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Baxter International Inc · S-4/A · On 10/6/94

Filed On 10/6/94 · SEC File 33-53937 · Accession Number 912057-94-3331

  As Of               Filer                 Filing     On/For/As Docs:Pgs              Issuer               Agent

10/06/94  Baxter International Inc          S-4/A                  3:143                                    912057

Pre-Effective Amendment to Registration of Securities Issued in a Business-Combination Transaction · Form S-4
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: S-4/A       Pre-Effective Amendment to Registration of           136    751K 
                          Securities Issued in a                                 
                          Business-Combination Transaction                       
 2: EX-5.1      Opinion re: Legality                                   5     23K 
 3: EX-99.1     Miscellaneous Exhibit                                  2±     9K

S-4/A · Pre-Effective Amendment to Registration of Securities Issued in a Business-Combination Transaction
Document Table of Contents

Page	(sequential)	\|	(alphabetic)	Top
			Alternative Formats (RTF, XML, et al.) Accounting Treatment Agreement Assets Available Information Background and Negotiations Leading to the Merger Baxter Baxter Common Stock Baxter Dividend Policy Baxter Information Incorporated by Reference Baxter's Reasons for the Merger Baxter Stock Values Business Certain Federal Income Tax Considerations Companies, The Comparison of Rights of Holders of Baxter and Intramed Common Stock Competition Conduct of the Business of the Combined Companies Following the Merger Conflicts of Interest of Intramed's Directors and Officers in the Merger Contractual Arrangements Credit and Working Capital Practices Customers and Marketing Description of Baxter Capital Stock Description of Intramed Capital Stock Dissenters' Rights Effective Date of the Merger Employee Benefit Plans Employees Exchange Ratio Executive Officers and Directors of Baxter Executive Officers and Directors of Intramed Exhibits and Financial Statement Schedules Experts Financial Information about Foreign and Domestic Operations and Export Sales General Governmental and Regulatory Approvals Government Regulation Government Regulation; Product Withdrawals and Recalls Health-Care Environment Incorporation of Certain Documents by Reference Increased Competition Among Health-Care Suppliers Indemnification of Directors and Officers Industry Segments Information Concerning Baxter Information Concerning Intramed Intramed Intramed Board Recommendation Intramed Common Stock Intramed Information Incorporated by Reference Intramed Laboratories, Inc Intramed Management's Discussion and Analysis or Plan of Operations Intramed Options Intramed's Endoscopes Intramed's Reasons for the Merger Intramed Warrants Joint Ventures Legal Matters Legal Proceedings Manner and Basis of Converting Shares and Options Manufacturing Market Background Medical/Laboratory Products and Distribution Medical Specialties Meeting, The Meeting, Voting and Proxies, The Merger and Related Transactions, The Merger, The Methods of Distribution Net loss Net loss per share Net sales Notes to Financial Statements Opinion of Financial Advisor Other Agreements Patents and Proprietary Technology Patents and Trademarks Preferred Stock Preferred Stock and Shareholder Rights Plan Preferred Stock Purchase Rights Product Liability and Insurance Properties Proxy Statement/Prospectus Summary Quality Control Raw Materials Reasons for the Merger Reimbursement Report of Ernst & Young, Independent Auditors Resales of Baxter Common Stock; Affiliates Research and Development Risk Factors Risks Related to Foreign Operations and Export Sales Security Ownership of Certain Beneficial Owners and Management Severance Agreements Special Meeting of Shareholders of Intramed Strategy Summary Historical Financial Information Tax Treatment of Merger Terms of the Merger The Companies The Meeting The Meeting, Voting and Proxies The Merger The Merger and Related Transactions Uncertainties Related to the Merger Undertakings
