
To further align the interests of the company's non-employee directors with
the company's senior management team and shareholders, the Board of Directors
approved a new Director Compensation Plan, effective May 1, 2001. The following
sections describe the former Director Compensation Plan (Former Director
Compensation Plan) in effect for 2000 and the first four months of 2001, the
new Director Compensation Plan (New Director Compensation Plan) beginning May
1, 2001, and the 2001 Transition Plan. All share numbers have been adjusted to
reflect the two-for-one split of Baxter Common Stock in May 2001.
Former Director Compensation Plan
Under the Former Director Compensation Plan, each non-employee director
received a grant of 2,000 restricted shares of Baxter Common Stock as a
retainer upon election or re-election to a three-year term. These restricted
shares were deemed vested for tax purposes on a monthly basis and were given to
each director at the end of the director's term of office. In addition, each
non-employee director received 6,000 restricted shares of Baxter Common Stock
as compensation upon election or re-election to a three-year term. These
restricted shares vested in 2,000-share installments on the dates of the three
annual meetings of stockholders following the date of election.
Each non-employee director received a $1,000 fee for each Board and each
committee meeting attended. Members of committees received an annual retainer
of $3,000, and chairmen of committees received an additional annual retainer of
$4,000, except that members of the Executive Committee did not receive a
retainer for their Executive Committee membership. Employee directors were not
compensated separately for their Board or committee activities.
13
Board of Directors
Each non-employee director who retired at age 65 or after, with at least
five years of Board service, received upon retirement 2,000 restricted shares
of Baxter Common Stock for each of his or her full years of service as a
non-employee director, pursuant to the Former Director Compensation Plan. These
restricted shares vested six months after the grant date. Each non-employee
director was eligible for medical benefits and life insurance benefits. No
medical benefits were paid to non-employee directors in 2001.
Under the Former Director Compensation Plan, if specified corporate control
changes occurred, all restrictions on the shares would be terminated. Until
vested, the restricted stock could not be transferred or sold by the director.
During the restriction period, the director had all of the other rights of a
stockholder, including the right to receive dividends and vote the shares.
New Director Compensation Plan
Under the New Director Compensation Plan, the Board eliminated the
restricted stock, cash, retirement benefit, and medical benefit components of
the Former Director Compensation Plan and transitioned to a new all-stock
option plan design, which also retained the life insurance benefit from the
Former Director Compensation Plan.
Under the New Director Compensation Plan, each non-employee director is
entitled to receive a target grant of stock options annually. The actual grant
may be increased or decreased based on the percentage change in Baxter's total
shareholder return (TSR) compared to the TSR for the Standard & Poor's Health
Care Composite Index for the 12-month period from October 1 to September 30,
prior to the stock option grant. Beginning this year, Baxter's TSR will be
compared to the new Standard & Poor's 500 Health Care Index, instead of the
Standard & Poor's Health Care Composite Index, which was discontinued in
December 2001 as described on page 26. Based on this comparison, the stock
option grant can be increased up to a maximum of 150% of target or decreased to
a minimum of 75% of target. This stock performance multiplier is the same as
that used for senior management, as described in the Compensation Committee
report under ''Long-Term Incentives'' on page 17. In addition, each
non-employee director will be eligible to continue the same life insurance
benefit as that provided under the Former Director Compensation Plan. Life
insurance premiums of $898 in the aggregate, were paid in 2001 for the benefit
of non-employee directors.
2001 Transition Plan
As a part of the transition from the Former Director Compensation Plan to
the New Director Compensation Plan, each non-employee director received a
one-time stock option grant for their shares of restricted stock which were
previously issued under the Former Director Compensation Plan but unearned as
of May 1, 2001, and which were forfeited in connection with the transition to
the New Director Compensation Plan. In addition, each non-employee director who
qualified for the non-employee director retirement benefit (provided for under
the Former Director Compensation Plan) as of May 1, 2001, was given the choice
of keeping their restricted stock earned under the Former Director Compensation
Plan or converting such restricted stock into stock options. If a director
chose to retain his or her restricted stock, the amount of shares was capped
and will be received by such director when his or her service with the Board
ends. Each non-employee director who did not qualify for the retirement benefit
as of May 1, 2001, was granted a fixed number of stock options for each full
year of his or her service on the Board as of May 1, 2001.
14
Audit Committee Report
The Audit Committee of the Board of Directors of Baxter assists the Board
in fulfilling its oversight responsibilities. The Audit Committee consists of
four independent directors, as defined by New York Stock Exchange listing
standards. Its duties and responsibilities are set forth in a written charter,
which was initially adopted and approved by the Board on March 21, 2000
(included as Exhibit B to the company's 2001 proxy statement), and which is
annually reviewed and revised as appropriate.
Management is responsible for Baxter's internal controls and the financial
reporting process. A professional staff of internal corporate auditors reviews
the design of, and compliance with, Baxter's internal control systems and the
accounting policies and procedures supporting the financial reporting process.
PricewaterhouseCoopers LLP (PWC), the company's independent accountants, are
responsible for performing an independent audit of Baxter's consolidated
financial statements in accordance with generally accepted auditing standards
and for issuing a report on those statements. The Audit Committee's
responsibility is to monitor and oversee these processes.
In the course of fulfilling its responsibilities, the Audit Committee has:
. reviewed and discussed the results of the internal audit plan for the
year ended December 31, 2001;
. reviewed and discussed with management Baxter's audited financial
statements for the year ended December 31, 2001;
. discussed with representatives of PWC the matters required to be
discussed by Statement on Auditing Standards No. 61, Communication with
Audit Committees;
. received the written disclosures and the letter from PWC required by
Independence Standards Board Standard No. 1, Independence Discussions
with Audit Committees;
. discussed with representatives of PWC the public accounting firm's
independence from Baxter and management; and
. considered whether the provision by PWC of non-audit services is
compatible with maintaining PWC's independence.
Based on the foregoing, the Audit Committee recommended to the Board of
Directors that Baxter's audited financial statements referred to above be
included in Baxter's Annual Report on Form 10-K for the fiscal year ended
December 31, 2001 for filing with the Securities and Exchange Commission.
Thomas T. Stallkamp (Chairman)
Pei-yuan Chia
Gail D. Fosler
Fred L. Turner
15
Compensation Committee Report
The Compensation Committee of the Board of Directors (the ''Committee''),
comprised of four non-employee directors, establishes and monitors the total
compensation program for the executive officers of Baxter and its subsidiaries.
