baxter international

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baxter international

  1. 1. -----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AfjoVG498rTj7ClAT8LubmxOrMEgN/jzejHW6zzlKcjOh79ysfTKxhdSpJlzJ3+x 8xjVrHIAteLnw8GH7b/9cA== <SEC-DOCUMENT>0000950131-98-001860.txt : 19980323 <SEC-HEADER>0000950131-98-001860.hdr.sgml : 19980323 ACCESSION NUMBER: 0000950131-98-001860 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 14 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980320 SROS: CSX SROS: NYSE SROS: PCX FILER: COMPANY DATA: COMPANY CONFORMED NAME: BAXTER INTERNATIONAL INC CENTRAL INDEX KEY: 0000010456 STANDARD INDUSTRIAL CLASSIFICATION: SURGICAL & MEDICAL INSTRUMENTS & APPARATUS [3841] IRS NUMBER: 360781620 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-04448 FILM NUMBER: 98570280 BUSINESS ADDRESS: STREET 1: ONE BAXTER PKWY CITY: DEERFIELD STATE: IL ZIP: 60015 BUSINESS PHONE: 7089482000 MAIL ADDRESS: STREET 1: ONE BAXTER PARKWAY CITY: DEERFIELD STATE: IL ZIP: 60015 FORMER COMPANY: FORMER CONFORMED NAME: BAXTER TRAVENOL LABORATORIES INC DATE OF NAME CHANGE: 19880522 FORMER COMPANY: FORMER CONFORMED NAME: BAXTER LABORATORIES INC DATE OF NAME CHANGE: 19760608 </SEC-HEADER> <DOCUMENT> <TYPE>10-K <SEQUENCE>1 <DESCRIPTION>FORM 10-K <TEXT>
  2. 2. <PAGE> - ------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 (MARK ONE) [X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997 OR [_]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM __________ TO __________ COMMISSION FILE NUMBER 1-4448 - ------------------------------------------------------------------------------- LOGO Baxter International Inc. - ------------------------------------------------------------------------------- (Exact Name of Registrant in its Charter) DELAWARE 36-0781620 ------------------------------------------- ------------------------- (State or Other Jurisdiction of Incorporation or (I.R.S. Employer Organization) Identification No.) ONE BAXTER PARKWAY, DEERFIELD, ILLINOIS 60015 ------------------------------- ------------------------- (Address of Principal Executive Offices) (Zip Code) 847.948.2000 Registrant's telephone number, including area code ____________________________ Securities registered pursuant to Section 12(b) of the Act: NAME OF EACH EXCHANGE TITLE OF EACH CLASS ON WHICH REGISTERED -------------------- Common stock, $1 par value New York Stock Exchange Chicago Stock Exchange Preferred Stock Purchase Rights Pacific Stock Exchange (currently traded with common stock) New York Stock Exchange Chicago Stock Exchange Pacific Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None ---------------- Indicate by check mark whether the registrant (1) has filed all reports
  3. 3. required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. X Yes No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein and will not be contained, to the best of registrant's knowledge, in the definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [_] The aggregate market value of the voting common equity held by non- affiliates of the registrant (based on the per share closing sale price of $55.38 on March 6, 1998, and for the purpose of this computation only, the assumption that all registrant's directors and executive officers are affiliates) was approximately $15.3 billion. There is no non-voting common equity held by non-affiliates of the registrant. The number of shares of the registrant's common stock, $1 par value, outstanding as of March 6, 1998, was 280,661,677. DOCUMENTS INCORPORATED BY REFERENCE Those sections or portions of the registrant's annual report to stockholders for fiscal year ended December 31, 1997 and of the registrant's proxy statement for use in connection with its annual meeting of stockholders to be held on May 5, 1998, described in the cross reference sheet and table of contents attached hereto are incorporated by reference in this report. - ------------------------------------------------------------------------------- <PAGE> CROSS REFERENCE SHEET AND TABLE OF CONTENTS - ------------------------------------------------------------------------------- <TABLE> <CAPTION> Page Number (Reference) (1) ----------- <C> <S> <C> Item 1. Business (a)General Development of Business.................... 1(2) (b)Financial Information about Industry Segments...... 1(3) (c)Narrative Description of Business.................. 1(4) (d)Financial Information about Foreign and Domestic Operations and Export Sales.......................................... 5(5) Item 2. Properties............................................ 5 Item 3. Legal Proceedings..................................... 6(6) Item 4. Submission of Matters to a Vote of Security Holders... 6 Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters................................... 6(7) Item 6. Selected Financial Data............................... 6(8) Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations................... 6(9) Item 7A. Quantitative and Qualitative Disclosures about Market
  4. 4. Risk.................................................. 6(10) Item 8. Financial Statements and Supplementary Data........... 6(11) Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure................... 6 Item 10. Directors and Executive Officers of the Registrant (a)Identification of Directors........................ 7(12) (b)Identification of Executive Officers............... 7 (c)Compliance with Section 16(a) of the Securities Exchange Act of 1934.................................. 9(13) Item 11. Executive Compensation................................ 9(14) Item 12. Security Ownership of Certain Beneficial Owners and Management............................................ 9(15) Item 13. Certain Relationships and Related Transactions........ 9 Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.............................................. 9 (a)Financial Statements............................... 9 (a)Reports on Form 8-K................................ 9 (c)Exhibits........................................... 9 </TABLE> - --------------------- (1) Information incorporated by reference to the Company's Annual Report to Stockholders for the year ended December 31, 1997 ("Annual Report") and the board of directors' proxy statement for use in connection with the Registrant's annual meeting of stockholders to be held May 5, 1998 ("Proxy Statement"). (2) Annual Report, pages 31-46, section entitled "Notes to Consolidated Financial Statements" and pages 17-24, section entitled "Management's Discussion and Analysis." (3) Annual Report, pages 44-45, section entitled "Notes to Consolidated Financial Statements--Industry and Geographic Information." (4) Annual Report, pages 17-24, section entitled "Management's Discussion and Analysis" and pages 44-45, section entitled "Notes to Consolidated Financial Statements--Industry and Geographic Information." (5) Annual Report, pages 44-45, section entitled "Notes to Consolidated Financial Statements--Industry and Geographic Information." (6) Annual Report, pages 41-44, section entitled "Notes to Consolidated Financial Statements--Legal Proceedings." (7) Annual Report, page 46, section entitled "Notes to Consolidated Financial Statements--Quarterly Financial Results and Market for the Company's Stock (Unaudited)." (8) Annual Report, inside back cover, section entitled "Five-Year Summary of Selected Financial Data." (9) Annual Report, pages 17-24, section entitled "Management's Discussion and Analysis." (10) Annual Report, pages 21-22, section entitled "Financial Instrument Market Risk." (11) Annual Report, pages 26-46, sections entitled "Report of Independent Accountants," "Consolidated Balance Sheets," "Consolidated Statements of Income," "Consolidated Statements of Cash Flows," "Consolidated Statements of Stockholders' Equity" and "Notes to Consolidated Financial Statements." (12) Proxy Statement, pages 2-5, section entitled "Proposal 1--Election of Directors." (13) Proxy Statement, page 16, section entitled "Section 16(a) Beneficial Ownership Reporting Compliance." (14) Proxy Statement, pages 6-10, sections entitled "Compensation of Directors" and "Executive Compensation," and pages 14-15, section entitled "Pension Plan, Excess Plans and Supplemental Plans." (15) Proxy Statement, pages 16-17, section entitled "Ownership of Company Securities." <PAGE> - --------------------------------------------------------------------------------
  5. 5. LOGO Baxter International Inc., One Baxter Parkway, Deerfield, Illinois 60015. - -------------------------------------------------------------------------------- PART I - -------------------------------------------------------------------------------- ITEM 1. BUSINESS. (a) General Development of Business. Baxter International Inc. was incorporated under Delaware law in 1931. As used in this report, except as otherwise indicated in information incorporated by reference, "Baxter" means Baxter International Inc. and the "Company" means Baxter and its subsidiaries. The Company is engaged in the worldwide development, distribution and manufacture of a diversified line of products, systems and services used primarily in the health-care field. Products are manufactured by the Company in 25 countries and sold in approximately 100 countries. Health-care is concerned with the preservation of health and with the diagnosis, cure, mitigation and treatment of disease and body defects and deficiencies. The Company's products are used by hospitals, clinical and medical research laboratories, blood and dialysis centers, rehabilitation centers, nursing homes, doctors' offices and at home under physician supervision. See "Recent Developments." For information regarding acquisitions, investments in affiliates and divestitures, see the Company's Annual Report to Stockholders for the year ended December 31, 1997 (the "Annual Report"), pages 32-33, sections entitled "Notes to Consolidated Financial Statements--Acquisitions and Divestitures," and "--Subsequent Events" which are incorporated by reference. (b) Financial Information About Industry Segments. Incorporated by reference from the Annual Report, pages 44-45, section entitled "Notes to Consolidated Financial Statements--Industry and Geographic Information." (c) Narrative Description of Business. Recent Developments VIMRX In December 1997, the Company and VIMRX Pharmaceuticals Inc. formed a new cell therapy company to develop innovative treatments for cancer and other life-threatening diseases. The Company transferred certain assets of its Immunotherapy division to the new company and holds a minority-ownership position along with warrants to acquire an additional ownership interest in the future. Ohmeda In January 1998, the Company signed a definitive agreement to acquire the Pharmaceutical Products Division of the BOC Group's Ohmeda health-care business, a manufacturer of gases and drugs used for general and local anesthesia. The transaction is subject to customary anti-trust review and is expected to close in 1998. Somatogen