1	1st Page
4	Intramed Laboratories, Inc
9	Available Information
"	Incorporation of Certain Documents by Reference
11	Proxy Statement/Prospectus Summary
"	General
"	The Companies
12	The Meeting
"	Special Meeting of Shareholders of Intramed
13	The Merger
"	Risk Factors
"	Terms of the Merger
"	Exchange Ratio
"	Baxter Stock Values
15	Baxter
"	Intramed
16	Reasons for the Merger
"	Conflicts of Interest of Intramed's Directors and Officers in the Merger
17	Opinion of Financial Advisor
18	Effective Date of the Merger
"	Manner and Basis of Converting Shares and Options
"	Intramed Options
19	Intramed Warrants
"	Certain Federal Income Tax Considerations
20	Severance Agreements
"	Other Agreements
"	Accounting Treatment
"	Resales of Baxter Common Stock; Affiliates
"	Governmental and Regulatory Approvals
"	Dissenters' Rights
21	Summary Historical Financial Information
23	Uncertainties Related to the Merger
"	Increased Competition Among Health-Care Suppliers
"	Risks Related to Foreign Operations and Export Sales
"	Government Regulation; Product Withdrawals and Recalls
24	Legal Proceedings
"	The Meeting, Voting and Proxies
25	The Merger and Related Transactions
26	Baxter's Reasons for the Merger
"	Intramed's Reasons for the Merger
"	Intramed Board Recommendation
30	Background and Negotiations Leading to the Merger
34	Employee Benefit Plans
35	Conduct of the Business of the Combined Companies Following the Merger
36	Tax Treatment of Merger
41	Information Concerning Baxter
"	Business
"	Industry Segments
"	Medical Specialties
"	Medical/Laboratory Products and Distribution
42	Joint Ventures
"	Health-Care Environment
"	Methods of Distribution
43	Raw Materials
"	Patents and Trademarks
44	Competition
"	Credit and Working Capital Practices
"	Quality Control
"	Research and Development
45	Government Regulation
"	Employees
"	Contractual Arrangements
"	Financial Information about Foreign and Domestic Operations and Export Sales
"	Properties
51	Executive Officers and Directors of Baxter
54	Baxter Information Incorporated by Reference
"	Information Concerning Intramed
55	Market Background
56	Intramed's Endoscopes
57	Strategy
61	Customers and Marketing
"	Manufacturing
62	Patents and Proprietary Technology
64	Reimbursement
"	Product Liability and Insurance
65	Intramed Management's Discussion and Analysis or Plan of Operations
"	Net sales
67	Net loss
68	Executive Officers and Directors of Intramed
70	Security Ownership of Certain Beneficial Owners and Management
72	Intramed Information Incorporated by Reference
"	Description of Baxter Capital Stock
"	Baxter Common Stock
"	Preferred Stock and Shareholder Rights Plan
"	Preferred Stock
"	Preferred Stock Purchase Rights
73	Baxter Dividend Policy
"	Description of Intramed Capital Stock
"	Intramed Common Stock
74	Comparison of Rights of Holders of Baxter and Intramed Common Stock
80	Legal Matters
"	Experts
82	Report of Ernst & Young, Independent Auditors
83	Assets
87	Notes to Financial Statements
89	Net loss per share
93	Agreement
130	Item 20. Indemnification of Directors and Officers
"	Item 21. Exhibits and Financial Statement Schedules
131	Item 22. Undertakings