Compensation Philosophy for Executive Officers
The Committee's philosophy is to provide compensation opportunities that
are structured to be competitive when compared to companies of similar size and
scope, including health care and non-health care companies. This philosophy is
intended to assist Baxter in attracting, retaining and motivating executives
with superior leadership and management abilities. Consistent with this
philosophy, the Committee reviews compensation survey data from selected
companies in the pharmaceutical, medical device, and biotech industries
included in the Standard & Poor's Health Care Composite Index, as well as other
large non-health care companies of similar size and scope (''comparable
companies'').
Based on the survey data from the comparable companies, the Committee
determines the competitiveness of the total compensation structure for each
officer, including Mr. Kraemer, who served as Baxter's chairman and chief
executive officer in 2001. This structure consists primarily of a salary, cash
bonus, and stock options. The executive officers ordinarily receive the
majority of their total compensation through performance-based incentive plans,
which place a greater percentage of their compensation at risk while more
closely aligning their interests with the interests of Baxter's stockholders.
The Committee's philosophy with respect to the $1 million cap on the
tax-deductibility of executive compensation is to maximize the benefit of tax
laws for Baxter's stockholders by seeking performance-based exemptions and the
related stockholder approval where consistent with Baxter's compensation
policies and practices. For this purpose, proposal 4 in this proxy statement
seeks stockholder approval of Baxter's Officer Incentive Compensation Plan for
executive officers. Please see the description of this proposal beginning on
page 7 for more information about the Officer Incentive Compensation Plan and
the recommended stockholder approval.
Compensation Elements
Salaries
The Committee establishes salaries each year based on each executive
officer's individual performance within a structure intended to be competitive
with the 50th percentile of salaries paid to executive officers in the
comparable companies.
Cash Bonuses
Cash bonuses are intended to provide executive officers with an opportunity
to receive additional cash compensation, but only if it is earned through
achievement of specified performance goals. Cash bonuses, when combined with
salary, are intended to provide a total cash compensation target of
approximately the 60th percentile of total cash compensation paid to executive
officers in the comparable companies. Each year, the Committee establishes
performance goals for the company under the officer cash bonus plan. The
Committee also establishes a bonus range for each executive officer by
utilizing the market data from the comparable companies. After year-end results
are reported, the Committee determines each executive officer's bonus based on
the achievement of the specified performance goals and the executive officer's
individual performance. Baxter achieved or exceeded its
16
Compensation Committee Report
sales, net income growth and operational cash flow goals for 2001, which would
normally warrant executive officers to receive 100% or more of their target
bonus. Due to the seriousness of the issue in connection with the company's
Althane series dialyzers, the Committee, after thoughtful deliberation, decided
to cap the executive officers' bonus amounts for 2001 at 80% of their target
awards. Actual bonus amounts awarded for 2001 ranged from 50% to 80% of the
individual officers' bonus targets.
Long-Term Incentives
To further align management and stockholder interests and to continue to
promote a pay-for-performance philosophy, in November 2000 the company adopted
a new Long Term Incentive (LTI) Plan that eliminated the restricted stock
component from the prior LTI Plan and introduced a new all-stock option plan
design. This new, all-stock option plan design established the overall
competitiveness of the LTI Plan such that the value of the stock option targets
are competitive with approximately the 75th percentile of the long-term
incentive opportunities provided to the LTI Plan participants' counterparts in
the comparable companies.
To motivate participants to achieve superior total shareholder return (TSR)
compared to Baxter's competitors, the LTI Plan contains a Stock Performance
Multiplier that increases or decreases a participant's stock option target. The
Stock Performance Multiplier measures the percentage change in Baxter's TSR
compared to the TSR for a composite index of health care companies for the
12-month period from October 1 to September 30, prior to the stock option
grant. Based on this comparison, a participant's stock option target could
increase up to a maximum of 150% or decrease to a minimum of 75% of target.
Actual stock option awards are based on a combination of the participant's
stock option target, the Stock Performance Multiplier and the participant's
individual performance. In 2001 Baxter compared its TSR performance to the
Standard & Poor's Health Care Composite Index, and in 2002, it will compare its
TSR performance to the new Standard & Poor's 500 Health Care Index, described
on page 26.
For the period from October 2000 through September 2001, the company's TSR
was 42.97% compared to a TSR of -2.77% for the Standard & Poor's Health Care
Composite Index. In accordance with the Stock Performance Multiplier
incorporated in the LTI Plan, participants' stock option targets were adjusted
to the maximum of 150% of target. Actual stock option awards for executive
officers ranged from 70% to 130% of the adjusted target due to individual
performance.
Mr. Kraemer's 2001 Compensation
In 2001, Mr. Kraemer participated in the same compensation plans provided
to the other executive officers. The Committee's general approach to setting
Mr. Kraemer's compensation was to be competitive with the comparable companies,
while ensuring that his compensation was dependent upon achievement of Baxter's
financial performance goals and personal performance objectives, both of which
are reviewed and approved by the Board. The Board has established a process
through which the Compensation and the Planning and Organization Committees
work together to establish a link between Mr. Kraemer's performance and
decisions regarding his compensation. All compensation actions relating to Mr.
Kraemer were subject to the approval of the Board.
In November 2000, the Committee determined that Mr. Kraemer's salary for
2001 was $880,000, which was the same salary amount Mr. Kraemer received for
2000. At that time, the Committee recognized both the company's superior
performance and Mr.
17
Compensation Committee Report
Kraemer's exceptional leadership skills. However, the Committee also gave
weight to the fact that he was a relatively new Chairman and Chief Executive
Officer. Consistent with its pay-for-performance philosophy, the Committee
focused on increasing Mr. Kraemer's long-term incentive compensation for 2001.
In November 2000, the Committee increased Mr. Kraemer's stock option target
under the company's LTI Plan from 170,000 to 400,000 options. In November 2001,
the Committee granted stock options for 600,000 shares of Common Stock to Mr.
Kraemer under the company's LTI Plan with an exercise price equal to the then
current fair market value of $49.54 per share. This amount represented 100% of
his adjusted target, as the 400,000 target was increased by 150% to 600,000
based on the Stock Performance Multiplier under the LTI Plan. In February 2002,
the Committee determined that, for 2001, Mr. Kraemer earned a bonus of
$528,000. For the reasons described above under "Compensation Elements--Cash
Bonuses," Mr. Kraemer's bonus represented 60% of his target bonus amount.
Relationship of Executive Compensation to Company Performance
The Committee believes that management should be motivated and compensated
based on financial and non-financial measures. For this reason, the Committee
has historically emphasized the financial measures of sales growth, net income
growth, operational cash flow and total shareholder return when determining
compensation for all executive officers. For 2002, the Committee will replace
net income growth with earnings per share and add gross profit ratio as a new
financial measure. In terms of non-financial measures, the Committee focuses on
such areas as quality, customer service, product development, innovation and
talent management. The Committee believes that a combination of financial and
non-financial measures were the appropriate focus for 2001. These goals are
also incorporated in Baxter's 2002 incentive plans for executive officers and
other executives.
