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Baxter International - Reorganization Agreement Dated As Of 03/15/2000
EXHIBIT 10.1
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REORGANIZATION AGREEMENT
Dated as of March 15, 2000
by and between
BAXTER INTERNATIONAL INC.
and
EDWARDS LIFESCIENCES CORPORATION
TABLE OF CONTENTS
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---- ARTICLE I - DEFINITIONS AND INTERPRETATION................................................... 2 1.1. Definitions.......................................................................... 2 1.2. Interpretation....................................................................... 19
ARTICLE II - THE DISTRIBUTION................................................................. 21 2.1. Issuance and Delivery of Edwards Shares.............................................. 21 2.2. Distribution of Edwards Shares....................................................... 21 2.3. Treatment of Fractional Shares....................................................... 21 2.4. Baxter Board Action.................................................................. 21 2.5. Additional Approvals................................................................. 22
ARTICLE III - FOREIGN TRANSFERS............................................................... 22 3.1. Edwards World Trade.................................................................. 22 3.2. Puerto Rico (936).................................................................... 22 3.3. Puerto Rico (MS&P)................................................................... 23 3.4. Dominican Republic................................................................... 24 3.5. Intentionally Omitted................................................................ 24 3.6. Brazil............................................................................... 25 3.7. Canada............................................................................... 25 3.8. China................................................................................ 26 3.9. Taiwan............................................................................... 26 3.10. Singapore and the Philippines........................................................ 27 3.11. Malaysia............................................................................. 28 3.12. Thailand............................................................................. 28 3.13. Korea................................................................................ 29 3.14. India................................................................................ 29 3.15. Latin America........................................................................ 30 3.16. Switzerland.......................................................................... 33 3.17. EU Holdings (Denmark)................................................................ 35 3.18. Germany.............................................................................. 35 3.19. Austria.............................................................................. 36 3.20. France............................................................................... 37 3.21. Italy................................................................................ 37 3.22. Belgium/Luxembourg................................................................... 38 3.23. Netherlands.......................................................................... 39 3.24. Uden................................................................................. 40 3.25. Spain................................................................................ 40 3.26. United Kingdom....................................................................... 41 3.27. Restrictions on Intercompany Debt.................................................... 41 3.28. Transfer of Assets................................................................... 41 3.29. Transfer of Liabilities.............................................................. 41
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---- 3.30. Transfer of Edwards World Trade to Baxter........................................ 42 3.31. Edwards Holdings Switzerland..................................................... 42 3.32. Transfer of Inventory............................................................ 42
ARTICLE IV - TRANSFERS TO EDWARDS U.S. OPERATING SUBSIDIARY.............................. 42 4.1. Organization of Edwards U.S. Operating Subsidiary................................ 42 4.2. Transfer of Assets............................................................... 42 4.3. Transfer of Third-Party Distribution Contracts................................... 43 4.4. Assumption of Liabilities........................................................ 43 4.5. Transfer of Intangibles and Operating Subsidiaries............................... 43
ARTICLE V - ORGANIZATION OF EDWARDS LIFESCIENCES CORPORATION............................. 43 5.1. Organization of Edwards.......................................................... 43 5.2. Transfer of Certain Subsidiaries................................................. 44 5.3. Transfer of Assets............................................................... 44 5.4. Transfer of Liabilities.......................................................... 44
ARTICLE VI - EXCLUSIONS FROM TRANSFERS................................................... 44 6.1. Retained Assets.................................................................. 44 6.2. Retained Liabilities............................................................. 45 6.3. Termination of Existing Intercompany Agreements.................................. 46