  6. 6. In February 1998, the Company signed a definitive agreement to acquire Somatogen, Inc., a publicly-held biopharmaceutical developer of recombinant hemoglobin technology. It is expected that a substantial portion of the purchase price will be allocated to Somatogen's in-process research and development, which, under generally accepted accounting principles, will be immediately expensed by the Company. The transaction is subject to approval of Somatogen's shareholders and customary anti-trust review; it is expected to close in 1998. 1 <PAGE> Company Overview The Company operates in a single industry segment as a global developer, manufacturer and marketer of products and technologies related to the blood and circulatory system. It has market-leading positions in four businesses within this segment of the medical products and services industry: Blood Therapies, which develops biopharmaceutical and blood collection and separation products and technologies; I.V. Systems/Medical Products, which develops technologies and systems to improve intravenous medication delivery and distributes medical products; Renal, which develops products and services to treat kidney disease; and CardioVascular, which develops products and provides services to treat late-stage heart disease and vascular disorders. Information about operating results is incorporated by reference from the Annual Report, pages 17-21, section entitled "Management's Discussion and Analysis" and pages 44-45, section entitled "Notes to Consolidated Financial Statements--Industry and Geographic Information." United States Markets The health-care marketplace continues to be competitive. There has been consolidation in the Company's customer base and by its competitors which has resulted in pricing and market share pressures. These industry trends are expected to continue. The Company intends to continue to manage these issues by capitalizing on its market-leading positions, developing new products and services, leveraging its cost structure and making acquisitions. International Markets The Company generates more than 50% of its revenues outside the United States. While health-care cost containment continues to be a focus around the world, demand for health-care products and services continues to be strong worldwide, particularly in developing markets such as Latin America and Asia. The Company's strategies emphasize global expansion and technological innovation to advance medical care worldwide. Joint Ventures The Company conducts an immaterial portion of its business through joint ventures. The majority of these joint ventures are accounted for under the equity method of accounting. Methods of Distribution The Company conducts its selling efforts through its subsidiaries and divisions. Many subsidiaries and divisions have their own sales forces and direct their own sales efforts. In addition, sales are made to independent distributors, dealers and sales agents. The Company's distribution centers are stocked with adequate inventories to facilitate prompt customer service. Sales and distribution methods include frequent contact by sales representatives, automated communications via various electronic purchasing systems,
  7. 7. circulation of catalogs and merchandising bulletins, direct mail campaigns, trade publications and advertising. Customers may return defective merchandise for credit or replacement. In recent years, such returns have been insignificant. International sales and distribution are made in approximately 100 countries either on a direct basis or through independent local distributors. International subsidiaries employ their own field sales forces in Argentina, Australia, Austria, Belgium, Brazil, Canada, Chile, China, Colombia, Denmark, Ecuador, Finland, France, Germany, Guatemala, Hong Kong, India, Indonesia, Italy, Japan, Malaysia, Mexico, the Netherlands, New Zealand, Norway, Peru, the Philippines, Portugal, Singapore, Spain, Switzerland, Taiwan, Thailand, the United Kingdom and Venezuela. In other countries, sales are made through independent distributors or sales agents. Raw Materials Raw materials essential to the Company's business are purchased worldwide in the ordinary course of business from numerous suppliers. The vast majority of these materials are generally available, and no serious shortages or delays have been encountered. Certain raw materials used in producing some of the Company's products are available only from a small number of suppliers. In addition, certain biomaterials for medical implant applications (primarily polymers) are becoming more difficult to obtain due to market withdrawals by biomaterial suppliers, primarily as a result of perceived exposures to liability in the United States. 2 <PAGE> In some of these situations, the Company has long-term supply contracts with its suppliers, although it does not consider its obligations under such contracts to be material. The Company does not always recover cost increases through customer pricing due to contractual limits and market pressure on such price increases. See "Contractual Arrangements." Patents and Trademarks Products manufactured by the Company are sold primarily under its own trademarks and trade names. Some products purchased and resold by the Company are sold under the Company's trade names while others are sold under trade names owned by its suppliers. The Company owns a number of patents and trademarks throughout the world and is licensed under patents owned by others. The Company's policy is to protect its products and technology through patent and trademark applications on a worldwide basis. This protection is sought in a manner that balances the cost of such protection against obtaining the greatest value for the Company. The Company also recognizes the need to promote the enforcement of its patents and trademarks. However, while the Company can not make any assurances that any of its patents will not be circumvented, it does not consider its overall business to be materially dependent upon any individual patent or trademark. Competition Historically, competition in the health-care industry has been characterized by the search for technological and therapeutic innovations in the prevention, diagnosis and treatment of disease. The Company believes that it has benefited from the technological advantages of certain of its products. While others will continue to introduce new products which compete with those sold by the Company, the Company believes that its research and development efforts will permit it to remain competitive in all presently material product areas. Although no single company competes with the Company in all of its businesses, the Company is faced with substantial competition in all of its markets.
  8. 8. The changing health-care environment in recent years has led to increasingly intense competition among United States health-care suppliers. Competition is focused on price, service and product performance. Pressure in these areas is expected to continue. The Company continues to increase its efforts to minimize costs and meet United States price competition. The Company believes that its cost position will continue to benefit from improvements in manufacturing technology and increased economies of scale. The Company continues to emphasize its investments in innovative and cost-effective technologies and the quality of its products and services. Credit and Working Capital Practices As of February 28, 1998, the Company's debt ratings on senior debt were A3 by Moody's, A by Standard & Poor's and A- by Duff & Phelps. The Company's credit practices and related working capital needs are comparable to those of other market participants. Collection periods tend to be longer for sales outside the United States. Quality Management The Company places significant emphasis on providing quality products and services to its customers. A major portion of the Company's quality systems relate to the manufacturing, packaging, sterilization, handling, distribution and labeling of the products by the Company. These quality systems, including control procedures that are developed and implemented by technically trained professionals, result in rigid specifications for raw materials, packaging materials, labels, sterilization procedures and overall manufacturing process control. The quality systems integrate the efforts of suppliers of both raw materials and finished goods to provide the highest value to customers. On a statistical sampling basis, internal quality assurance organizations test components and finished goods at different stages in the manufacturing process to assure that exacting standards are met. 3 <PAGE> Research and Development The Company is actively engaged in research and development programs to develop and improve products, systems and manufacturing methods. These activities are performed at 21 research and development centers located around the world and include facilities in Australia, Austria, Belgium, France, Germany, Italy, Japan, Malta, the Netherlands, Sweden, the United Kingdom and the United States. Expenditures for Company-sponsored research and development activities were $392 million in 1997, $340 million in 1996 and $327 million in 1995. Principal areas of strategic focus for research include hemoglobin therapeutics, xenotransplantation, medication-delivery systems and left- ventricular systems. The Company is conducting several clinical trials of its hemoglobin therapeutic, or "blood substitute," in the United States and Europe. The Company currently anticipates launching the product by late 1999 or early in the year 2000. The Company's research efforts emphasize self- manufactured product development, and portions of that research relate to multiple product lines. For example, many product categories benefit from the Company's research effort as applied to the human body's circulatory systems. In addition, research relating to the performance and purity of plastic materials has resulted in advances that are applicable to a large number of the Company's products.