Pei-yuan Chia (Chairman)
Walter E. Boomer
Susan Crown
Brian D. Finn
18
Executive Compensation
Summary
The following table shows, for the years ended December 31, 2001, 2000 and
1999, the compensation provided by Baxter and its subsidiaries to the chairman
of the board and chief executive officer and the four next most highly
compensated executive officers in all capacities in which they served. The five
individuals identified in the Summary Compensation Table are referred to as the
''named executive officers'' throughout this proxy statement.
A two-for-one split of Baxter's Common Stock was distributed beginning on
May 30, 2001 to stockholders of record on May 9, 2001. Share numbers and per
share amounts have been adjusted in this proxy statement to reflect this stock
split.
Summary Compensation Table
Long Term Compensation
------------------------------------------------
Annual Compensation Awards Payouts
------------------------- ------------------------- ---------
Restricted Securities LTIP All Other
Salary Bonus Other Stock Award(s) Underlying Payouts Compensation
Name and Principal Position Year ($)(1) ($)(1) ($)(2) ($)(3) Options(4) ($)(5) ($)(6)
------------------------------------------------------------------------------------------------------------
Harry M. Jansen Kraemer, Jr. 2001 880,000 528,000 169,658 -0- 600,000 -0- 66,793
Chairman of the Board and 2000 880,000 1,320,000 146,187 2,150,126 975,000 2,649,375 60,500
Chief Executive Officer 1999 800,000 1,120,000 178,416 -0- 725,418 847,969 39,288
------------------------------------------------------------------------------------------------------------
Alan L. Heller(7) 2001 600,000 240,000 3,864 -0- 164,700 -0- 990
Senior Vice President and 2000 92,308 80,000 -0- 248,070 183,000 -0- 83
President-Renal 1999 -- -- -- -- -- -- --
------------------------------------------------------------------------------------------------------------
Brian P. Anderson 2001 470,000 248,500 9,047 -0- 120,000 -0- 22,965
Senior Vice President and 2000 418,077 275,000 6,043 468,512 246,000 662,344 20,350
Chief Financial Officer 1999 380,000 250,000 4,110 -0- 195,672 282,656 17,963
------------------------------------------------------------------------------------------------------------
Thomas H. Glanzmann 2001 401,539 252,000 2,113 -0- 156,000 -0- 23,318
Senior Vice President and 2000 350,000 364,000 4,188 780,071 218,500 551,953 15,118
President-BioScience 1999 304,233 143,000 858,665 -0- 164,384 235,547 1,570
------------------------------------------------------------------------------------------------------------
Carlos del Salto 2001 425,000 224,000 3,612 -0- 108,000 -0- 24,710
Senior Vice President 2000 385,192 357,500 1,208 554,392 247,000 772,734 22,665
Intercontinental/Asia and 1999 350,000 350,000 2,453 -0- 226,124 282,656 16,637
President-Latin America
------------------------------------------------------------------------------------------------------------
(1) Amounts shown include cash compensation earned by the named executive
officers during the year covered, including amounts deferred at the
election of those officers. Bonuses are paid in the year following the year
during which they are earned.
(2) As permitted by the rules of the Securities and Exchange Commission, this
column excludes perquisites and other personal benefits for the named
executive officer if the total incremental cost in a given year did not
exceed the lesser of $50,000 or 10 percent of the combined salary and bonus
for that year. Accordingly, for Messrs. Heller, Anderson, Glanzmann and del
Salto the amounts shown exclude such perquisites and only represent
reimbursements for the payment of taxes. Of the amounts shown for Mr.
Kraemer, $42,122 in 2001, $41,787 in 2000 and $54,035 in 1999 represent the
approximate incremental cost to Baxter for his personal use of company
aircraft, which Baxter required for security reasons. In 1999, Mr.
Glanzmann relocated to the United States and, as a result, his Swiss
expatriate compensation package was terminated. The termination provided
for a one-time payout of certain elements of his compensation and benefits
package in the amount of $600,000, which included payments for housing,
education, travel, relocation and related tax gross-ups, since he will no
longer be entitled to these allowances with his new assignment. In
addition, the amounts shown for Mr. Glanzmann in 1999 include amounts
reimbursed by the company for the payment of taxes due to Mr. Glanzmann's
expatriate assignments.
19
Executive Compensation
(3) Except for the restricted stock awarded to Mr. Heller, the amounts are
based on the $27.94 closing price of Baxter Common Stock on February 21,
2000, the date the restricted stock was awarded. As of December 31, 2000,
these shares were no longer held by Messrs. Kraemer, Anderson, Glanzmann
and del Salto because they converted their restricted stock to stock
options pursuant to the transition to the new Long Term Incentive Plan. The
amount for Mr. Heller is based on the $41.35 closing price of Baxter Common
Stock on November 13, 2000, the date the restricted stock was awarded to
Mr. Heller. The restricted stock awarded to Mr. Heller vested on December
31, 2001.
(4) The number shown represents the number of shares of Common Stock for which
options were granted to each named executive officer. The 2000 options
include, for all of the named executive officers except Mr. Heller, options
granted as a result of the transition to the new Long Term Incentive Plan.
The 1999 options include Supplemental Stock Options granted pursuant to the
1998 Supplemental Incentive Plan and options granted pursuant to Baxter's
Shared Investment Plan during which the company's senior management team
collectively purchased over six million shares of Common Stock through
personal full-recourse loans to exercise options to purchase Common Stock
on May 3, 1999. The Shared Investment Plan is more fully described in
Baxter's Proxy Statement for its 2000 Annual Meeting of Stockholders. The
amounts shown are adjusted for the stock dividend paid pursuant to the
spin-off of Edwards Lifesciences Corporation on March 31, 2000, as well as
the 2-for-1 split of Baxter's Common Stock in May 2001.
(5) Amounts shown represent the market value of earned restricted stock which
vested under Baxter's LTI Plan on December 31, 2000 and 1999 (each a
''Vesting Date''). The vested shares were earned as of the December 31
preceding each Vesting Date.
(6) Amounts shown represent matching contributions in Baxter's Incentive
Investment Plan, a qualified section 401(k) profit sharing plan, additional
matching contributions in Baxter's deferred compensation plan and the
dollar value of split-dollar and term life insurance benefits. In 2001,
those three amounts, expressed in the same order as identified above, for
the named executive officers are as follows: Mr. Kraemer--$5,100, $60,900
and $793; Mr. Heller--$0, $0 and $990; Mr. Anderson--$5,100, $17,250 and
$615; Mr. Glanzmann--$5,100, $17,866 and $352; and Mr. del Salto--$5,100,
$18,375 and $1,235.