ARTICLE VII - ASSET SEPARATION CLOSING MATTERS........................................... 46 7.1. Delivery of Instruments of Conveyance............................................ 46 7.2. Delivery of Other Agreements..................................................... 46 7.3. Non-Assignable Contracts......................................................... 46 7.4. Further Assurances............................................................... 47 7.5. Novation of Assumed Liabilities.................................................. 48 7.6. Nominee Shares................................................................... 49 7.7. Provision of Corporate Records................................................... 49
ARTICLE VIII - REPRESENTATIONS AND WARRANTIES............................................ 49 8.1. Organization, Good Standing and Authority of Baxter.............................. 49 8.2. Organization, Good Standing and Authority of Edwards............................. 49 8.3. No Other Representations and Warranties.......................................... 49
ARTICLE IX - CERTAIN COVENANTS........................................................... 50 9.1. Conduct of Edwards Business Pending the Distribution Date........................ 50 9.2. Registration and Listing......................................................... 50 9.3. Funds Distributed to Baxter...................................................... 51 9.4. Post-Distribution Tax-Related Restrictions....................................... 51 9.5. Intercompany Receivables and Payables, Cash Management and True-Up............... 52 9.6. Intercompany Debt True-Up........................................................ 53
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---- 9.7. Collection of Accounts Receivable.................................................. 56 9.8. Agreements Relating to Baxter and Edwards.......................................... 58 9.9. Certain Releases................................................................... 59 9.10. Litigation......................................................................... 59 9.11. Liability for Previously Delivered Products........................................ 59 9.12. Edwards Bank Accounts.............................................................. 60 9.13. Informal, Nondocumented Real Estate Leases......................................... 61 9.14. Third Party Consents............................................................... 61 9.15. Material Governmental Approvals and Consents....................................... 61 9.16. Late Payments...................................................................... 61
ARTICLE X - INTELLECTUAL PROPERTY LICENSES.................................................. 62 10.1. License to Baxter of Transferred Intellectual Property............................. 62 10.2. License to Edwards of Retained Baxter Intellectual Property........................ 63 10.3. Licenses Related to Interlink...................................................... 65 10.4. Use by Edwards of Baxter's Trademarks.............................................. 65 10.5. Limitations on Requirements to Supply.............................................. 66 10.6. Fair Market Value.................................................................. 66
ARTICLE XI - CONDITIONS TO THE DISTRIBUTION................................................. 67 11.1. Approval by Baxter Board of Directors.............................................. 67 11.2. Receipt of IRS Private Letter Tax Ruling........................................... 67 11.3. Compliance with State and Foreign Securities and................................... 67 11.4. SEC Filings and Approvals.......................................................... 67 11.5. Filing and Effectiveness of Registration Statement; No Stop Order.................. 67 11.6. Approval of NYSE Listing Application............................................... 67 11.7. Receipt of Fairness Opinions of Financial Advisors................................. 67 11.8. Ancillary Agreements............................................................... 68 11.9. Resignations....................................................................... 68 11.10. Election of Edwards Board.......................................................... 68 11.11. Consents........................................................................... 68 11.12. No Actions......................................................................... 68 11.13. New Credit Facility................................................................ 68 11.14. Consummation of Pre-Distribution Transactions...................................... 68 11.15. No Other Events.................................................................... 68 11.16. Satisfaction of Conditions......................................................... 68
ARTICLE XII - EMPLOYEES AND EMPLOYEE BENEFIT MATTERS........................................ 69 12.1. Edwards Employees.................................................................. 69 12.2. Employment of Edwards Employees.................................................... 69 12.3. Terminations/Layoff/Severance...................................................... 69 12.4. International Edwards Employees.................................................... 69