  9. 9. Government Regulation Most products manufactured or sold by the Company are subject to regulation by the Food and Drug Administration (the "FDA"), as well as by other agencies, both within and outside the United States. In the United States, the federal agencies which regulate the Company's facilities, operations and personnel include the FDA, the Environmental Protection Agency, the Occupational Health & Safety Administration, the Customs Department, the Commerce Department, and others. State agencies also regulate the facilities, operations and personnel of the Company within their respective states. The federal agencies possess authority to regulate the introduction and advertising of the Company's products and devices as well as manufacturing procedures, labeling and recordkeeping. In addition, the FDA has the power, among other powers, to enjoin the manufacture or sale of products and devices, to seize adulterated or misbranded products and devices and to require the manufacturer to remove them from the market. From time to time, the Company has removed products from the market that were found not to meet acceptable standards. This may occur in the future. Product regulatory laws exist in most other countries where the Company does business. These foreign government agencies also regulate public health, environmental, employment, export, customs, and other aspects of the Company's global operations. Environmental policies of the Company mandate compliance with all applicable regulatory requirements concerning environmental quality and contemplate, among other things, appropriate capital expenditures for environmental protection. Various non-material capital expenditures for environmental protection were made by the Company during 1997 and similar expenditures are planned for 1998. See Item 3.--"Legal Proceedings." Employees As of December 31, 1997, the Company employed approximately 41,000 people. Contractual Arrangements A substantial portion of the Company's products are sold through contracts with both international and domestic purchasers. Some of these contracts are for terms of more than one year and include limits on price increases. In the case of hospitals, clinical laboratories and other facilities, these contracts may specify minimum quantities of a particular product or categories of products to be purchased by the customer. 4 <PAGE> Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the Private Securities Litigation Reform Act of 1995 Statements throughout this report that are not historical facts, including but not limited to, statements in the "Company Overview," "International Markets" and "Recent Developments" sections of this report (including material incorporated therein by reference) are forward looking statements. These statements are based on the Company's current expectations and involve numerous risks and uncertainties. Some of these risks and uncertainties are factors that affect all international businesses, while some are specific to the Company and the health-care arenas in which it operates. The factors below in some cases have affected and could affect the Company's actual results, causing results to differ, and possibly differ materially, from those expressed in any such forward looking statements. These factors include technological advances in the medical field, economic conditions, demand and market acceptance risks for new and existing products, technologies and health- care services, the impact of competitive products and pricing, manufacturing
  10. 10. capacity, new plant start-ups, the United States and global regulatory, trade and tax policies, continued price competition related to the Company's United States operations, product development risks, including technological difficulties, ability to enforce patents and unforeseen foreign commercialization and regulatory factors. In particular, the Company, as well as other companies in its industry, is experiencing increased regulatory activity by the United States FDA with respect to its plasma-based biologicals and its complaint-handling systems. Additionally, as discussed in Item 3.-- "Legal Proceedings," upon the resolution of certain legal matters, the Company may incur charges in excess of presently established reserves. Any such charge could have a material adverse effect on the Company's results of operations or cash flows in the period in which it is recorded. Currency fluctuations are also a significant variable for global companies, especially fluctuations in local currencies where hedging opportunities are unreasonably expensive or unavailable. If the United States dollar continues to strengthen against most foreign currencies, the Company's ability to realize projected growth rates in its sales and net earnings outside the United States will continue to be negatively impacted. The Company believes that its expectations with respect to forward looking statements are based upon reasonable assumptions within the bounds of its knowledge of its business and operations, but there can be no assurance that the actual results or performance of the Company will conform to any future results or performance expressed or implied by such forward looking statements. (d) Financial Information About Foreign and Domestic Operations and Export Sales. International operations are subject to certain additional risks inherent in conducting business outside the United States, such as changes in currency exchange rates, price and currency exchange controls, import restrictions, nationalization, expropriation and other governmental action. Financial information is incorporated by reference from the Annual Report, pages 44-45, section entitled "Notes to Consolidated Financial Statements-- Industry and Geographic Information." - -------------------------------------------------------------------------------- ITEM 2. PROPERTIES. The Company owns or has long-term leases on substantially all of its major manufacturing facilities. The Company maintains 21 manufacturing facilities in the United States, including six in Puerto Rico, and also manufactures in Australia, Austria, Belgium, Brazil, Canada, China, Colombia, Costa Rica, the Dominican Republic, France, Indonesia, Ireland, Italy, Japan, Malta, Mexico, the Netherlands, the Philippines, Singapore, Spain, Switzerland, Tunisia, Turkey and the United Kingdom. The Company owns or operates distribution facilities throughout the world, including 90 located in 26 foreign countries. The Company maintains a continuing program for improving its properties, including the retirement or improvement of older facilities and the construction of new facilities. This program includes improvement of manufacturing facilities to enable production and quality control programs to conform with the current state of technology and government regulations. Capital expenditures were $403 million in 1997, $318 million in 1996 and $309 million in 1995. In addition, the Company added to the pool of equipment leased or rented to customers, spending $93 million in 1997, $80 million in 1996 and $90 million in 1995. 5 <PAGE>
  11. 11. - ------------------------------------------------------------------------------- ITEM 3. LEGAL PROCEEDINGS. Incorporated by reference from the Annual Report, pages 41-44, section entitled "Notes to Consolidated Financial Statements--Legal Proceedings." - ------------------------------------------------------------------------------- ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None. - ------------------------------------------------------------------------------- PART II - ------------------------------------------------------------------------------- ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. Incorporated by reference from the Annual Report, page 46, section entitled "Notes to Consolidated Financial Statements--Quarterly Financial Results and Market for the Company's Stock (Unaudited)." - ------------------------------------------------------------------------------- ITEM 6. SELECTED FINANCIAL DATA. Incorporated by reference from the Annual Report, inside back cover, section entitled "Five-Year Summary of Selected Financial Data." - ------------------------------------------------------------------------------- ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Incorporated by reference from the Annual Report, pages 17-24, section entitled "Management's Discussion and Analysis." - ------------------------------------------------------------------------------- ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Incorporated by reference from the Annual Report, pages 21-22, section entitled "Financial Instrument Market Risk." - ------------------------------------------------------------------------------- ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. Incorporated by reference from the Annual Report, pages 26-46, sections entitled "Report of Independent Accountants," "Consolidated Balance Sheets," "Consolidated Statements of Income," "Consolidated Statements of Cash Flows," "Consolidated Statements of Stockholders' Equity" and "Notes to Consolidated Financial Statements."
  12. 12. - ------------------------------------------------------------------------------- ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. 6 <PAGE> PART III - -------------------------------------------------------------------------------- ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. (a) Identification of Directors Incorporated by reference from the board of directors' proxy statement for use in connection with Baxter's annual meeting of stockholders to be held on May 5, 1998 (the "Proxy Statement"), pages 2-5, section entitled "Proposal 1-- Election of Directors." (b) Identification of Executive Officers Following are the names and ages, as of March 1, 1998, of the executive officers of Baxter International Inc. ("Baxter"), and one or both of its two principal direct subsidiaries, Baxter Healthcare Corporation ("Healthcare") and Baxter World Trade Corporation ("World Trade"), their positions and summaries of their backgrounds and business experience. All executive officers of Baxter are elected or appointed by the board of directors and hold office until the next annual meeting of directors and until their respective successors are elected and qualified. The annual meeting of directors is held after the annual meeting of stockholders. All executive officers of Healthcare and World Trade are elected or appointed by the boards of directors of the applicable subsidiary and hold office until their respective successors are elected and qualified. As permitted by applicable law, actions by these boards (and their sole stockholder, Baxter) may be taken by written consent in lieu of a meeting. (1) Baxter International Inc. Executive Officers Vernon R. Loucks Jr., age 63, has been chairman of the board of directors since 1987 and chief executive officer of Baxter since 1980. Mr. Loucks was first elected an officer of Baxter in 1971. Harry M. Jansen Kraemer Jr., age 43, has been president of Baxter since March 1997. Mr. Kraemer previously was the senior vice president and chief financial officer of Baxter from 1993, and the vice president of finance and operations for a subsidiary of Baxter since 1992. Prior to that, he was employed as controller, group controller, and president of various divisions of subsidiaries of Baxter. Brian P. Anderson, age 47, has the been senior vice president and chief financial officer of Baxter since February 1998. Mr. Anderson previously was the vice president of finance of Baxter since March 1997, the corporate controller since 1993, and the vice president of corporate audit of a subsidiary of Baxter since 1991. Prior to that, he was a partner in the international accounting firm of Deloitte & Touche. Arthur F. Staubitz, age 58, has been a senior vice president of Baxter since December 1997. From 1993 to December 1997, he was senior vice president and general counsel of Baxter. From 1993 to 1994, he was also secretary of Baxter. Mr. Staubitz previously was vice president/general manager of the ventures
  13. 13. group of a subsidiary of Baxter. Prior to that, he was senior vice president, secretary and general counsel of Amgen, Inc. Prior to that, he was a vice president of a Baxter subsidiary, and prior to that he was a vice president and deputy general counsel of Baxter. Michael J. Tucker, age 45, has been senior vice president of Baxter since 1995. From 1994 to 1995, he was a corporate vice president of World Trade. Mr. Tucker previously was a vice president of a division of World Trade, and prior to that, was a vice president of another division of a subsidiary of Baxter. Fabrizio Bonanni, age 51, has been a vice president of Baxter since 1995. From 1994 to 1995, he was a corporate vice president of World Trade. Mr. Bonanni previously was a vice president of a division of World Trade. John F. Gaither, Jr., age 48, has been a vice president of Baxter since 1994. Between 1991 and 1994, Mr. Gaither was vice president of law and strategic planning for a subsidiary of Baxter, and prior to that, was secretary and deputy general counsel of Baxter. David C. McKee, age 50, has been a vice president of Baxter since 1996, and was also secretary from February 1997 to February 1998. Since 1994, Mr. McKee has been deputy general counsel of Baxter. Prior to that, he was associate general counsel of a subsidiary of Baxter. 7 <PAGE> Kshitij Mohan, age 53, has been a vice president of Baxter since 1995. In 1995, Mr. Mohan also was a corporate vice president of World Trade. Mr. Mohan previously was a vice president of a division of Healthcare. John L. Quick, age 53, has been a vice president of Baxter since 1995. From 1994 to 1995, he was a corporate vice president of Healthcare. Mr. Quick previously was a vice president of a division of Healthcare, and prior to that, was a vice president of another division of that subsidiary. Thomas J. Sabatino, age 39, has been vice president and general counsel of Baxter since December 1997. He was also assistant secretary from February 1997 to December 1997. From 1995 to December 1997, Mr. Sabatino was associate general counsel of Healthcare. Prior to that, he was vice president and assistant general counsel of Tenet Healthcare Corporation from March 1995 to July 1995. From April 1994 to March 1995, he was vice president and general counsel of American Medical International, Inc., and from September 1993 to March of 1994, he was acting general counsel of that company; from 1992 to September 1993, he was its associate general counsel. Steven J. Meyer, age 41, has been treasurer of Baxter since February 1997. From 1993 to 1997, Mr. Meyer was a vice president of international finance of a business group of World Trade. Mr. Meyer previously was the international controller of a business group of World Trade. Jan Stern Reed, age 38, has been corporate secretary of Baxter since February 1998. She was assistant secretary from February 1997 to February 1998. From 1995 to 1997, Ms. Reed was assistant secretary of, and counsel to Wheelabrator Technologies, Inc. From 1992 to 1995, she was counsel to Waste Management, Inc. and Wheelabrator Technologies, Inc. (2) Healthcare and World Trade Executive Officers Timothy B. Anderson, age 51, has been a group vice president of Healthcare and World Trade since 1994. Between 1992 and 1994, Mr. Anderson was a vice president of Baxter. Mr. Anderson previously was president of several divisions of a subsidiary of Baxter.