(7) Mr. Heller joined Baxter in October 2000.
20
Executive Compensation
Stock Option Grants
The following table contains information relating to the stock option
grants made in 2001 to the named executive officers.
Option Grants Table
Option Grants in Last Fiscal Year
Individual Grants
-------------------------------------------------- Potential Realizable Value at
Number of Percent of Assumed Annual Rates of
Securities Total Options Stock Price Appreciation
Underlying Granted to Exercise or for Option Term
Options Employees in Base Price Expiration ----------------------------------------
Name Granted (#) Fiscal Year (%) ($/Sh) (1) Date 0% 5%(2) 10%(2)
---------------------------------------------------------------------------------------------------------------------
Mr. Kraemer 600,000 2.45 49.54 11/25/2011 $0.00 $ 18,693,264 $ 47,372,401
---------------------------------------------------------------------------------------------------------------------
Mr. Heller 164,700 .67 49.54 11/25/2011 $0.00 $ 5,131,301 $ 13,003,724
---------------------------------------------------------------------------------------------------------------------
Mr. Anderson 120,000 .49 49.54 11/25/2011 $0.00 $ 3,738,653 $ 9,474,480
---------------------------------------------------------------------------------------------------------------------
Mr. Glanzmann 156,000 .64 49.54 11/25/2011 $0.00 $ 4,860,249 $ 12,316,824
---------------------------------------------------------------------------------------------------------------------
Mr. del Salto 108,000 .44 49.54 11/25/2011 $0.00 $ 3,364,788 $ $8,527,032
---------------------------------------------------------------------------------------------------------------------
All Stockholders N/A N/A N/A N/A $0.00 $18,658,774,503(3) $47,284,998,015(3)
---------------------------------------------------------------------------------------------------------------------
All Optionees 24,485,379 100.00 various various $0.00 $ 762,852,752(4) $ 1,933,218,650(4)
---------------------------------------------------------------------------------------------------------------------
Optionee Gain as % of
All Stockholders' Gain N/A N/A N/A N/A N/A 4.1% 4.1%
---------------------------------------------------------------------------------------------------------------------
(1) The exercise price shown for the named executive officers is the closing
price of Baxter Common Stock on the date of the grant, which was November
26, 2001. The options become exercisable three years from the date of
grant. The exercise price of the options may be paid in cash or in shares
of Baxter Common Stock. If specified corporate control changes occur, all
outstanding options will become exercisable immediately.
(2) Potential realizable values are calculated net of the option exercise price
but before taxes associated with exercise. The assumed rates of stock price
appreciation are set by rules of the Securities and Exchange Commission
governing proxy statement disclosure and are not intended to forecast the
future appreciation of Baxter Common Stock.
(3) The potential realizable values for all stockholders were calculated on the
598,892,990 shares of Baxter Common Stock outstanding on December 31, 2001.
The potential realizable values were calculated assuming the stockholders
purchased Baxter Common Stock at $49.54, the closing price on November 26,
2001.
(4) The potential realizable values for all optionees were calculated based on
the approximately 24.5 million shares subject to options that were granted
to approximately 44,500 employees of Baxter at various exercise prices at
different times during the year. The potential realizable values were
calculated assuming that all of the options were granted at the $49.54
exercise price.
21
Executive Compensation
Stock Option Exercises
The following table contains information relating to the exercise of stock
options by the named executive officers in 2001, as well as the number and
value of their unexercised options as of December 31, 2001.
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options at Options at
Fiscal Year End (#)(1) Fiscal Year End ($)(2)
Shares Acquired Value ------------------------- -------------------------
Name on Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
----------------------------------------------------------------------------------------------
Mr. Kraemer 9,870 334,522 942,728 1,520,418 23,183,031 16,127,164
Mr. Heller -0- -- -0- 347,700 -0- 2,921,998
Mr. Anderson 16,234 551,031 336,726 366,672 9,350,399 4,238,567
Mr. Glanzmann 8,690 291,771 249,282 363,884 6,281,437 3,808,060
Mr. del Salto -0- -- 340,442 353,624 8,650,133 4,279,995
----------------------------------------------------------------------------------------------
(1) The sum of the numbers under the Exercisable and Unexercisable columns of
this table represents each named executive officer's total number of
outstanding options.
(2) The dollar amounts shown under the Exercisable and Unexercisable columns of
this table represent the number of shares subject to exercisable and
unexercisable options, respectively, which had an exercise price below the
closing price of Baxter Common Stock on December 31, 2001, which was
$53.63, multiplied by the difference between that price and the exercise
price of the options.
Pension Plan, Excess Plans and Supplemental Plans
The table on the following page shows estimated annual retirement benefits
payable to participants in Baxter's United States pension plan (''Pension
Plan'') whose employment terminates at normal retirement (age 65). The normal
retirement benefit equals (i) 1.75 percent of a participant's Final Average Pay
multiplied by the employee's number of years of Pension Plan participation,
minus (ii) 1.75 percent of a participant's estimated primary social security
benefit, multiplied by the employee's years of Pension Plan participation. The
Final Average Pay is equal to the average of a participant's five highest
consecutive calendar years of earnings out of his or her last ten calendar
years of earnings. In general, the earnings covered by the Pension Plan include
salary, annual cash bonuses and other regular pay. The figures shown include
benefits payable under the Pension Plan, Baxter's related defined benefit
excess pension plan and supplemental plans for certain individuals. The
estimates assume that benefit payments begin at age 65 under a single life
annuity form. The figures are net of the Social Security offset specified by
the Pension Plan's benefit formula and therefore do not include Social Security
benefits payable from the federal government. The estimated primary Social
Security benefit used in the calculations is that payable for an individual
attaining age 65 in 2001.
22
Executive Compensation
Although age 65 is the normal retirement age under the Pension Plan, the
Pension Plan has early retirement provisions based on a point system. Under the
point system, each participant is awarded one point for each year of Pension
Plan participation and one point for each year of age. Participants who
terminate employment after accumulating at least 65 points, and who wait to
begin receiving their Pension Plan benefits until they have 85 points, receive
an unreduced Pension Plan benefit regardless of their actual age when they
begin receiving their Pension Plan benefits.