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---- 12.5. Employment Solicitation................................................................... 70 12.6. WARN Act.................................................................................. 70 12.7. Leave of Absence Policies................................................................. 70 12.8. Withdrawal from Participation in Baxter Plans and Establishment of Edwards Plans.......... 71 12.9. Transfer of Account Balances and Accrued Benefits......................................... 71 12.10. Entitlement to Distributions Under Pension Plan........................................... 73 12.11. Welfare Benefits Provided Under Edwards Plans............................................. 73 12.12. Stock Purchase Plans...................................................................... 73 12.13. Workers' Compensation..................................................................... 74 12.14. Vacation Pay Policy....................................................................... 74 12.15. Non-Qualified Deferred Compensation Plans................................................. 74 12.16. Split-Dollar Life Insurance............................................................... 74 12.17. Restricted Stock.......................................................................... 74 12.18. Information to be Provided to Baxter...................................................... 74 12.19. Corporate Action; Delegation of Authority................................................. 75 12.20. Transfer of Employee Files................................................................ 75
ARTICLE XIII - INSURANCE MATTERS.................................................................. 75 13.1. Insurance Prior to the Distribution Date.................................................. 75 13.2. Ownership of Existing Policies and Programs............................................... 75 13.3. Procurement of Insurance for Edwards...................................................... 75 13.4. Acquisition and Maintenance of Post-Distribution Edwards Insurance Policies and Programs.. 76 13.5. Edwards Directors' and Officers' Insurance................................................ 76 13.6. Pre-Distribution Insurance Claims Administration.......................................... 77 13.7 Post-Distribution Insurance Claims Administration......................................... 77 13.8. Non-Waiver of Rights to Coverage.......................................................... 78 13.9. Scope of Affected Policies of Insurance................................................... 78
ARTICLE XIV - EXPENSE AND TAX MATTERS............................................................. 78 14.1. Allocation of Expenses.................................................................... 78 14.2. Allocation of Taxes....................................................................... 79
ARTICLE XV - RELEASE AND INDEMNIFICATION.......................................................... 79 15.1. Release of Pre-Distribution Claims........................................................ 79 15.2. Indemnification by Edwards................................................................ 81 15.3. Indemnification by Baxter................................................................. 82 15.4. Applicability of and Limitation on Indemnification........................................ 82 15.5. Adjustment of Indemnifiable Losses........................................................ 83 15.6. Procedures for Indemnification of Third Party Claims...................................... 84 15.7. Procedures for Indemnification of Direct Claims........................................... 86
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---- 15.8. Contribution......................................................................... 86 15.9. No Third-Party Beneficiaries......................................................... 86 15.10. Remedies Cumulative.................................................................. 87 15.11. Survival............................................................................. 87
ARTICLE XVI - DISPUTE RESOLUTION.............................................................. 87 16.1. General.............................................................................. 87 16.2. Escalation........................................................................... 87 16.3. Arbitration.......................................................................... 87 16.4. Procedures........................................................................... 88 16.5. Injunctive Relief.................................................................... 88
ARTICLE XVII - ACCESS TO INFORMATION AND SERVICES............................................. 88 17.1. Access to Financial Information...................................................... 88 17.2. Ownership of Information............................................................. 89 17.3. Compensation for Providing Information............................................... 89 17.4. Retention of Records................................................................. 89 17.5. Limitations.......................................................................... 90 17.6. Production of Witnesses.............................................................. 90 17.7. Confidentiality...................................................................... 90 17.8. Privileged Matters................................................................... 91
ARTICLE XVIII - MISCELLANEOUS 92 18.1. Entire Agreement..................................................................... 92 18.2. Choice of Law and Forum.............................................................. 92 18.3. Amendment............................................................................ 93 18.4. Waiver............................................................................... 93 18.5. Partial Invalidity................................................................... 93 18.6. Execution in Counterparts............................................................ 93 18.7. Successors and Assigns............................................................... 93 18.8. Third Party Beneficiaries............................................................ 93 18.9. Notices.............................................................................. 93 18.10. Performance.......................................................................... 94 18.11. Force Majeure........................................................................ 94 18.12. No Public Announcement............................................................... 94 18.13. Termination.......................................................................... 95