  14. 14. Donald W. Joseph, age 60, has been a group vice president of Healthcare and World Trade since 1994. Between 1990 and 1994, Mr. Joseph was a vice president of Baxter. Jack L. McGinley, age 51, has been a group vice president of Healthcare since 1994. Between 1992 and 1994, Mr. McGinley was a vice president of Baxter. Mr. McGinley previously was president of a division of Healthcare, and prior to that, he was president of the Japanese subsidiary of World Trade. Michael A. Mussallem, age 45, has been a group vice president of Healthcare since 1994. From 1993 to 1994, Mr. Mussallem was president of a division of Healthcare, and prior to that, was president of another division of that subsidiary. Carlos del Salto, age 55, has been a senior vice president of World Trade since 1996. From 1994 to 1996, Mr. del Salto was a corporate vice president of World Trade. Between 1992 and 1994, Mr. del Salto was a vice president of Baxter. Mr. del Salto previously was president--Latin America/Switzerland/Austria of a subsidiary of Baxter, and prior to that, he was vice president--Latin America of that subsidiary. David F. Drohan, age 59, has been a corporate vice president of Healthcare since 1996. Between 1991 and 1996, Mr. Drohan was president of a division of Healthcare. James M. Gatling, age 48, has been a corporate vice president of Healthcare since 1996. Between 1991 and 1996, Mr. Gatling was a vice president of a division of Healthcare. J. Robert Hurley, age 48, has been a corporate vice president of World Trade since 1993. Mr. Hurley previously was vice president of a division of World Trade. Roberto E. Perez, age 48, has been a corporate vice president of Healthcare and World Trade since 1995. Between 1992 and 1995, Mr. Perez was president of a division of a subsidiary of Baxter, and prior to that, was a vice president of that division. 8 <PAGE> (c) Compliance with Section 16(a) of the Securities Exchange Act of 1934. Incorporated by reference from the Proxy Statement, page 16, section entitled "Section 16(a) Beneficial Ownership Reporting Compliance." - -------------------------------------------------------------------------------- ITEM 11. EXECUTIVE COMPENSATION. Incorporated by reference from the Proxy Statement, pages 6-10, sections entitled "Compensation of Directors" and "Executive Compensation" and pages 14- 15, section entitled "Pension Plan, Excess Plans and Supplemental Plans." - -------------------------------------------------------------------------------- ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. Incorporated by reference from the Proxy Statement, pages 16-17, section entitled "Ownership of Company Securities." -
  15. 15. -------------------------------------------------------------------------------- ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. None. - -------------------------------------------------------------------------------- PART IV - -------------------------------------------------------------------------------- ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. The following documents are filed as a part of this report: (a) Financial Statements Location Financial Statements Required By Item 8 of This Form Consolidated Balance Sheets Annual Report, page 27 Consolidated Statements of Income Annual Report, page 28 Consolidated Statements of Cash Flows Annual Report, page 29 Consolidated Statements of Stockholders' Equity Annual Report, page 30 Notes to Consolidated Financial Statements Annual Report, pages 31- Report of Independent Accountants 46 Annual Report, page 26 Schedules Required By Article 12 of Regulation S-X Report of Independent Accountants on Financial Statement Schedule page 10 II Valuation and Qualifying Accounts page 11 All other schedules have been omitted because they are not applicable or not required. (b) Reports on Form 8-K A report on Form 8-K, dated February 11, 1998, was filed with the SEC under Item 5, Other Events, to file a press release disclosing Baxter's 1997 results. (c) Exhibits required by Item 601 of Regulation S-K are listed in the Exhibit Index, which is incorporated herein by reference. Exhibits in the Exhibit Index marked with a "C" in the left margin constitute management contracts or compensatory plans or arrangements contemplated by Item 14(a) of Form 10-K. The list of exhibits so designated is incorporated by reference in this Part IV, Item 14. 9 <PAGE> REPORT OF INDEPENDENT ACCOUNTANTS ON THE FINANCIAL STATEMENT SCHEDULE To the Board of Directors of Baxter International Inc. Our audits of the consolidated financial statements referred to in our report dated February 5, 1998 appearing on page 26 of the 1997 Annual Report to Stockholders of Baxter International Inc. (which report and consolidated financial statements are incorporated by reference in the Annual Report on Form 10-K) also included an audit of the Financial Statement Schedule listed in Item 14(a) of this Form 10-K. In our opinion, this Financial Statement Schedule presents fairly, in all material respects, the information set forth therein
  16. 16. when read in conjunction with the related consolidated financial statements. PRICE WATERHOUSE LLP Chicago, Illinois February 5, 1998 10 <PAGE> SCHEDULE II - -------------------------------------------------------------------------------- VALUATION AND QUALIFYING ACCOUNTS (In millions) <TABLE> - -------------------------------------------------------------------------------- -------- <CAPTION> Additions ----------------------- Balance at Charged to Charged to Deductions Balance beginning costs and other from at end of Description of period expenses accounts (A) reserves period - -------------------------------------------------------------------------------- -------- <S> <C> <C> <C> <C> <C> <C> <C> Year ended December 31, 1997: Accounts receivable $24 $ 9 $(1) $(3) $29 - -------------------------------------------------------------------------------- -------- Year ended December 31, 1996: Accounts receivable $22 $ 5 $(2) $(1) $24 - -------------------------------------------------------------------------------- -------- Year ended December 31, 1995: Accounts receivable $21 $ 9 $ 1 $(9) $22 - -------------------------------------------------------------------------------- -------- </TABLE> (A) Valuation accounts of acquired or divested companies and foreign currency translation adjustments. 11 <PAGE> SIGNATURES Pursuant to the requirements of section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Baxter International Inc.
  17. 17. /s/ Vernon R. Loucks Jr. By:____________________________________ Vernon R. Loucks Jr. Chairman of the Board and Chief Executive Officer Date: March 17, 1998 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated. (i) Principal Executive Officers: (iv)A Majority of the Board of Directors /s/ Vernon R. Loucks Jr. Walter E. Boomer Vernon R. Loucks Jr. Pei-yuan Chia Director, Chairman of the Board John W. Colloton and Chief Executive Officer Susan Crown /s/ Harry M. Jansen Kraemer Jr. Mary Johnston Evans Harry M. Jansen Kraemer Jr. Martha R. Ingram President Harry M. Jansen Kraemer Jr. (ii) Principal Financial Officer: Arnold J. Levine /s/ Brian P. Anderson Georges C. St. Laurent, Jr. Brian P. Anderson Monroe E. Trout, M.D. Senior Vice President and Chief Reed V. Tuckson, M.D. Financial Officer Fred L. Turner /s/ Vernon R. Loucks Jr. (iii) Controller: By: ____________________________________ /s/ Brian P. Anderson Vernon R. Loucks Jr. Brian P. Anderson Director and Attorney-in-Fact Senior Vice President and Chief Accounting Officer 12 <PAGE> - -------------------------------------------------------------------------------- APPENDICES <TABLE> <CAPTION> DESCRIPTION PAGE - ----------- ---- <S> <C> Computation of Ratio of Earnings to Fixed Charges (Exhibit 12) 16 Subsidiaries of the Company (Exhibit 21) 17 </TABLE> -