Pension Plan Table
Estimated Annual Retirement Benefits
Years of Pension Plan Participation(1)($)
---------------------------------------------
Final Average Pay(1)($) 15 20 25 30 35
-----------------------------------------------------------------------
300,000 74,100 98,800 123,500 148,200 173,100
400,000 100,300 133,800 167,200 200,700 234,300
500,000 126,600 168,800 211,000 253,200 295,600
600,000 152,800 203,800 254,700 305,700 356,800
700,000 179,100 238,800 298,500 358,200 418,100
800,000 205,300 273,800 342,200 410,700 479,300
900,000 231,600 308,800 386,000 463,200 540,600
1,000,000 257,800 343,800 429,700 515,700 601,800
1,100,000 284,100 378,800 473,500 568,200 663,100
1,200,000 310,300 413,800 517,200 620,700 724,300
1,300,000 336,600 448,800 561,000 673,200 785,600
1,400,000 362,800 483,800 604,700 725,700 846,800
1,500,000 389,100 518,800 648,500 778,200 908,100
1,600,000 415,300 553,800 692,200 830,700 969,300
1,700,000 441,600 588,800 736,000 883,200 1,030,600
1,800,000 467,800 623,800 779,700 935,700 1,091,800
1,900,000 494,100 658,800 823,500 988,200 1,153,100
2,000,000 520,300 693,800 867,200 1,040,700 1,214,300
2,100,000 546,600 728,800 911,000 1,093,200 1,275,600
2,200,000 572,800 763,800 954,700 1,145,700 1,336,800
2,300,000 599,100 798,800 998,500 1,198,200 1,398,100
2,400,000 625,300 833,800 1,042,200 1,250,700 1,459,300
2,500,000 651,600 868,800 1,086,000 1,303,200 1,520,600
2,600,000 677,800 903,800 1,129,700 1,355,700 1,581,800
2,700,000 704,100 938,800 1,173,500 1,408,200 1,643,100
-----------------------------------------------------------------------
(1) As of December 31, 2001, the named executive officers' years of Pension
Plan participation and Final Average Pay for purposes of calculating annual
retirement benefits payable under the Pension Plan are as follows: Mr.
Kraemer--18 years and $1,491,515; Mr. Heller--1 year and $680,000; Mr.
Anderson--9 years and $579,004; and Mr. del Salto--27 years and $605,438.
Mr. Glanzmann does not participate in the Pension Plan. In 1999, Mr.
Glanzmann transferred to the United States and became a participant in
Baxter's International Retirement Plan, earning his first year of service
under that plan in 1999. In addition, for each of the first five years Mr.
Glanzmann participates in the International Retirement Plan, he is credited
with 20 percent of his 11 years of pre-participation Baxter service. As of
December 31, 2001, the annual retirement benefit payable to Mr. Glanzmann
after retirement under the International Retirement Plan is approximately
$156,325, based on Mr. Glanzmann's 9 years of credited service under the
plan and his average compensation, excluding deferred and certain other
types of compensation specified in the plan, during the last three years.
23
Ownership of Baxter Stock
Stock Ownership of Directors and Officers
On February 28, 2002, there were approximately 599,868,645 shares of Baxter
Common Stock outstanding. The following table sets forth information as of that
date, unless otherwise specified, regarding beneficial ownership of Baxter's
Common Stock by the named executive officers and all directors, each of whom
owned less than one percent of the outstanding Common Stock. The table also
sets forth the total number of shares of Baxter Common Stock beneficially owned
by all executive officers and directors of Baxter, as a group, which amounted
to 1.24 percent of the outstanding Common Stock. Except as otherwise noted,
each individual has sole investment and voting power with respect to the shares
listed. Baxter is not aware of any stockholder owning in excess of 5% of its
outstanding Common Stock.
Options
Shares Exercisable
Beneficially Within 60
Name Owned days Total
---------------------------------------------------------------------------------------------------
Non-employee Directors:
Walter E. Boomer 11,192 -- (8) 11,192
Pei-yuan Chia 13,640(1) -- (8) 13,640(1)
John W. Colloton 11,215 -- (8) 11,215
Susan Crown 40,672(2)(3) -- (8) 40,672(2)(3)
Brian D. Finn 7,672(1) -- (8) 7,672(1)
Gail D. Fosler 1,000(1) -- (8) 1,000(1)
Martha R. Ingram 77,344 -- (8) 77,344
Joseph B. Martin, M.D., Ph.D. 100(4) -- (8) 100(4)
Thomas T. Stallkamp 6,160(1) -- (8) 6,160(1)
Monroe E. Trout, M.D. 26,770(4) -- (8) 26,770(4)
Fred L. Turner 35,466 -- (8) 35,466
Named Executive Officers:
Harry M. Jansen Kraemer, Jr. 616,249(1)(3)(5)(7) 1,010,458 1,626,707(1)(3)(5)(7)
Alan L. Heller 7,616(4)(5) -- 7,616(4)(5)
Brian P. Anderson 153,909(1)(5)(7) 370,590 524,499(1)(5)(7)
Thomas H. Glanzmann 103,195(5)(7) 271,858 375,053(5)(7)
Carlos del Salto 166,562(5)(7) 374,306 540,868(5)(7)
All directors and executive officers
as a group (31 persons) 2,730,862(1)--(7) 4,744,150(8) 7,475,012(1)--(8)
---------------------------------------------------------------------------------------------------
(1) Includes shares held in joint tenancy with spouse over which the named
individual shares voting or investment power as follows: Mr. Chia--9,640
shares; Mr. Finn--5,000 shares; Ms. Fosler--1,000 shares; Mr.
Stallkamp--6,160 shares; Mr. Kraemer--135,569 shares; Mr. Anderson--33,459
shares; and all directors and executive officers as a group--294,877 shares.
(2) Includes 2,000 shares held by a partnership of which Ms. Crown is a partner
and 4,000 shares held by various trusts of which her minor children are
beneficiaries. Ms. Crown disclaims beneficial ownership of these shares,
except to the extent of her interest in such entities.
(3) Includes shares not held directly by the named individual but held by or
for the benefit of their spouses or minor children as follows: Ms.
Crown--8,000 shares; Mr. Kraemer--340 shares; and all directors and
executive officers as a group--22,548 shares.
(4) Includes shares not held directly by the named individual but in a family
trust of which the named individual is a trustee or co-trustee as follows:
Mr. Heller--380 shares, Dr. Martin--100 shares and Dr. Trout--26,770 shares.
(5) Includes shares which the individual has a right to acquire within 60 days
of February 28, 2002 pursuant to his or her participation in Baxter's
Employee Stock Purchase Plan as follows: Mr. Kraemer--186 shares; Mr.
Heller--369; Mr. Anderson--230; Mr. Glanzmann--205; Mr. del Salto--208; and
all executive officers as a group--2,721 shares.