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EXHIBITS -------- Exhibit A - Edwards Business Exhibit B - Operating Agreements Exhibit C - Tax Sharing Agreement Exhibit D - Transferred Subsidiaries Exhibit E - Amended and Restated Certificate of Incorporation of Edwards Exhibit F - Amended and Restated By-laws of Edwards Exhibit G - Form of Edwards Stockholder Rights Plan Exhibit H - Board of Directors of Edwards
SCHEDULES --------- Schedule 1.1(b) - BHC Loans Schedule 1.1(f) - CERCLA and OSHA Liabilities Schedule 1.1(g) - Other Assumed Environmental Liabilities Schedule 1.1(l) - Guarantees and Letters of Credit Schedule 1.1(m) - Indemnification Agreements Schedule 1.2(d) - Owned Real Property Schedule 1.2(e) - Real Property Leases Schedule 1.2(f) - Aircraft Schedule 1.2(g)(ii) - Patents Schedule 1.2(g)(iv) - Trademarks Schedule 1.2(h)(i) - Contracts Related to Acquisitions or Divestitures Schedule 1.2(h)(ii) - Customer Contracts Schedule 1.2(h)(iv) - Government Contracts Schedule 1.2(h)(v) - Supplier Contracts Schedule 1.2(h)(vi) - Joint Development and Confidentiality Contracts Schedule 1.2(h)(vii) - Consulting Contracts Schedule 1.2(h)(viii) - Distribution Contracts Schedule 1.2(h)(xi) - Personal Property Leases Schedule 1.2(h)(xii) - Derivatives Contracts Schedule 1.2(h)(xiii) - Other Contracts Schedule 1.2(i) - Permits and Licenses Schedule 1.2(j) - Claims and Indemnities Schedule 1.2(k) - Subsidiaries, Joint Ventures and Minority Interests Schedule 1.2(n) - Intellectual Property Licenses Schedule 1.2(o) - Software and Software Contracts Schedule 1.2(p) - Internet Protocol Addresses Schedule 1.2(q) - Other Assets Schedule 3.1 - Timing of Foreign Transfers Schedule 4.3 - Foreign Subsidiaries' Third-Party Distribution Contracts Schedule 6.1(h) - Baxter Distribution Countries Schedule 6.2 - Retained Liabilities Schedule 6.3 - Surviving Intercompany Agreements Schedule 9.3 - Use of Proceeds Summary Schedule 9.6(g) - Transfers
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Schedule 9.8 - Shared Agreements Schedule 9.10(a) - Assumed Actions Schedule 9.10(b) - Transferred Actions Schedule 9.12 - Transferred Bank Accounts Schedule 10.2(a) - Licensed Baxter Intellectual Property Schedule 12.1 - Edwards Employees Schedule 12.4 - Calculation of Edwards Foreign and Puerto Rico Employees' Pension Benefits
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REORGANIZATION AGREEMENT
------------------------
REORGANIZATION AGREEMENT, dated as of March 15, 2000 (this
"Agreement"), by and between Baxter International Inc., a Delaware corporation --------- ("Baxter"), and Edwards Lifesciences Corporation, a Delaware corporation ------ ("Edwards") which is, as of the date hereof, a wholly-owned Subsidiary (as ------- hereinafter defined) of Baxter.
WHEREAS, Baxter, through its Subsidiaries, provides, inter alia, a comprehensive line of therapies and services to treat cardiovascular disease (as more fully described in Exhibit A hereto, the "Edwards Business");
--------- ----------------
WHEREAS, the Board of Directors of Baxter has determined that it would be advisable and in the best interests of Baxter and its stockholders for Baxter to transfer to Edwards and/or one or more of its Subsidiaries the business, operations, assets and liabilities related to the Edwards Business;
WHEREAS, Baxter has agreed to transfer and assign, or cause to be transferred and assigned, to Edwards or one or more of its Subsidiaries substantially all of the assets and properties related to the Edwards Business held by Baxter, Baxter Healthcare Corporation, a Delaware corporation ("BHC")
--- and a wholly-owned Subsidiary of Baxter, and, subject to certain exceptions, certain other Subsidiaries of Baxter, and Edwards has agreed to assume, or cause to be assumed by one or more of its Subsidiaries, certain liabilities and obligations arising out of or relating to the Edwards Business;
WHEREAS, the Board of Directors of Baxter has determined that it would be advisable and in the best interests of Baxter and its stockholders for Baxter to distribute on a pro-rata basis to the holders of record of Baxter common stock, par value $1.00 per share (the "Baxter Common Stock"), without any
------------------- consideration being paid by such holders, all of the outstanding shares of Edwards common stock, par value $1.00 per share (the "Edwards Common Stock"),
-------------------- owned directly and indirectly by Baxter (the "Distribution");
------------
WHEREAS, for United States federal income tax purposes, the Distribution is intended to qualify as a tax-free spin-off within the meaning of Sections 355 and 368(a)(1)(D) of the United States Internal Revenue Code of 1986, as amended (the "Code"); and
----
WHEREAS, it is appropriate and desirable to set forth the principal corporate transactions required to effect the Distribution and certain other agreements that will govern the relationship of Baxter and Edwards following the Distribution;
NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Baxter and Edwards agree as follows:
ARTICLE I
DEFINITIONS AND INTERPRETATION
------------------------------
1.1. Definitions. In this Agreement, the following terms have the
----------- meanings specified or referred to in this Section 1.1:
-----------
"Accounts Payable Amount" has the meaning specified in Section 9.6(g).