  18. 18. -------------------------------------------------------------------------------- EXHIBITS FILED WITH SECURITIES AND EXCHANGE COMMISSION <TABLE> <CAPTION> NUMBER AND DESCRIPTION OF EXHIBIT --------------------------------- <C> <C> <S> 3. Certificate of Incorporation and Bylaws 3.1* Restated Certificate of Incorporation, filed as exhibit 3.1 to the Company's annual report on Form 10-K for the year ended December 31, 1992, file number 1-4448 (the "1992 Form 10-K"). 3.2* Certificate of Designation of Series A Junior Participating Preferred Stock, filed under the Securities Act of 1933 as exhibit 4.3 to the Company's registration statement on Form S- 8 (No. 33-28428). 3.3 Amended and Restated Bylaws. Instruments defining the rights of security holders, including 4. indentures 4.1* Indenture dated November 15, 1985 between the Company and Bankers Trust Company, filed as exhibit 4.8 to the Company's current report on Form 8-K dated December 16, 1985, file no. 1-4448. 4.2* Amended and Restated Indenture dated November 15, 1985 (the "Indenture"), between the Company and Continental Illinois National Bank and Trust Company of Chicago ("Continental"), filed under the Securities Act of 1933 as exhibit 4.1 to the Company's registration statement on Form S-3 (No. 33-1665). 4.3* First Supplemental Indenture to the Indenture between the Company and Continental, filed under the Securities Act of 1933 as exhibit 4.1(A) to the Company's registration statement on Form S-3 (No. 33-6746). 4.4* Supplemental Indenture dated as of January 29, 1997, between the Company and First Trust National Association (as successor to Continental), filed under the Securities Act of 1933 as exhibit 4.1B to the Company's debt securities shelf registration statement on Form S-3 (No. 333-19025) (the "1997 Shelf"). 4.5* Fiscal and Paying Agency Agreement dated as of April 26, 1984, among American Hospital Supply International Finance N.V., the Company and The Toronto-Dominion Bank, as amended, filed as exhibit 4.9 to the Company's annual report on Form 10-K for the year ended December 31, 1985 (the "1985 Form 10-K"). 4.6* Fiscal and Paying Agency Agreement dated as of November 15, 1984, between the Company and Citibank, N.A., as amended, filed as exhibit 4.16 to the Company's annual report on Form 10-K for the year ended December 31, 1987, file no. 1-4448 (the "1987 Form 10-K"). 4.7* Specimen 9 1/2% Note, filed as exhibit 4.3(a) to the Company's current report on Form 8-K dated June 23, 1988, file no. 1- 4448. 4.8* Specimen 9 1/4% Note, filed as exhibit 4.3(a) to the Company's current report on Form 8-K dated September 13, 1989, file number 1-4448. 4.9* Specimen 9 1/4% Note, filed as exhibit 4.3(a) to the Company's current report on Form 8-K dated December 7, 1989, file number 1-4448. 4.10* Specimen 7.125% Note, filed as exhibit 4.10 to the Company's annual report on Form 10-K for the year ended December 31, 1996 (the "1996 Form 10-K"). 4.11* Specimen 7.65% Debenture, filed as exhibit 4.11 to the 1996 Form 10-K. </TABLE>
  19. 19. 13 <PAGE> <TABLE> <C> <C> <S> 10. Material Contracts C 10.1* Form of Indemnification Agreement entered into with directors and officers, filed as exhibit 19.4 to the Company's quarterly report on Form 10-Q for the quarter ended September 30, 1986, file no. 1-4448. C 10.2* 1988 Long-Term Incentive Plan, filed as exhibit 10.12 to the 1987 Form 10-K. C 10.3* 1987-1989 Long-Term Performance Incentive Plan, filed as exhibit 10.15 to the Company's annual report on Form 10-K for the year ended December 31, 1986 (the "1986 Form 10-K"). C 10.4* 1989 Long-Term Incentive Plan, filed as exhibit 10.12 to the Company's annual report on Form 10-K for the year ended December 31, 1988, file no. 1-4448 (the "1988 Form 10-K"). C 10.5* Stock Option Plan Adopted July 25, 1988, filed as exhibit 10.13 to the 1988 Form 10-K. C 10.6* 1991 Officer Incentive Compensation Plan, filed as exhibit 10.11 to the Company's annual report on Form 10-K for the year ended December 31, 1990, file number 1-4448 (the "1990 Form 10- K"). C 10.7* Baxter International Inc. and Subsidiaries Incentive Investment Excess Plan, filed as exhibit 10.17 to the 1988 Form 10-K. C 10.8* Baxter International Inc. and Subsidiaries Supplemental Pension Plan, filed as exhibit 10.18 to the 1988 Form 10-K. C 10.9* Limited Rights Plan, filed as exhibit 19.6 to the Company's quarterly report on Form 10-Q for the quarter ended September 30, 1989, file no. 1-4448 (the "September, 1989 Form 10-Q"). C 10.10* Amendments to various plans regarding disability, filed as exhibit 19.9 to the September, 1989 Form 10-Q. C 10.11* Amendments to 1987-1989 Long-Term Performance Incentive Plan and 1988 Long-Term Incentive Plan, filed as exhibit 19.10 to the September, 1989 Form 10-Q. C 10.12* 1987 Incentive Compensation Program, filed as exhibit C to the Company's proxy statement for use in connection with its May 13, 1987, annual meeting of stockholders, file no. 1-4448. 10.13* Rights Agreement between the Company and The First National Bank of Chicago, filed as exhibit 1 to a registration statement on Form 8-A dated March 21, 1989, file no. 1-4448. C 10.14* Amendment to 1987 Incentive Compensation Program, filed as exhibit 19.1 to September, 1989 Form 10-Q. C 10.15* Restricted Stock Grant Terms and Conditions, filed as exhibit 10.25 to the Company's annual report on Form 10-K for the year ended December 31, 1991, file number 1-4448 (the "1991 Form 10- K"). C 10.16* Vernon R. Loucks Restricted Stock Grant Terms and Conditions, filed as exhibit 10.26 to the 1991 Form 10-K. C 10.17 Deferred Compensation Plan, amended and restated effective January 1, 1998. C 10.18* Restricted Stock Plan for Non-Employee Directors (as amended and restated in 1992), filed as exhibit 10.28 to the 1992 Form 10-K. C 10.19* Restricted Stock Grant Terms and Conditions (as amended), filed as exhibit 10.31 to the 1992 Form 10-K. C 10.20* 1992 Officer Incentive Compensation Plan, filed as exhibit 10.29 to the 1992 Form 10-K. C 10.21* 1993 Officer Incentive Compensation Plan, filed as exhibit
  20. 20. 10.30 to the 1992 Form 10-K. C 10.22* 1994 Officer Incentive Compensation Plan, filed as exhibit 10.31 to the Company's annual report on Form 10-K for the year ended December 31, 1993, file number 1-4448 (the "1993 Form 10- K"). </TABLE> 14 <PAGE> <TABLE> <C> <C> <S> C 10.23* Corporate Aviation Policy, filed as exhibit 10.33 to the 1992 Form 10-K. C 10.24* Plan and Agreement of Reorganization between Baxter and Caremark International Inc., filed as exhibit 10.34 to the 1992 Form 10-K. C 10.25* 1994 Incentive Compensation Program, filed as exhibit A to the Company's proxy statement for use in connection with its April 29, 1994 annual meeting of stockholders, file no. 1-4448. C 10.26* 1994 Shared Investment Plan and Terms and Conditions, filed as exhibit 10.1 to the Company's quarterly report on Form 10-Q for the quarter ended June 30, 1994. C 10.27* 1995 Officer Incentive Compensation Plan, filed as exhibit 10.31 to the Company's annual report on Form 10-K for the year ended December 31, 1994 (the "1994 Form 10-K"). C 10.28* Baxter International Inc. Restricted Stock Plan for Non- Employee Directors, as amended and restated effective May 8, 1995, filed as exhibit 10.32 to the 1994 Form 10-K. C 10.29* 1996 Officer Incentive Compensation Plan, filed as exhibit 10.33 to the Company's annual report on Form 10-K for the year ended December 31, 1995 (the "1995 Form 10-K"). C 10.30* 1995 Stock Option Grant Terms and Conditions, filed as exhibit 10.34 to the 1995 Form 10-K. 10.31* Reorganization Agreement between Baxter and Allegiance Corporation, filed as exhibit 2 to the Form 10 registration statement, file no. 1-11885, dated September 20, 1996. C 10.32* Supplemental Pension Agreement: Jack L. McGinley, filed as exhibit 10.32 to the 1996 Form 10-K. C 10.33* November 1996 Stock Option Grant Terms and Conditions, filed as exhibit 10.33 to the 1996 Form 10-K. C 10.34* November 1996 Premium Price Stock Option Grant Terms and Conditions, filed as exhibit 10.34 to the 1996 Form 10-K. C 10.35* Officer Incentive Compensation Plan, filed as exhibit 10.35 to the 1996 Form 10-K. C 10.36 November 1997 Stock Option Grant Terms and Conditions. C 10.37 1998 Incentive Compensation Program. C 10.38 Long Term Incentive Plan. 12. Statements re: computation of ratios. 13. 1997 Annual Report to Stockholders (such report, except to the extent incorporated herein by reference, is being furnished for the information of the Securities and Exchange Commission only and is not deemed to be filed as part of this annual report on Form 10-K). 21. Subsidiaries of the Company. 23. Consent of Price Waterhouse LLP. 24. Powers of Attorney. 27. Financial Data Schedule. </TABLE> - ------- *Incorporated herein by reference. CExhibit contemplated by Item 14(a)(3) of Form 10-K. (All other exhibits are inapplicable or not required.)