S-4/A 1st Page of 136 TOC Top Previous Next Bottom Just 1st
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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 6, 1994
REGISTRATION NO. 33-53937
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________

AMENDMENT NO. 2
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
________________

BAXTER INTERNATIONAL INC.
(Exact name of Registrant as specified in its charter)

DELAWARE 3841 36-0781620
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
_______________
ONE BAXTER PARKWAY
DEERFIELD, ILLINOIS 60015
(708) 948-2000
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)

ARTHUR F. STAUBITZ
BAXTER INTERNATIONAL INC.
ONE BAXTER PARKWAY
DEERFIELD, ILLINOIS 60015
(708) 948-2000

(Name, address, including zip code, and telephone number, including area code,
of agent for service)
________________

COPIES OF ALL COMMUNICATIONS, INCLUDING ALL COMMUNICATIONS SENT TO THE AGENT FOR
SERVICE, SHOULD BE SENT TO:

MITCHELL L. EDWARDS BARRY E. TAYLOR
LAURIE A. ALLEN CHRISTOPHER F. BOYD
BROBECK, PHLEGER & HARRISON WILSON, SONSINI, GOODRICH &
ROSATI, P.C.
550 S. Hope Street 650 Page Mill Road
Los Angeles, CA 90071-2604 Palo Alto, California 94304
(213) 489-4060 (415) 493-9300
________________

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
UPON CONSUMMATION OF THE MERGER DESCRIBED HEREIN AND AFTER THE
EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.

If any of the securities being registered on this Form are being offered
in connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. / /
________________

· Enlarge/Download Table

CALCULATION OF REGISTRATION FEE

--------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------
Amount to Proposed Maximum Proposed Maximum Amount of
Title of Securities to be be Offering Price per Aggregate Offering Registration
Registered(1) Registered(2) Security Price(3) Fee(4)
--------------------------------------------------------------------------------------------------------------------------------

Common Stock, $1.00 par value 442,009 Not applicable $11,492,234 *
per share
--------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------
<FN>

* Registration Fee of $3,146.67 previously paid.

(1) This Registration Statement relates to securities of the Registrant to be
issued to holders of common stock of Intramed Laboratories, Inc.
("Intramed") in connection with the Merger (as herein described).
(2) Represents the number of shares of the Registrant's Common Stock issuable
upon consummation of the Merger, given an Exchange Ratio (as herein defined)
of .124, which assumes a common stock price of the Registrant of $22.00, the
lowest closing price of the Registrant's Common Stock as reported by the New
York Stock Exchange (the "NYSE") from January 1, 1994 through May 18, 1994,
the latest practicable date prior to the filing of this Registration
Statement.
(3) Although not applicable, represents the maximum aggregate offering price
which would be computed by using the closing price of the Registrant's
Common Stock as reported by the NYSE on May 18, 1994, the latest practicable
date prior to the filing of this Registration Statement.
(4) Pursuant to Rule 457(f)(1) under the Securities Act of 1993, as amended, the
registration fee was computed in accordance with Rule 457(c) on the basis of
the market value of the 3,564,589 shares of Intramed Common Stock to be
received by the Registrant in the Merger. The average of the high and low
price of Intramed Common Stock as quoted on The Nasdaq Small-Cap Market on
May 18, 1994, the latest practicable date prior to the filing of this
Registration Statement, was $2.56.

_________________

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

S-4/A 2nd Page of 136 TOC 1st Previous Next Bottom Just 2nd

BAXTER INTERNATIONAL INC.
___________________

CROSS-REFERENCE SHEET SHOWING LOCATION IN PROSPECTUS
OF INFORMATION REQUIRED BY ITEMS OF FORM S-4

FORM S-4 REGISTRATION STATEMENT ITEM AND
HEADING LOCATION IN PROSPECTUS
---------------------------------------- ----------------------

(Information About the Transaction)

1. Forepart of the Registration Statement
and Outside Front Cover Page of
Prospectus............................... Facing Page; Cross-Reference
Sheet; Outside Front Cover Page

2. Inside Front and Outside Back Cover
Pages of Prospectus...................... Inside Front and Outside Back
Cover Pages

3. Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information............ Summary; Risk Factors; The Merger
and Related Transactions; Terms of
the Merger; Information Concerning
Baxter; Information Concerning
Intramed and Intramed's
Management's Discussion and
Analysis of Financial Condition
and Results of Operations

4. Terms of the Transaction................. Summary; The Merger and Related
Transactions; Terms of the Merger;
Description of Baxter Capital
Stock; Comparison of Rights of
Holders of Baxter and Intramed
Common Stock

5. Pro Forma Financial Information.......... *

6. Material Contacts with the Company Being
Acquired................................. The Merger and Related
Transactions

7. Additional Information Required for
Reoffering by Persons and Parties Deemed
to be Underwriters...................... *