----------------------- --------------
"Accounts Receivable Amount" has the meaning specified in Section
-------------------------- ------- 9.6(g). ------
"Accounts Receivable Report" has the meaning specified in Section
-------------------------- ------- 9.7(f). ------
"Act" has the meaning specified in Section 9.11(a).
--- ---------------
"Action" means any action, claim, suit, arbitration, inquiry,
------ subpoena, discovery request, proceeding or investigation by or before any court or grand jury, any governmental or other regulatory or administrative entity, agency or commission or any arbitration tribunal.
"Active Edwards Employees" means any regular full-time or part-time
------------------------ employee of Baxter or one of its Subsidiaries who commences employment with Edwards or one of its Subsidiaries immediately following the Distribution Date.
"Actual Balance Sheet" has the meaning specified in Section 9.6(g).
-------------------- --------------
"Actually Using" has the meaning specified in Section 10.1(a).
-------------- ---------------
"Affiliate" means, with respect to any Person, any other Person that
--------- directly or indirectly controls, is controlled by or is under common control with such Person. For the purpose of this definition, the term "control" means the power to direct the management of an entity, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the term "controlled" has the meaning correlative to the foregoing. After the Distribution Date, Edwards and Baxter shall not be deemed to be under common control for purposes hereof due solely to the fact that Edwards and Baxter have common stockholders.
"Aggregate Amount Received" has the meaning specified in Section
------------------------- ------- 9.6(g). ------
"Anasco Division" has the meaning specified in Section 3.2.
--------------- -----------
"Asset Transfer Amount" has the meaning specified in Section 9.6(g).
--------------------- --------------
"Assumed Actions" has the meaning specified in Section 9.10(a).
--------------- ---------------
"Assumed Liabilities" means all contractual and other Liabilities of
------------------- Baxter or any of its Subsidiaries (excluding the Retained Liabilities) arising out of or relating to (but only to the extent relating to) the Edwards Business any Divested Business and/or any of the past or present facilities of Baxter or any of its Subsidiaries used primarily in connection with the Edwards Business or any Divested Business, whether due or to become due, including:
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(a) All Liabilities (excluding, except as provided in subparagraph (b) below, Loans owed to Baxter or any of its Subsidiaries) that are reflected, disclosed or reserved for on the Balance Sheet, as such Liabilities may be increased or decreased in the operation of the Edwards Business from the date of the Balance Sheet through the Distribution Date in the ordinary course of business consistent with past practice;
(b) The Loans set forth on Schedule 1.1(b) hereto;
---------------
(c) All Liabilities under or related to the Real Estate Leases and the Edwards Contracts, such assumption to occur as (i) assignee if such Real Estate Leases and Edwards Contracts are assignable and are assigned or otherwise transferred to Edwards or one of its Subsidiaries, or (ii) subcontractor, sublessee or sublicensee as provided in Section 7.3 below if assignment of such
----------- Real Estate Leases and Edwards Contracts and/or the proceeds thereof is prohibited by law or by the terms thereof or is not permitted by the other contracting party;
(d) All warranty, performance and similar obligations entered into or made prior to the Distribution Date with respect to the products or services of the Edwards Business;
(e) All Liabilities related to any and all Actions asserting a violation of any law, rule or regulation related to or arising out of the operations of the Edwards Business, whether before or after the Distribution Date and the Liabilities relating to any Assumed Actions;
(f) All Liabilities arising under (i) CERCLA and any other foreign, federal, state or local laws regarding the management, control and clean-up of hazardous materials (including off-site waste disposal liabilities) or (ii) the Occupational Safety and Health Act or similar state laws or regulations, in either case relating to or arising out of the operations of the Edwards Business, whether before or after the Distribution Date, including those set forth on Schedule 1.1(f) hereto;
---------------