  21. 21. LOGO Printed on Recycled Paper 15 <PAGE> EXHIBIT 12 - -------------------------------------------------------------------------------- COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES <TABLE> <CAPTION> (In millions, except ratios) Year ended December 31 - -------------------------------------------------------------------------------- - 1997 1997 1996 1995 1995 1994 1993 1993 - -------------------------------------------------------------------------------- - <S> <C> <C> <C> <C> <C> <C> <C> <C> (C) (C) (C) Income (loss) from continuing operations before income tax expense (benefit) $523 $875 $793 $524 $741 $559 $(74) $472 - -------------------------------------------------------------------------------- - Add: Interest costs 206 206 133 117 117 120 109 109 Estimated interest in rentals (A) 29 29 27 29 29 31 31 31 - -------------------------------------------------------------------------------- - Fixed charges as defined 235 235 160 146 146 151 140 140 - -------------------------------------------------------------------------------- - Interest costs capitalized (8) (8) (3) (3) (3) (2) (5) (5) Losses of less than majority owned affiliates, net of dividends 0 0 8 10 10 18 27 27 - -------------------------------------------------------------------------------- - Income as adjusted $750 $1,102 $958 $677 $894 $726 $ 88 $634 - -------------------------------------------------------------------------------- - Ratio of earnings to fixed charges 3.19 4.69 5.99 4.64 6.12 4.80 (B) 4.53 - -------------------------------------------------------------------------------- - </TABLE>
  22. 22. (A) Represents the estimated interest portion of rents. (B) As a result of the loss incurred during this period, the Company's earnings did not cover the indicated fixed charges. The earnings required to attain a ratio of one-to-one are $52 million. (C) Included in this exhibit are supplemental presentations of the ratio of earnings to fixed charges which exclude the following significant unusual charges: 1993: $216 million restructuring charge and $330 million net litigation charge. 1995: $103 million restructuring charge, $96 million net litigation charge and $18 million in-process research and development charge. 1997: $352 million in-process research and development charge. 16 <PAGE> EXHIBIT 21 - -------------------------------------------------------------------------------- SUBSIDIARIES OF THE COMPANY, AS OF MARCH 13, 1998 <TABLE> <CAPTION> Organized % owned by under immediate Subsidiary laws of parent (1) (2) - ------------------------------------------------------------------------------- <S> <C> <C> Baxter International Inc......................... Delaware Baxter Research Medical Inc..................... Utah 100 Baxter Healthcare Corporation................... Delaware 100 Nextran Inc.................................. Delaware 100 Renal Management Strategies Inc.............. Delaware 91 Baxter World Trade Corporation.................. Delaware 100 Baxter Foreign Sales Corporation............. Barbados 100 Baxter Export Corporation.................... Nevada 100 Baxter, S.A.................................. Belgium 98.44(3) Baxter S.A................................. France 64.57(3) Baxter Deutschland GmbH...................... Germany 100 Baxter SpA................................... Italy 98.98(3) Baxter Pharmacy Services Corporation......... Delaware 100(4) Baxter Sales and Distribution Corp......... Delaware 100 Baxter Healthcare Corporation of Puerto Rico...................................... Alaska 100 Baxter Healthcare (Holdings) Limited......... United Kingdom 99.99(3) Baxter Healthcare Limited.................. United Kingdom 99.99(3) Baxter Healthcare S.A........................ Panama 100 Baxter Healthcare Pte. Ltd................... Singapore 100 Baxter World Trade S.A..................... Belgium 49.29(3) Baxter Limited............................... Japan 100 Baxter Healthcare Pty. Ltd................... Australia 99.99(3) Baxter Edwards AG............................ Switzerland 100(1) Baxter S.A. de C.V........................... Mexico 99.9(3) Laboratorios Baxter S.A. (Colombia).......... Delaware 100 Baxter Corporation........................... Canada 100 Baxter Biotech Worldwide Ltd.................... Delaware 100 Baxter Biotech Holding AG.................... Switzerland 100 Immuno International AG.................... Switzerland 100 Immuno--U.S., Inc........................ Michigan 100 Immuno AG................................ Austria 100(3) </TABLE> -
  23. 23. -------------------------------------------------------------------------------- Subsidiaries omitted from this list, considered in aggregate as a single subsidiary, would not constitute a significant subsidiary. * * * * * (1) Including director's qualifying and other nominee shares. (2) All subsidiaries set forth herein are reported in the Company's financial statements through consolidations or under the equity method of accounting. (3) Remaining shares owned by the Company, its subsidiaries or employees. (4) Of common stock, with preferred stock held by Baxter Healthcare Corporation. 17 </TEXT> </DOCUMENT> <DOCUMENT> <TYPE>EX-3.3 <SEQUENCE>2 <DESCRIPTION>AMENDED & RESTATED BYLAWS <TEXT> <PAGE> EXHIBIT 3.3 ----------- Amended and Restated March 17, 1998 BAXTER INTERNATIONAL INC. BYLAWS ARTICLE I STOCKHOLDERS SECTION l. PLACE OF HOLDING MEETINGS. All meetings of the stockholders shall be held at the office of the Corporation in Deerfield, Illinois, or such other place as shall be determined by the Board of Directors. SECTION 2. ELECTION OF DIRECTORS. (a) The annual meeting of stockholders for the election of directors and the transaction of other business shall be held at such time and date as shall be determined by the Board of Directors. (b) Only persons who are nominated in accordance with the following procedures shall be eligible for election as directors of the Corporation, except as may be otherwise provided in the Certificate of Incorporation of the Corporation with respect to the right of holders of preferred stock of the Corporation to nominate and elect a specified number of directors in certain circumstances. Nominations of persons for election to the Board of Directors may be made at any annual meeting of stockholders, or at any special meeting of stockholders called for the purpose of electing directors, (i) by or at the direction of the Board of Directors (or any duly authorized committee thereof) or (ii) by any stockholder of the Corporation (A) who is a stockholder of record on the date of the giving of the notice provided for in this Section 2 and on the record date for the determination of stockholders entitled to vote at such meeting and (B) who complies with the notice procedures set forth in this Section 2. (c) In addition to any other applicable requirements, for a nomination
  24. 24. to be made by a stockholder, such stockholder must have given timely notice thereof in proper written form to the Corporate Secretary of the Corporation. (d) To be timely, a stockholder's notice to the Corporate Secretary must be delivered to or mailed and received at the principal executive offices of the Corporation (i) in the case of an annual meeting, not less than sixty (60) days nor more than ninety (90) days prior to the anniversary date of the immediately preceding annual meeting of stockholders; provided, however, that in the event that the annual meeting is called for a date that is not within thirty (30) days before or after such anniversary date, notice by the stockholder in order to be timely must be so received not later than the close of business on the tenth (10th) day following the day on which such notice of the date of the annual meeting was mailed or such public disclosure of the date of <PAGE> the annual meeting was made, whichever occurs first, and (ii) in the case of a special meeting of stockholders called for the purpose of electing directors, not later than the close of business on the tenth (10th) day following the day on which notice of the date of the special meeting was mailed or public disclosure of the date of the special meeting was made, whichever occurs first. (e) To be in proper written form, a stockholder's notice to the Corporate Secretary must set forth (i) as to each person whom the stockholder proposes to nominate for election as a director (A) the name, age, business address and residence address of the person, (B) the principal occupation or employment of the person, (C) the class or series and number of shares of capital stock of the Corporation which are owned beneficially or of record by the person and (D) any other information relating to the person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and regulations promulgated thereunder; and (ii) as to the stockholder giving the notice (A) the name and record address of such stockholder, (B) the class or series and number of shares of capital stock of the Corporation which are owned beneficially or of record by such stockholder, (C) a description of all arrangements or understandings between such stockholder and each proposed nominee and any other person or persons (including their names) pursuant to which the nomination(s) are to be made by such stockholder, (D) a representation that such stockholder intends to appear in person or by proxy at the meeting to nominate the persons named in its notice and (E) any other information relating to such stockholder that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder. Such notice must be accompanied by a written consent of each proposed nominee to being named as a nominee and to serve as a director if elected. (f) No person shall be eligible for election as a director of the Corporation, at any annual meeting of stockholders or at any special meeting of stockholders called for the purpose of electing directors, unless nominated in accordance with the procedures set forth in this Section 2. If the chairman of the meeting determines that a nomination was not made in accordance with the foregoing procedures, the chairman shall declare to the meeting that the nomination was defective and such defective nomination shall be disregarded. SECTION 3. VOTING. Each stockholder entitled to vote in accordance with the terms of the Certificate of Incorporation, these Bylaws or Delaware law shall, unless the Certificate of Incorporation or Delaware law otherwise provides, be entitled to one vote, in person or by proxy, for each share of stock entitled to vote held by such stockholder, but no proxy shall be voted after three years from its date unless such proxy provides for a longer period. The vote for directors, and upon the demand of any stockholder, the vote upon any question before the meeting, shall be by ballot. Except for the election of directors,