8. Interests of Named Experts and Counsel.. Experts; Legal Matters

9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities............................. Undertakings

(Information about the Registrant)

10. Information with Respect to S-3
Registrants............................. Available Information;
Incorporation of Certain Documents
by Reference; Summary; Risk
Factors; The Meeting, Voting and
Proxies; The Merger and Related
Transactions; Terms of the Merger;
Information Concerning Baxter;
Description of Baxter Capital
Stock

11. Incorporation of Certain Information by
Reference............................... Incorporation of Certain
Information by Reference

12. Information with Respect to S-2 or S-3
Registrants............................. *

13. Incorporation of Certain Information by
Reference............................... *

14. Information with Respect to Registrants
other than S-2 or S-3 Registrants....... *

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(Information about the Company being Acquired)

15. Information with Respect to S-3
Companies............................... *

16. Information with Respect to S-2 or S-3
Companies............................... *

17. Information with Respect to Companies
other than S-2 or S-3 Companies......... Available Information; Summary;
Risk Factors; The Meeting, Voting
and Proxies; The Merger and
Related Transactions; Terms of the
Merger; Information Concerning
Intramed; Intramed's Management's
Discussion and Analysis of
Financial Condition and Results of
Operation; Description of Intramed
Capital Stock

(Voting and Management Information)

18. Information if Proxies, Comments or
Authorizations are to be Solicited...... Summary; The Meeting, Voting and
Proxies; Terms of the Merger;
Information Concerning Baxter;
Information Concerning Intramed

19. Information if Proxies, Consents or
Authorizations are Not to be Solicited
or in an Exchange Offer................. *

---------
* Not Applicable.

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INTRAMED LABORATORIES, INC.
11100 ROSELLE STREET
SAN DIEGO, CA 92121

October 11, 1994

Dear Shareholder:

A Special Meeting of Shareholders of Intramed Laboratories, Inc. ("Intramed")
will be held on November 10, 1994, at 9:00 a.m., local time, at the principal
executive offices of Intramed located at 11100 Roselle Street, San Diego,
California 92121.

At this Special Meeting, you will be asked to consider and vote to approve
and adopt the Agreement and Plan of Reorganization dated March 30, 1994 (the
"Reorganization Agreement"), pursuant to which Intramed shall be merged (the
"Merger") with and into Baxter CVG Sub Inc., a Delaware corporation
("Acquisition"), a wholly-owned subsidiary of Baxter International Inc., a
Delaware corporation ("Baxter"), which has acquired a controlling interest in
Intramed from the prior holders of a majority of Intramed's outstanding Common
Stock (the "Majority Shareholders") and subsequently contributed such shares to
Acquisition. Baxter acquired 2,081,555 shares, representing 58.5% of Intramed's
outstanding Common Stock, from the Majority Shareholders, which included Alpha
Venture Partners III, C.R. Bard, two Thomas J. Fogarty Trusts, the Parrish
Family Trust, Robertson, Stephens & Co., Alan J. Schempp, Stephen Sosnowski and
Southern California Ventures II. Acquisition, as the surviving entity, will be
a wholly-owned subsidiary of Baxter upon the effectiveness of the Merger (which
will occur as soon as possible after obtaining all necessary regulatory and
shareholder approvals, and satisfaction of certain other conditions) (the
"Effective Time"). At the Effective Time, the Majority Shareholders and the
remaining shareholders of Intramed (other than Acquisition) shall receive a per
share purchase price of $2.7215 for each share of Intramed Common Stock
previously tendered to Baxter or converted in the Merger, to be paid in shares
of Baxter Common Stock (collectively, the "Merger Shares") according to an
exchange ratio determined by the average closing price of Baxter Common Stock on
the New York Stock Exchange for the ten trading days prior to the Effective Time
(the "Exchange Ratio"). In addition, all outstanding options to purchase
Intramed Common Stock shall be either repurchased by Intramed or replaced by
Baxter with substitute options (the "Merger Options") to purchase shares of
Baxter Common Stock as of the Effective Time, as more fully described in the
enclosed Proxy Statement/Prospectus.