24
Ownership of Baxter Stock
(6) Includes shares beneficially owned as of February 28, 2002 by executive
officers in Baxter's Incentive Investment Plan, a qualified 401(k) profit
sharing plan, over which such executive officers have voting and investment
power; all executive officers as a group--18,786.
(7) Includes shares held by individuals pursuant to the terms of the Shared
Investment Plan, as follows: Mr. Kraemer--480,000 shares, Mr.
Anderson--120,000 shares; Mr. Glanzmann--100,000 shares;
Mr. del Salto--140,000 shares; and all executive officers as a
group--1,967,000 shares.
(8) Does not include stock options vesting on May 1, 2002 which were granted to
non-employee directors on May 1, 2001 under the New Director Compensation
Plan and the 2001 Transition Plan, as described on page 14, as follows:
General Boomer--60,328; Mr. Chia--65,000; Mr. Colloton--140,328; Ms.
Crown--100,328; Mr. Finn--30,328; Ms. Ingram--17,656; Mr.
Stallkamp--27,600; Dr. Trout--15,000; and Mr. Turner--17,656. Also excludes
options to purchase 11,250 shares vesting on July 24, 2002 which were
granted to Ms. Fosler upon her election to the Board and options to
purchase 2,500 shares vesting on February 26, 2003 which were granted to
Dr. Martin upon his election to the Board.
Section 16(a) Beneficial Ownership Reporting Compliance
Three executive officers inadvertently failed to report transactions as
follows: Eric Beard omitted 6,596 shares of Baxter stock held by him from his
Form 3 filed in October 1998. J. Robert Hurley failed to report a gift of
Baxter stock to his daughters on the Form 5 he filed for 2000. Alan Heller
failed to report one transaction on the Form 4 he filed for October 2001.
Messrs. Beard, Hurley and Heller have each filed an amended form correcting
these errors.
25
Baxter's Financial Performance
The following graph compares the performance of Baxter's Common Stock with
the Standard & Poor's 500 Composite Index, the Standard & Poor's Health Care
Composite Index and the Standard & Poor's 500 Health Care Index. The Standard &
Poor's Health Care Composite Index was discontinued on December 21, 2001, and
reporting of the return for that index by the Chicago Board Options Exchange
ended on that date. Therefore, Baxter has chosen to measure itself against the
Standard & Poor's 500 Health Care Index, which includes the same issuers
included in the Standard & Poor's Health Care Composite Index plus Cardinal
Health, Inc., AmerisourceBergen Corporation and McKesson Corporation. The
comparison of total return for each of the years shown in the table below
assumes that $100 was invested on December 31, 1996 in each of Baxter, the
Standard & Poor's 500 Composite Index, the Standard & Poor's Health Care
Composite Index and the Standard & Poor's 500 Health Care Index, with
investment weighted on the basis of market capitalization. Total return is
based on the change in year end stock price plus reinvested dividends, except
that the return for the new Standard & Poor's 500 Health Care Index reported
below does not include dividends. Historical results for the new Standard &
Poor's 500 Health Care Index which reflect reinvestment of dividends are not
yet available. The 2000 Baxter dividend includes the Edwards Lifesciences
Corporation stock dividend distributed in connection with the spin-off of
Edwards Lifesciences Corporation by Baxter on March 31, 2000. Historical
results are not necessarily indicative of future performance.
[CHART]
S&P Health S&P 500 Health Care
Baxter S&P Care Composite Index (return
International 500 Index (thru excludes reinvestment
Inc. Index December 21, 2001) of dividends)
12/96 $100 $100 $100 $100
12/97 $126 $133 $144 $142
12/98 $164 $171 $207 $202
12/99 $163 $208 $190 $178
12/00 $242 $189 $259 $242
12/01 $298 $166 $230 $211
26
Minority Stockholder Proposal
Stockholder Proposal Relating to Cumulative Voting in the Election of Directors
- Proposal 5 on the Proxy Card
Baxter has been informed that the following stockholder proposal will be
presented for a vote at the 2002 Annual Meeting. The Board of Directors
recommends a vote AGAINST this proposal; its reasons follow the stockholder's
proposal and supporting statement.
Stockholder Proposal
Baxter has been advised that Martin Glotzer, Suite 301, 7061 N. Kedzie,
Chicago, Illinois 60645, owner of 100 shares of Baxter common stock, will have
the following resolution presented at the annual meeting:
RESOLVED: That the stockholders of Baxter International, Inc., assembled in
annual meeting in person and by proxy, hereby request the Board of Directors to
take the steps necessary to provide for cumulative voting in the election of
directors, which means each stockholder shall be entitled to as many votes as
shall equal the number of shares he or she owns multiplied by the number of
directors to be elected, and he or she may cast all of such votes for a single
candidate, or any two or more of them as he or she may see fit.
Stockholder's Statement Supporting the Proposed Resolution
Continued very strong support along the lines I suggest were shown at a
previous annual meeting when 36%, owners of 145,829,598 shares, were cast in
favor of this proposal.
I believe the Board of Directors should adopt cumulative voting in the
election of directors as part of its program of corporate governance. Provision
for cumulative voting brings to the corporate system a means by which a
significant group of shareholders, though in the minority, can elect candidates
of its choice, making a more diverse Board of Directors. If you agree, please
mark your proxy for this resolution.
Board of Directors' Statement Opposing Stockholder Resolution
The Board believes that cumulative voting for the election of directors
would not serve the best interests of Baxter and its stockholders. Accordingly,
the Board recommends a vote AGAINST the proposed resolution for the reasons
explained below.
The Board firmly believes that cumulative voting would threaten to
undermine effective Board functioning in at least two important respects.
First, it is the Board's duty to represent the interests of all of the
stockholders. To do so, each director must feel a responsibility toward all
stockholders, without any special loyalty to any one group. From this
perspective, cumulative voting is undesirable since directors elected by a
particular group of stockholders may be primarily concerned with representing
the interests of the narrow constituency that elected them rather than
representing the interests of all stockholders. Directors should be elected
based on their ability and commitment to represent the best interests of Baxter
and its stockholders as a whole. This tenet is best served when each director
is elected by a plurality of the stockholders.
Second, cumulative voting introduces the possibility of partisanship among
Board members, which could undermine the ability of the Board members to work
together effectively. If narrow constituencies of stockholders were to elect
''special interest'' directors through cumulative voting, the resulting
inability of those directors to exercise independent judgment could impair the
Board's sound analysis and timely conduct of Baxter's business, to the
detriment of Baxter and all of its stockholders.
27
Minority Stockholder Proposal
The variety and complexity of issues facing Baxter require that no actual or
apparent ''special influence'' bring into question the objectivity of the
Board's insight, perspective or counsel.