  25. 25. which shall be decided by a plurality of the shares present in person or represented by proxy at the meeting and entitled to vote thereat, all matters shall be decided by the affirmative vote of a majority of shares present in person or represented by proxy at any meeting duly called and entitled to vote thereat, except as otherwise provided by the Certificate of Incorporation or Delaware law. Page 2 <PAGE> The Corporate Secretary shall prepare and make, at least ten days before each meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof and may be inspected by any stockholder who is present. SECTION 4. QUORUM. Except as provided in the next section hereof, any number of stockholders together holding a majority of the stock issued and outstanding and entitled to vote thereat, who shall be present in person or represented by proxy at any meeting duly called, shall constitute a quorum for the transaction of business. SECTION 5. ADJOURNMENT OF MEETINGS. If less than a quorum shall be in attendance at any time for which the meeting shall have been called, the meeting may, after the lapse of at least half an hour, be adjourned from time to time by a majority of the stockholders present or represented and entitled to vote thereat. If notice of such adjourned meeting is sent to the stockholders entitled by statute to receive the same, and such notice contains a statement of the purpose of the meeting, that the previous meeting failed for lack of a quorum, and that under the provisions of this Section it is proposed to hold the adjourned meeting with a quorum of those present, then any number of stockholders, in person or by proxy, shall constitute a quorum at such meeting unless otherwise provided by statute. SECTION 6. SPECIAL MEETINGS: HOW CALLED. Special meetings of the stockholders for any purpose or purposes may be called only (a) by the Chairman of the Board, the Chief Executive Officer or the Corporate Secretary, and shall be called by the Chairman of the Board, the Chief Executive Officer or the Corporate Secretary upon a request in writing therefor, stating the purpose or purposes thereof, delivered to the Chairman of the Board, the Chief Executive Officer or the Corporate Secretary, signed by a majority of the directors or (b) by resolution of the directors. SECTION 7. NOTICE OF STOCKHOLDERS' MEETINGS. Written or printed notice stating the time and place of regular or special meetings of the stockholders and the general nature of the business to be considered shall be mailed by the Corporate Secretary, or such other officer as the Board of Directors may designate, to each stockholder entitled to vote thereat at such stockholder's address as it appears on the records of the Corporation, at least twenty (20) days but not more than sixty (60) days before the date of such meeting. SECTION 8. CONDUCT OF THE MEETINGS. Page 3 <PAGE> (a) The chairman of the meeting shall have absolute authority over matters of procedure and there shall be no appeal from the ruling of the
  26. 26. chairman. If the chairman, in his or her absolute discretion, deems it advisable to dispense with the rules of parliamentary procedure as to any one meeting of stockholders or part thereof, the chairman shall so state and shall clearly state the rules under which the meeting or appropriate part thereof shall be conducted. (b) If disorder should arise which prevents continuation of the legitimate business of the meeting, the chairman may quit the chair and announce the adjournment of the meeting; and upon his or her doing so, the meeting is immediately adjourned. (c) The chairman may ask or require that anyone not a bona fide stockholder or proxy leave the meeting. (d) A resolution or motion shall be considered for vote only if (i) proposed by a stockholder or duly authorized proxy, and seconded by an individual, who is a stockholder or a duly authorized proxy, other than the individual who proposed the resolution and (ii) all other requirements under law, the Corporation's Certificate of Incorporation, these Bylaws or otherwise, for consideration of such a resolution or motion have been duly satisfied as determined by the chairman in his or her absolute discretion, from which there shall be no appeal. SECTION 9. ANNUAL MEETINGS. (a) No business may be transacted at an annual meeting of stockholders, other than business that is either (i) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors (or any duly authorized committee thereof), (ii) otherwise properly brought before the annual meeting by or at the direction of the Board of Directors (or any duly authorized committee thereof) or (iii) otherwise properly brought before the annual meeting by any stockholder of the Corporation (A) who is a stockholder of record on the date of the giving of the notice provided for in this Section 9 and on the record date for the determination of stockholders entitled to vote at such annual meeting and (B) who complies with the notice procedures set forth in this Section 9. (b) In addition to any other applicable requirements, for business to be properly brought before an annual meeting by a stockholder, such stockholder must have given timely notice thereof in proper written form to the Corporate Secretary of the Corporation, which notice is not withdrawn by such stockholder at or prior to such annual meeting. (c) To be timely, a stockholder's notice to the Corporate Secretary must be delivered to or mailed and received at the principal executive offices of the Corporation not less than sixty (60) days nor more than ninety (90) days prior to the anniversary date of the immediately preceding annual meeting of stockholders; provided, however, that in the event that the annual meeting is called for a date that is not within thirty (30) days before or after such anniversary date, notice by the stockholder in order to be timely must be so received not later than the close of business on the tenth (10th) day following the day on which such notice of the date of Page 4 <PAGE> the annual meeting was mailed or such public disclosure of the date of the annual meeting was made, whichever occurs first. (d) To be in proper written form, a stockholder's notice to the Corporate Secretary must set forth as to each matter such stockholder proposes to bring before the annual meeting (i) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (ii) the name and record address of such
  27. 27. stockholder, (iii) the class or series and number of shares of capital stock of the Corporation which are owned beneficially or of record by such stockholder, (iv) a description of all arrangements or understandings between such stockholder and any other person or persons (including their names) in connection with the proposal of such business by such stockholder and any material interest of such stockholder in such business and (v) a representation that such stockholder intends to appear in person or by proxy at the annual meeting to bring such business before the meeting. (e) No business shall be conducted at the annual meeting of stockholders except business brought before the annual meeting in accordance with the procedures set forth in this Section 9, provided, however, that, once business has been properly brought before the annual meeting in accordance with such procedures, nothing in this Section 9 shall be deemed to preclude discussion by any stockholder of any such business. If the chairman of the annual meeting determines that business was not properly brought before the annual meeting in accordance with the foregoing procedures, the chairman shall declare to the meeting that the business was not properly brought before the meeting and such business shall not be transacted. ARTICLE II DIRECTORS SECTION 1. QUALIFICATION AND QUORUM. No person shall be eligible for election or appointment as a director who, at the time of his election or appointment is 72 years old, or older, provided, however, that this provision shall not be applicable to persons who have been elected or appointed as directors prior to the 1978 annual meeting of the stockholders. One-third of the total number of directors (rounded upwards, if necessary, to the next whole number) shall constitute a quorum for the transaction of business at any meeting of the Board of Directors. If at any meeting of the Board of Directors there shall be less than a quorum present, a majority of those present may adjourn the meeting from time to time until a quorum is obtained, and no further notice thereof need to be given other than by announcement at said meeting which shall be so adjourned. The Board of Directors may also transact business without a meeting if all members of the Board of Directors consent thereto in writing. SECTION 2. FIRST MEETING. The newly elected directors may hold their first meeting for the purpose of organization and the transaction of business if a quorum be present, immediately after the annual meeting of the stockholders; or the time and place of such meeting may be fixed by consent in writing of all the directors. Page 5 <PAGE> SECTION 3. ELECTION OF OFFICERS. At the first meeting or at any subsequent meeting called for the purpose, the directors shall elect a Chairman of the Board from their number, and a Chief Executive Officer, a President, one or more Executive Vice Presidents, one or more Senior Vice Presidents, one or more Group Vice Presidents, one or more Vice Presidents, a Treasurer, a Corporate Secretary, and one or more Assistant Corporate Secretaries, who need not be directors. Such officers shall hold office until the next annual election of officers, and until their successors are elected and qualified. SECTION 4. SPECIAL MEETINGS: HOW CALLED: NOTICE. Special meetings of the Board of Directors may be called by the Chairman of the Board, the Chief Executive Officer, the President or the Corporate Secretary on the written request of any two directors on twenty-four (24) hours notice to each director. Such notice, which need not specify the purpose of the meeting or the matters to be
  28. 28. considered thereat, may be given as provided in Article VIII, personally (including by telephone) or by telegram or other written communication delivered to the residence or office of the director. Such personal notice or written communication shall be effective when delivered. SECTION 5. PLACE OF MEETING. The directors may hold their meetings and have one or more offices, and keep the books of the Corporation, outside the State of Delaware, at any office or offices of the Corporation, or at any place as they may from time to time by resolution determine. SECTION 6. GENERAL POWERS OF DIRECTORS. The Board of Directors shall have the management of the business of the Corporation, and subject to the restrictions imposed by law, by the Certificate of Incorporation, or by these Bylaws, may exercise all the powers of the Corporation, including any powers incidental thereto. SECTION 7. COMPENSATION OF DIRECTORS. Directors shall not receive any stated salary for their services as directors, but by resolution of the Board of Directors a fixed fee may be paid together with expenses for attendance at meetings. Nothing herein contained shall be construed to preclude any director from serving the Corporation in any other capacity as an officer, agent or otherwise, and receiving compensation therefor. ARTICLE III COMMITTEES SECTION 1. The Board of Directors shall create an Executive Committee, an Audit Committee, a Compensation Committee, a Finance Committee, a Planning and Organization Page 6 <PAGE> Committee, and a Public Policy Committee, and may create such other committees as the Board of Directors, from time to time, deems desirable. Each committee shall consist of three or more of the directors of the Corporation and, to the extent provided in the resolutions creating the committees or in these Bylaws, shall have the powers of the Board of Directors in the management of the business and affairs of the Corporation. SECTION 2. A majority of the Executive Committee shall consist of directors who are independent of management and free from any relationships that, in the opinion of the Board of Directors, would interfere with their exercise of independent judgment as a committee member. The Policy Statement on audit committees issued by the New York Stock Exchange shall be applicable in determining which directors are "independent" for this purpose. The Executive Committee shall have all the powers and authority of the Board of Directors, including the authority to declare a regular quarterly dividend, to authorize the issuance of stock and other securities and to adopt a Certificate of Ownership and Merger under Delaware law, provided that the Executive Committee shall not, in any event, have authority to amend the Certificate of Incorporation, to adopt any agreement of merger or consolidation involving the Corporation as a merging or consolidating party, to recommend to the stockholders the sale, lease or exchange of all or substantially all of the Corporation's property and assets, to recommend to the stockholders a dissolution of the Corporation or a revocation of a dissolution, to amend the Bylaws of the Corporation or to declare a dividend other than a regular quarterly dividend. SECTION 3. The Audit Committee shall consist solely of directors who are independent of management as defined in Section 2.