Baxter is registering the issuance of the Merger Shares under the Securities
Act of 1933, as amended. The number of Merger Shares which shall be issued in
the Merger will be determined according to the Exchange Ratio. The Merger is
structured to be a tax-free reorganization which will not be taxable to Baxter,
Intramed or the Intramed shareholders (the "Intramed Shareholders").

THE INTRAMED BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE REORGANIZATION
AGREEMENT AND THE MERGER DESCRIBED IN THE ATTACHED MATERIAL AND THE TRANSACTIONS
CONTEMPLATED THEREBY AND HAS DETERMINED THAT THE MERGER IS IN THE BEST INTERESTS
OF INTRAMED AND THE INTRAMED SHAREHOLDERS. THE BOARD OF DIRECTORS RECOMMENDS
THAT THE INTRAMED SHAREHOLDERS CONSENT TO THE MATTERS DESCRIBED IN THE
ACCOMPANYING MATERIAL. BECAUSE ACQUISITION, AS THE MAJORITY SHAREHOLDER OF
INTRAMED, INTENDS TO VOTE IN FAVOR OF THE MERGER, APPROVAL OF THE REORGANIZATION
AGREEMENT IS ASSURED WHETHER OR NOT ANY OTHER INTRAMED SHAREHOLDER AFFIRMATIVELY
VOTES TO APPROVE THE REORGANIZATION AGREEMENT. THE DIRECTORS OF INTRAMED HAVE
CERTAIN CONFLICTS OF INTEREST WITH RESPECT TO THE TRANSACTION. SEE "THE MERGER
AND RELATED TRANSACTIONS - CONFLICTS OF INTEREST OF INTRAMED'S DIRECTORS AND
OFFICERS IN THE MERGER."

In the material accompanying this letter, you will find a Notice of Special
Meeting of Shareholders, a Proxy Statement/Prospectus relating to, among other
things, the actions to be taken by Intramed Shareholders at the Special Meeting
and a proxy card. The Proxy Statement/Prospectus more fully describes the
proposed Merger and includes important information about Baxter and Intramed and
also serves as a Prospectus for Baxter describing the investment in Baxter that
the Intramed Shareholders will receive upon consummation of the Merger.

All Shareholders are cordially invited to attend the Special Meeting in
person. However, whether or not you plan to attend the Special Meeting, please
complete, sign, date and return your proxy in the enclosed postage-paid
envelope. If you attend the Special Meeting, you may vote in person if you
wish, even though you have previously returned your proxy.

Sincerely,

Stuart L. Foster
President and Chief Executive Officer

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INTRAMED LABORATORIES, INC.
11100 ROSELLE STREET
SAN DIEGO, CALIFORNIA 92121

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS

TO BE HELD ON NOVEMBER 10, 1994

NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders of Intramed
Laboratories, Inc., a California corporation ("Intramed"), will be held on
November 10, 1994, at 9:00 a.m., local time, at the principal executive offices
of Intramed located at 11100 Roselle Street, San Diego, California, to consider
and vote upon the following matters, which are more fully described in the
accompanying Proxy Statement/Prospectus:

1. The approval and adoption of the Agreement and Plan of Reorganization
dated March 30, 1994 (the "Reorganization Agreement"), among Baxter
International Inc., a Delaware corporation ("Baxter"), Intramed and the
prior holders of a majority of Intramed's outstanding Common Stock (the
"Majority Shareholders"), pursuant to which Intramed shall be merged (the
"Merger") with and into Baxter CVG Sub Inc., a Delaware corporation
("Acquisition"), a wholly-owned subsidiary of Baxter, which has acquired a
controlling interest in Intramed from the Majority Shareholders and
subsequently contributed such shares to Acquisition. Acquisition, as the
surviving entity, will be a wholly-owned subsidiary of Baxter as of the
effectiveness of the Merger (the "Effective Time"). At the Effective
Time, the Majority Shareholders and the remaining shareholders of Intramed
(other than Acquisition) shall receive a per share purchase price of
$2.7215 for each share of Intramed Common Stock previously tendered to
Baxter or converted in the Merger, to be paid in shares of Baxter Common
Stock according to an exchange ratio determined by the average closing
price of Baxter Common Stock on the New York Stock Exchange for the ten
trading days prior to the Effective Time. In addition, all outstanding
options to purchase Intramed Common Stock shall be either repurchased by
Intramed or replaced by Baxter with substitute options to purchase shares
of Baxter Common Stock as of the Effective Time, as more fully described
in the enclosed Proxy Statement/Prospectus.