The possibility of factionalism that cumulative voting presents has led to
a trend against its adoption. Many companies have eliminated cumulative voting
over the years and, overall, its presence has declined. Less than 11% of the
companies in the Standard & Poor's 500 Index have cumulative voting. The State
of California, considered among the most protective of stockholder interests,
amended its state laws in 1989 to permit the repeal of cumulative voting. In
supporting the change, the Committee on Corporations of the Business Law
Section of the State Bar of California argued:
''While a healthy diversity of opinion and experience, as represented by
independent directors, is desirable, factionalism is not appropriate in
the board's essential executive function. The principal objective of a
business enterprise should be profit and gain for its shareholders, not
political accommodation of competing interests . . . Practical
experience has shown that effective management of a corporation
requires candor and consensus in the Boardroom, [not] rancor and
contention.''
The Board believes that the present method of voting will continue to work
as successfully in the future as it has in the past. Eleven of Baxter's twelve
current Board members are independent non-employee directors, and the Board's
Planning and Organization Committee, which assists and advises the Board in
connection with Board membership, consists solely of non-employee directors.
This ensures that the Board will continue to act independently and in the best
interests of all of Baxter's stock holders. The Board encourages stockholders
to present director candidates to the Planning and Organization Committee. A
summary of the process by which stockholders may present director candidates is
included on page 30 of this proxy statement.
Baxter's stockholders have rejected this proposal at seven consecutive
annual meetings from 1994 to 2000. This proposal was not submitted at the 2001
Annual Meeting.
The Board recommends a vote AGAINST cumulative voting in the election of
directors.
28
Other Information
Attending the Annual Meeting
The Annual Meeting will take place at the Drury Lane Theatre in Oakbrook
Terrace, Illinois. A map showing the meeting location appears at the end of
this proxy statement.
Admittance to the meeting will be limited to stockholders eligible to vote
or their authorized representatives. Due to recent world events, we intend to
strictly adhere to the following procedures, so please read them carefully. If
you plan to attend the Annual Meeting, simply indicate your intention by
marking the designated box on the proxy card, or by following the instructions
provided when you vote through the Internet or by telephone. Stockholders who
wish to attend the Annual Meeting, but do not wish to vote by proxy prior to
the meeting, may register at the door. If you hold shares through a broker,
bank or other nominee, your name will not appear on the list of registered
stockholders and you will be admitted only after showing proof of ownership,
such as your most recent account statement or a letter from your broker or bank.
Reducing Mailing Expenses
Duplicates: If you received more than one copy of the 2001 Annual Report to
Stockholders at the same address and you wish to reduce the number you receive,
we will discontinue the mailing of the annual report on accounts you select.
Mark the designated box on the appropriate proxy card(s) or follow the
instructions provided when you vote through the Internet or by telephone. You
should continue to receive at least one annual report. For this reason, please
do not mark the box on all of your proxy cards or make this selection for all
of your accounts when voting through the Internet or by telephone.
Electronic Delivery: If you wish to view future proxy materials and annual
reports over the Internet instead of receiving copies in the mail, follow the
instructions provided when you vote through the Internet. A registered
stockholder may contact us at http://www.eproxyvote.com/bax to vote during the
proxy voting period. If you vote by telephone, you will not have the option to
elect electronic delivery while voting. A registered stockholder may choose
electronic delivery at any time during the year by accessing the site directly
at http://www.econsent.com/bax and enrolling. If you elect electronic delivery,
we will discontinue mailing the proxy materials and annual reports to you
beginning next year and send you an e-mail message notifying you of the
Internet address or addresses where you may access the proxy materials and
annual report.
Cost of Proxy Solicitation
Baxter will bear the costs of soliciting proxies. Copies of proxy
solicitation materials will be mailed to all stockholders, and employees of
Baxter may communicate with stockholders to solicit their proxies. Banks,
brokers and others holding stock in their names, or in the names of nominees,
may request and forward copies of the proxy solicitation material to beneficial
owners and seek authority for execution of proxies, and Baxter will reimburse
them for their expenses in doing so at the rates approved by the New York Stock
Exchange.
In addition, Baxter has retained Georgeson Shareholder, 17 State Street,
New York, New York 10004 to assist in the distribution and solicitation of
proxies. Baxter has agreed to pay Georgeson Shareholder a fee of $10,000 plus
expenses for these services.
29
Other Information
Future Stockholder Proposals and Nominations
Any stockholder who intends to present a proposal at Baxter's annual
meeting to be held in 2003, and who wishes to have a proposal included in
Baxter's proxy statement for that meeting, must deliver the proposal to the
Corporate Secretary. All proposals must be received by the Corporate Secretary
no later than November 22, 2002 and must satisfy the rules and regulations of
the Securities and Exchange Commission to be eligible for inclusion in the
proxy statement for that meeting.
Stockholders may present proposals that are proper subjects for
consideration at an annual meeting, even if the proposal is not submitted by
the deadline for inclusion in the proxy statement. To do so, the stockholder
must comply with the procedures specified by Baxter's bylaws. The bylaws, which
are available upon request from the Corporate Secretary, require all
stockholders who intend to make proposals at an annual stockholders meeting to
submit their proposals to the Corporate Secretary not fewer than 60 and not
more than 90 days before the anniversary date of the previous year's annual
meeting.
The bylaws also provide that nominations for director may only be made by
the Board of Directors (or an authorized board committee) or by a stockholder
entitled to vote who sends notice to the Corporate Secretary not fewer than 60
nor more than 90 days before the anniversary date of the previous year's annual
meeting and complies with the procedures specified in Baxter's bylaws.
To be eligible for consideration at the 2003 Annual Meeting, proposals
which have not been submitted by the deadline for inclusion in the proxy
statement and any nominations for director must be received by the Corporate
Secretary between February 6 and March 8, 2003. This advance notice period is
intended to allow all stockholders to have an opportunity to consider all
business and nominees expected to be considered at the meeting.
All submissions to, or requests from, the Corporate Secretary should be
made to Baxter's principal executive offices at One Baxter Parkway, Deerfield,
Illinois 60015.
By order of the Board of Directors,
/s/ Jan Stern Reed
JAN STERN REED
Corporate Secretary and Associate General Counsel
Deerfield, Illinois
March 22, 2002
30
Directions to the Annual Meeting
[MAP]
From downtown Chicago From O'Hare Airport
Take I-290 West to I-88 West, Take I-190 East to I-294 South,
Immediately after you pay the Take I-294 South to I 88 West,
first toll on I-88, exit at Immediately after you pay the
Cermak Road, first toll on I-88, exit at
Proceed straight at stop light on Cermak Road,
Spring Road, Proceed straight at stop light on
You will then pass through two Spring Road,
stop lights and will pass the You will then pass through two
Hyatt on your right, stop lights and will pass the
After the second stop light, turn Hyatt on your right,
right onto Drury Lane, After the second stop light, turn
Turn left at Drury Lane Entrance right onto Drury Lane,
sign. Turn left at Drury Lane Entrance
sign.