  29. 29. The Audit Committee shall assist the Board of Directors in fulfilling its responsibilities for the Corporation's accounting and financial reporting practices and provide a channel of communication between the Board of Directors and the Corporation's independent auditors. To accomplish the above purposes, the Audit Committee shall: (a) Review with the independent auditors the scope of their annual and interim examinations, placing particular attention where either the committee or the auditors believe such attention should be directed, and to direct the auditors to expand (but not to limit) the scope of their audit whenever such action is, in the opinion of the committee, necessary or desirable. The independent auditors shall have sole authority to determine the scope of the audit which they deem necessary for the formation of an opinion on financial statements. (b) Consult with the auditors during any annual or interim audit on any situation which the auditors deem advisable for resolution prior to the completion of their examination. (c) Meet with the auditors to appraise the effectiveness of the audit effort. Such appraisal shall include a discussion of the overall approach to and the scope of the examination, with particular attention on those areas on which either the Audit Committee or the auditors believe emphasis is necessary or desirable. Page 7 <PAGE> (d) Determine through discussions with the auditors and otherwise, that no restrictions were placed by management on the scope of the examination or its implementation. (e) Inquire into the effectiveness of the Corporation's accounting and internal control functions through discussions with the auditors and appropriate officers of the Corporation and exercise supervision of the Corporation's policies which prohibit improper or illegal payments. (f) Review with the auditors and management any registration statement which shall be filed by the Corporation in connection with the public offering of securities and such other public financial reports as the committee or the Board of Directors shall deem desirable. (g) Report to the Board of Directors on the results of the Audit Committee's activities and recommend to the Board of Directors any changes in the appointment of independent auditors which the Audit Committee may deem to be in the best interests of the Corporation and its stockholders. (h) Have such other powers and perform such other duties as the Board of Directors shall, from time to time, grant and assign to it. SECTION 4. The Compensation Committee shall consist solely of directors who are independent of management, as defined in Section 2. The Compensation Committee shall (a) determine the salaries of officers, other than the Chairman of the Board, the Chief Executive Officer and the President and advise the Board of Directors of such determination, (b) exercise the authority of the Board of Directors concerning benefit plans, including those plans which are limited in their application to officers and senior management, (c) serve as the administration committee of the Corporation's stock option plans, (d) make recommendations to the Board of Directors concerning the salaries of the Chairman of the Board, the Chief Executive Officer and the President, (e) advise the Board of Directors and the Chief Executive Officer on
  30. 30. other compensation and benefit matters and (f) perform such other duties as shall be requested by the and Chief Executive Officer or designated by Board of Directors resolution or specific benefit plans. SECTION 5. A majority of the Finance Committee shall consist of directors who are independent of management as defined in Section 2. The Finance Committee shall exercise the power and authority of the Board of Directors, and assist the Board of Directors in fulfilling its responsibilities, in connection with the financial affairs of the Corporation, as follows: The Finance Committee shall: (a) have the authority to approve, without further action by the Board of Directors: (i) financing proposals, including loans and securities offerings involving not more than Page 8 <PAGE> $100 million, and matters relating thereto, and (ii) proposed capital expenditures, acquisitions, divestitures, partnerships, strategic alliances involving the purchase or sale of a security, and other similar transactions involving a commitment by the Corporation of more than $10 million, but not more than $50 million (including the issue of the Corporation's common stock in connection with such transactions); and (b) review the following and, when appropriate, report or make recommendations to the Board of Directors: (i) quarterly and extraordinary dividend proposals, (ii) financing proposals involving more than $100 million, (iii) results of the management of pension assets and the reasonableness of the major actuarial assumptions which impact the funding of the pension benefits, (iv) proposed capital expenditures, acquisitions, divestitures, partnerships, strategic alliances involving the purchase or sale of a security, and other similar transactions involving a commitment by the Corporation of more than $50 million, and (v) the risk management program of the Corporation; and (c) exercise such other authority and duties as the Board of Directors may from time to time delegate to it. SECTION 6. The Planning and Organization Committee shall consist solely of directors who are independent of management, as defined in Section 2. The Planning and Organization Committee shall assist and advise the Board of Directors in connection with Board of Directors membership, Board of Directors committee structure and membership and general organization and planning matters. To accomplish these purposes, the Planning and Organization Committee shall: (a) Develop general criteria for use in selecting potential new Board of Directors members and assist the Board of Directors in identifying and attracting qualified candidates for election to the Board of Directors; (b) Recommend to the Board of Directors annually a slate of nominees to be proposed by the Board of Directors to the stockholders as nominees for election as directors and, from time to time, recommend persons to fill any vacancy on the Board of Directors; (c) Recommend to the Board of Directors any changes in number, authority and duties of Board of Directors committees and the chairmen and members who should serve thereon; (d) Advise the Board of Directors and the Chief Executive Officer on major organization matters and issues relating to the organization structure of
  31. 31. the Corporation, as well as management succession plans; (e) In the event of the death, incapacity, resignation or other absence (temporary or permanent) of the Chief Executive Officer, the Planning and Organization Committee shall confer and recommend for election by the full Board of Directors an acting or successor Chief Executive Officer; Page 9 <PAGE> (f) Make recommendations to the Board of Directors concerning fees payable for Board of Directors membership, as well as retirement and other benefits available to Board of Directors members; (g) Exercise the authority of the Board of Directors concerning policies relating to service by directors and employees on other unrelated Board of Directors of directors; and (h) Have such other duties and authority as shall be assigned or granted to it from time to time by the Chief Executive Officer or the Board of Directors. SECTION 7. The Public Policy Committee shall consist of directors of the Corporation, a majority of whom are independent of management, as defined in Section 2. The Public Policy Committee shall review the policies and practices of the Corporation to assure that they are consistent with its social responsibility to employees, to customers, and to society. It is anticipated that emphasis will include the following areas: (a) the health and safety of employees and consumers; (b) the fulfillment of the company's responsibilities to women, racial minorities, and disadvantaged persons; (c) the physical and social environment; (d) contributions to educational, health, cultural, and other social institutions; (e) community actions where it is necessary to close or move a business unit or significantly reduce employment; (f) the ethical standards of the Corporation; and (g) other duties and authority as shall be assigned or granted to it from time to time by the Chief Executive Officer or the Board of Directors. SECTION 8. The following provisions shall apply to all committees of the Board of Directors: (a) Any power or authority granted to a committee by these bylaws may also be exercised by the Board of Directors or the Executive Committee. (b) Each member of a committee shall hold office until the next regular annual meeting of the Board of Directors following his designation and until his successor is designated as a member of a committee, or until the committee is dissolved by a majority of the whole Board of Directors or the member is removed as hereinafter provided. Page 10 <PAGE>
  32. 32. (c) Meetings of a committee may be called by any member thereof, the Chairman of the Board, the Chief Executive Officer, the President, the Corporate Secretary, or any Assistant Corporate Secretary upon twenty-four (24) hours notice to each member stating the place, date, and hour of the meeting, which notice may be written or oral. If mailed, the notice shall be deemed to be delivered when deposited in the United States mail, addressed to the member of the committee at his or her business address, provided it is mailed four (4) days prior to the meeting. Any member of a committee may waive notice of any meeting and no notice of any meeting need be given to any member thereof who attends in person. The notice of a meeting of a committee need not state the business proposed to be transacted at the meeting. (d) The lesser of a majority of the members or two members of a committee shall constitute a quorum for the transaction of business at any meeting thereof and action of a committee must be authorized by the affirmative vote of a majority of the members present at a meeting at which a quorum is present. (e) Any action that may be taken by a committee at a meeting may be taken without a meeting if a consent in writing, setting forth the action so to be taken, shall be signed by all of the members of a committee and filed with the minutes of the committee, which action shall be effective as of the date stated in such consent. (f) Any vacancy on a committee may be filled by a resolution adopted by a majority of the Board of Directors. (g) Any member of a committee may be removed at any time with or without cause by resolution adopted by a majority of the Board of Directors. (h) The chairman of the committee shall, if present, preside at all meetings of a committee. A committee may fix its own rules of procedure which shall not be inconsistent with these Bylaws. Each committee shall keep regular minutes of its proceedings and report its proceedings at the next meeting of the Board of Directors. (i) The Chairman of the Board, Chief Executive Officer and the President shall act in an advisory capacity to all committees other than the Executive Committee. ARTICLE IV OFFICERS SECTION 1. The officers of the Corporation shall include, when and if designated by the Board of Directors, a Senior Chairman, a Chairman of the Board, a Chief Executive Officer, a President, one or more Executive Vice Presidents, one or more Senior Vice Presidents, one or more Group Vice Presidents, one or more Vice Presidents, a Corporate Secretary, one or more Assistant Corporate Secretaries, a Treasurer, and such other officers as may from time to time be elected or appointed by the Board of Directors. Any one person may hold any number of offices of the Corporation unless specifically prohibited therefrom by law. Page 11 <PAGE> SECTION 2. SENIOR CHAIRMAN. The Senior Chairman shall, in the absence of the Chairman of the Board, the Chief Executive Officer and the President, preside at all meetings of the stockholders and the Board of Directors. In addition, the Senior Chairman shall advise the Chief Executive Officer and the President on matters of long and short term strategic planning, policy and other major matters affecting the Corporation and shall have such duties, authority and responsibilities as the Chief Executive Officer, the President or the Board of Directors shall designate from time to time.
  33. 33. SECTION 3. CHAIRMAN OF THE BOARD. The Chairman of the Board, if any, shall be an officer of the Corporation and, subject to the direction of the Board of Directors, shall perform such executive, supervisory and management functions and duties as may be assigned to him or her from time to time by the Board of Directors. The Chairman of the Board shall, when present, preside at all meetings of the stockholders and of the Board of Directors. He or she shall act as spokesman for the Board of Directors and as a liaison between the Board of Directors and the Corporation. The Chairman of the Board shall perform all other duties commonly incident to this office and shall also perform such other duties and have such other powers as the Board of Directors shall designate from time to time. SECTION 4. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer shall have responsibility for the management of the Corporation, including the general supervision and control of all the business and affairs of the Corporation, and shall have such other powers and duties as may be assigned to him or her from time to time by the Board of Directors. The Chief Executive Officer shall, in the absence of the Chairman of the Board, preside at all meetings of the stockholders and of the Board of Directors. The Chief Executive Officer shall participate in long range planning for the Corporation. He or she may sign shares of the Corporation, any deeds, mortgages, bonds, contracts or other instruments which the Board of Directors has authorized to be executed, or which are in the ordinary course of business of the Corporation. The Chief Executive Officer may vote, either in person or by proxy, all the shares of the capital stock of any company which the Corporation owns or is otherwise entitled to vote at any and all meetings of the stockholders of such company and shall have the power to accept or waive notice of such meetings. The Chief Executive Officer shall perform other duties commonly incident to this office and shall also perform such other duties and have such other powers as the Board of Directors shall designate from time to time. SECTION 5. PRESIDENT. The President shall have such duties and authority as the Chief Executive Officer may determine from time to time. In the absence or disability of the Chief Executive Officer, the President shall exercise all powers and discharge all of the duties of the Chief Executive Officer, including the general supervision and control of all the business and affairs of the Corporation. The President shall, in the absence of the Chairman of the Board and the Chief Executive Officer, preside at all meetings of stockholders and the Board of Directors. The President may sign any deeds, mortgages, bonds, contracts or other instruments which the Board of Directors has authorized to be executed or which are in the ordinary course of business of the Corporation. The President may vote, either in person or by proxy, all the shares of the capital Page 12 <PAGE> stock of any company which the Corporation owns or is otherwise entitled to vote at any and all meetings of the stockholders of such company and shall have the power to accept or waive notice of such meetings. The President shall perform all other duties commonly incident to this office and shall also perform such other duties and have such powers as the Chief Executive Officer shall designate from time to time. SECTION 6. VICE PRESIDENT. In the absence or disability of the Chief Executive Officer and the President, the functions of the Chief Executive Officer shall be performed by the Executive Vice President who was first elected to that office and who is not then absent or disabled, or, if none, the Senior Vice President who was first elected to that office and who is not then absent or disabled, or, if none, the Group Vice President who was first elected to that office and who is not then absent or disabled, or, if none, the Vice President who was first elected to that office and who is not then absent or disabled. Each Executive Vice President, Senior Vice President, Group Vice President and Vice President

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