Only Shareholders of record at the close of business on October 5, 1994 are
entitled to notice of, and to vote at the Special Meeting, or at any adjournment
or postponement thereof.

By Order of the Board of Directors,

Stuart L. Foster
President and Chief Executive Officer

APPROVAL AND ADOPTION OF THE REORGANIZATION AGREEMENT REQUIRES THE AFFIRMATIVE
VOTE OF THE HOLDERS OF A MAJORITY OF THE OUTSTANDING SHARES OF INTRAMED COMMON
STOCK. ABSTENTIONS WILL BE COUNTED FOR PURPOSES OF DETERMINING WHETHER A QUORUM
IS PRESENT AT THE SPECIAL MEETING AND WILL HAVE THE EFFECT OF NEGATIVE VOTES.
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE, SIGN AND
DATE THE ACCOMPANYING PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED RETURN
ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. YOU MAY
REVOKE YOUR PROXY IN THE MANNER DESCRIBED IN THE ACCOMPANYING PROXY
STATEMENT/PROSPECTUS. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON, IF YOU
WISH TO DO SO, EVEN IF YOU HAVE PREVIOUSLY SENT IN YOUR PROXY.

S-4/A 6th Page of 136 TOC 1st Previous Next Bottom Just 6th

BAXTER INTERNATIONAL INC.

PROSPECTUS
____________________________________

INTRAMED LABORATORIES, INC.

PROXY STATEMENT
____________________________________

This Proxy Statement/Prospectus relates to the proposed merger (the
"Merger") of Intramed Laboratories, Inc. ("Intramed") with and into Baxter CVG
Sub Inc. ("Acquisition"), a wholly-owned subsidiary of Baxter International Inc.
("Baxter"), as contemplated by the Agreement and Plan of Reorganization dated
March 30, 1994 (the "Reorganization Agreement") among Baxter, Intramed and
certain prior shareholders of Intramed who collectively held a majority of
Intramed's outstanding common stock (the "Majority Shareholders"). Baxter
acquired 2,081,555 shares, representing 58.5% of Intramed's outstanding common
stock, from the Majority Shareholders, which included Alpha Venture Partners
III, C.R. Bard, two Thomas J. Fogarty Trusts, the Parrish Family Trust,
Robertson, Stephens & Co., Alan J. Schempp, Stephen Soshowski and Southern
California Ventures II. Acquisition, as the surviving entity, will be a
wholly-owned subsidiary of Baxter as of the effectiveness of the Merger (as soon
as possible after obtaining all necessary regulatory and shareholder approvals,
and satisfaction of certain other conditions) (the "Effective Time"). In
connection with the Merger, Baxter has filed a Registration Statement on Form
S-4 with the Securities and Exchange Commission pursuant to the Securities Act
of 1933, as amended, covering an aggregate of up to 442,009 shares of common
stock, $1.00 par value per share, of Baxter (the "Baxter Common Stock") issuable
to the Majority Shareholders in consideration of the shares of Intramed Common
Stock (the "Intramed Common Stock") previously tendered to Baxter and to the
remaining holders (other than Acquisition) of Intramed's Common Stock to be
exchanged in the Merger. Immediately prior to the Merger, there will be
outstanding 3,564,589 shares of Intramed Common Stock (including the shares
purchased by Baxter from the Majority Shareholders pursuant to the
Reorganization Agreement and contributed to Acquisition) and options to purchase
an aggregate of approximately 60,000 shares of Intramed Common Stock. At the
Effective Time, the Majority Shareholders and the remaining shareholders of
Intramed (other than Acquisition) shall receive a per share purchase price of
$2.7215 for each share of Intramed Common Stock previously tendered to Baxter or
converted in the Merger, to be paid in shares of Baxter Common Stock (the
"Merger Shares") according to an exchange ratio determined by the average
closing price of Baxter Common Stock on the New York Stock Exchange for the ten
trading days prior to the Effective Time (the "Exchange Ratio"). Also as a
result of the Merger, each then outstanding option to purchase Intramed Common
Stock shall be replaced by Baxter with substitute options to purchase Baxter
Common Stock based upon the Exchange Ratio. The calculation of the Exchange
Ratio is described in more detail in this Proxy Statement/Prospectus. See
"Terms of the Merger -- Manner and Basis of Converting Shares and Options."