(g) All environmental Liabilities relating to facilities transferred to Edwards or one of its Subsidiaries in fee or by way of an assignment of a lease or sublease from a third party, including those set forth on Schedule
-------- 1.1(g) hereto; ------
(h) All Liabilities in connection with claims of past, current or prospective employees of the Edwards Business, including claims related to any Baxter Plans, except as otherwise provided in Article XII, whether incurred
----------- prior to, on or after the Distribution Date;
(i) All Liabilities under any mortgage interest subsidy program on behalf of any Edwards Employee;
(j) All Liabilities associated with the transfer of assets from the Baxter Savings Plan to the Edwards Savings Plan;
(k) All Liabilities related to the Transferred Intellectual Property included as part of the Transferred Assets;
(l) All Liabilities under each of the guarantees and letters of credit set forth on Schedule 1.1(l) hereto;
---------------
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(m) All Liabilities under the indemnification agreements set forth on Schedule 1.1(m); ---------------
(n) All Liabilities for property taxes with respect to any of the Transferred Assets;
(o) All Liabilities for deferred taxes with respect to the Edwards Business consistent with FAS 109;
(p) All Liabilities related to Governmental Permits; and
(q) All other Liabilities (other than the Retained Liabilities) relating to the Edwards Business or any Divested Business, whether existing on the date hereof or arising at any time or from time to time after the date hereof, and whether based on circumstances, events or actions arising heretofore or hereafter, whether or not such Liabilities shall have been disclosed herein, and whether or not reflected on the books and records of Baxter or Edwards or the Balance Sheet.
"Balance Sheet" has the meaning specified in paragraph (a) of the
------------- definition of "Transferred Assets."
"Baxter" has the meaning specified in the first paragraph of this
------ Agreement.
"Baxter Alaska" has the meaning specified in Section 3.2.
------------- -----------
"Baxter Austria" has the meaning specified in Section 3.19.
-------------- ------------
"Baxter Asia" has the meaning specified in Section 3.10.
----------- ------------
"Baxter Belgium" has the meaning specified in Section 3.22.
-------------- ------------
"Baxter Canada" has the meaning specified in Section 3.7.
------------- -----------
"Baxter Chile" has the meaning specified in Section 3.15(b).
------------ ---------------
"Baxter China" has the meaning specified in Section 3.8.
------------ -----------
"Baxter Colombia" has the meaning specified in Section 3.15(a).
--------------- ---------------
"Baxter Common Stock" has the meaning specified in the fifth paragraph
------------------- of this Agreement.
"Baxter Edwards" means Baxter Edwards AG, a company organized under
-------------- the laws of Switzerland.
"Baxter Export Corporation" means Baxter Export Corporation, a Nevada
------------------------- corporation.
"Baxter Foreign Pension Plan" has the meaning specified in Section
--------------------------- ------- 12.4. ----
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"Baxter France" has the meaning specified in Section 3.20.
-------------- ------------
"Baxter Germany" means Baxter Deutschland GmbH, a German limited
-------------- company and a wholly-owned Subsidiary of Baxter Germany Holdings.
"Baxter Germany Holdings" means Baxter Deutschland Holding GmbH, a
----------------------- German limited company and a wholly-owned Subsidiary of Baxter World Trade.
"Baxter Group Member" means Baxter and (a) any corporation that is a
------------------- member of the same controlled group of corporations (within the meaning of Section 414(b) of the Code) as Baxter; (b) a trade or business (whether or not incorporated) under common control (within the meaning of Section 414(c) of the Code) with Baxter; (c) any organization (whether or not incorporated) that is a member of an affiliated service group (within the meaning of Section 414(m) of the Code) that includes Baxter, a corporation described in clause (a) of this definition or a trade or business described in clause (b) of this definition or (d) any other entity that is required to be aggregated with Baxter pursuant to regulations promulgated under Section 414(o) of the Code.
"Baxter Hong Kong" has the meaning specified in Section 3.8.
---------------- -----------
"Baxter Hospitalar" means Baxter Hospitalar Ltda., a company organized
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