From the Western suburbs
Take I-88 East, exit at Midwest From Baxter Corporate Headquarters
Road, in Deerfield
After paying toll, turn right at Take I-294 South to I-88 West,
stop light onto Midwest Road, Immediately after you pay the
Turn right at stop light onto 22nd first toll on I-88, exit at
Street, Cermak Road,
Turn left at stop light onto Route Proceed straight at stop light on
83 (Kingery Highway), Spring Road,
Proceed straight on Route 83 (past You will then pass through two
Oak Brook Shopping stop lights and will pass the
Center) to Butterfield/Roosevelt Hyatt on your right,
Road, After the second stop light, turn
Exit to right onto right onto Drury Lane,
Butterfield/Roosevelt Road and Turn left to the Drury Lane
proceed to Entrance sign.
Drury Lane (South),
Turn right at Drury Lane Entrance
sign.
-------------------------------------------------------------------------------
P R O X Y
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS - MAY 7, 2002
Solicited by the Board of Directors of Baxter International Inc.
The undersigned hereby appoint(s) Harry M. Jansen Kraemer, Jr. and Thomas
J. Sabatino, Jr., and each of them, as proxyholders, with the powers the
undersigned would possess if personally present and with full power of
substitution, to vote all shares of common stock of the undersigned in
Baxter International Inc. (including shares credited to the Dividend Rein-
vestment Plan and the Employee Stock Purchase Plan) at the Annual Meeting
of Stockholders to be held on May 7, 2002, and at any adjournment thereof,
upon all subjects that may properly come before the meeting, subject to any
directions indicated on the reverse side of this card. If no directions are
given, the proxyholders will vote: for the election of the four nominees
for director listed hereon; in accordance with the Board of Directors'
recommendations on the matters listed on the reverse side of this card; and
at their discretion on any other matter that may properly come before the
meeting.
-------------------------------------
Election of Directors, Nominees: Comments/Change of Address
01 Harry M. Jansen Kraemer, Jr. _______________________________
02 Joseph B. Martin, M.D., Ph.D. _______________________________
03 Thomas T. Stallkamp _______________________________
04 Fred L. Turner _______________________________
------------------------------------- _______________________________
To vote through the Internet or by telephone, please see the instructions on the
reverse side of this card. To vote by mail, please sign and date this card on
the reverse and mail promptly in the enclosed envelope.
-------------
SEE REVERSE
SIDE
------------
--------------------------------------------------------------------------------
. FOLD AND DETACH HERE .
ELECTRONIC DISSEMINATION OF FUTURE PROXY MATERIALS
If you wish to access future proxy materials and the annual report via the
Internet instead of receiving copies in the mail, please follow the directions
below.
If you elect to vote via the Internet at http://www.eproxyvote.com/bax, a link
-----------------------------
to the site during the 2002 proxy voting period will enable you to enroll for
the electronic dissemination of next year's proxy material.
Any registered stockholder may elect the electronic dissemination of next year's
proxy material at any time during the year by enrolling at
http://www.econsent.com/bax.
---------------------------
8552
[X] Please mark your votes as in this example.
This proxy, when properly executed, will be voted in the manner directed
herein. If no directions are given, this proxy will be voted FOR
election of directors, FOR proposals 2, 3 and 4 and AGAINST proposal 5.
--------------------------------------------------------------------------------
The Board of Directors recommends a vote FOR proposals 1, 2, 3 and 4.
--------------------------------------------------------------------------------
FOR WITHHOLD
1. Election of Directors
(See Reverse). [_] [_]
For, except vote
withheld from the
following nominee(s):
-------------------------------------------------------------
FOR AGAINST ABSTAIN
2. Ratification [_] [_] [_]
of independent
accountants.
3. Approval to increase [_] [_] [_]
the authorized
shares of common
stock.
FOR AGAINST ABSTAIN
4. Approval of Officer [_] [_] [_]
Incentive Compensation
Plan.
--------------------------------------------------------------------------------
The Board of Directors recommends a vote AGAINST proposal 5.
--------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
5. Proposal relating to [_] [_] [_]
cumulative voting in the
election of directors.
--------------------------------------------------------------------------------
Mark the box if you have more [_]
than one account and want to
discontinue receiving multiple
copies of future annual reports.
Please see instructions in the
proxy statement.
Mark the box if you [_] Mark the [_]
will attend box if you
the Annual Meeting. want your
votes
treated as
confidential.
SIGNATURE (S)____________________ DATE___________
The signer hereby revokes all
proxies heretofore given by
the signer to vote at said
meeting or any adjournment
thereof.
NOTE: Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as given by the signer to vote at said meeting or any
attorney, executor, administrator, trustee or guardian, please give full
title as such.
--------------------------------------------------------------------------------
. FOLD AND DETACH HERE .
Baxter encourages you to take advantage of several convenient ways to vote your
shares on the matters to be covered at the 2002 Annual Meeting of Stockholders.
Please take the opportunity to use one of the three voting methods outlined
below to cast your ballot. If you vote through the Internet or by telephone, use
the voter control number printed in the box above, just below the perforation.
Your vote authorizes the named proxies to act in the same manner as if you
marked, signed, dated and returned the proxy card.
1. Vote through the Internet. Log on to the Internet and go to the web site
http://www.eproxyvote.com/ bax. Internet voting is available 24 hours a day,
7 days a week until 24 hours prior to the Annual Meeting. Have this proxy
card in hand when you log on and follow the step-by-step instructions
provided on the screen.
2. Vote by phone. United States and Canadian stockholders may call
1-877-PRX-Vote (1-877-779-8683) toll free from any touch-tone telephone.
Stockholders in other countries may call collect at 201-536-8073. Telephone
voting is available 24 hours a day, 7 days a week until 12:00 a.m. May 7,
2002. Have your proxy card in hand when you call. To vote in accordance
with the recommendations of the Board of Directors on ALL proposals, press
1. Your vote will be confirmed and cast as directed and the call will end.
If you wish to vote on each proposal separately, press 2.
3. Vote by mail. Mark, sign and date your proxy card (above) and return it in
the envelope herein provided or otherwise return it to Baxter,
P.O. Box 8616, Edison, New Jersey 08818-8616.
Thank You For Your Vote
BAXTER
Baxter International Inc.
One Baxter Parkway
Deerfield, Illinois 60015-4633