This Proxy Statement/Prospectus is being furnished to holders of Intramed
Common Stock in connection with the solicitation of proxies by Intramed's Board
of Directors for use at the Special Meeting of Intramed Shareholders to be held
on Thursday, November 10, 1994, at the principal offices of Intramed, 11100
Roselle Street, San Diego, California, commencing at 9:00 a.m., local time, and
at any adjournment or postponement thereof for the purposes set forth herein and
in the accompanying Notice of Intramed Special Meeting of Shareholders.

This Proxy Statement/Prospectus also constitutes the prospectus of Baxter
filed as part of the Registration Statement relating to the Baxter Common Stock
issuable to the Majority Shareholders and in exchange for all outstanding shares
of Intramed Common Stock (other than the shares of Intramed Common Stock held by
Acquisition) in the Merger. All information herein with respect to Baxter has
been furnished by Baxter, and all information herein with respect to Intramed
has been furnished by Intramed. This Proxy Statement/Prospectus is first being
mailed to the Shareholders of Intramed on or about October 11, 1994.

SEE "RISK FACTORS" FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE
CONSIDERED BY INTRAMED SHAREHOLDERS BEFORE VOTING ON OR CONSENTING TO THE
MATTERS MORE FULLY DESCRIBED HEREIN.
____________________________

THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
______________________________

THE DATE OF THIS PROXY STATEMENT/PROSPECTUS IS OCTOBER 11, 1994

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TABLE OF CONTENTS
PAGE

AVAILABLE INFORMATION................................................. 4
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE....................... 4
SUMMARY............................................................... 6
General......................................................... 6
The Companies................................................... 6
The Meeting..................................................... 7
The Merger...................................................... 8
Summary Historical Financial Information........................ 16
RISK FACTORS.......................................................... 18
Uncertainties Related to the Merger............................. 18
Increased Competition Among Health-Care Suppliers............... 18
Proposed Health-Care Cost Containment Measures ................. 18
Risks Related to Foreign Operations and Export Sales............ 18
Government Regulation; Product Withdrawals and Recalls.......... 18
Legal Proceedings............................................... 19
THE MEETING, VOTING AND PROXIES....................................... 19
Special Meeting of Shareholders of Intramed..................... 19
THE MERGER AND RELATED TRANSACTIONS................................... 20
Reasons for the Merger.......................................... 20
Baxter's Reasons for the Merger................................. 21
Intramed's Reasons for the Merger............................... 21
Intramed Board Recommendation................................... 21
Conflicts of Interest of Intramed's Directors and Officers
in the Merger................................................. 22
Opinion of Financial Advisor.................................... 23
Background and Negotiations Leading to the Merger............... 25
TERMS OF THE MERGER................................................... 27
Effective Date of the Merger.................................... 27
Manner and Basis of Converting Shares and Options............... 27
Employee Benefit Plans.......................................... 29
Intramed Options................................................ 29
Intramed Warrants............................................... 29
Conduct of the Business of the Combined Companies Following
the Merger.................................................... 30
Certain Federal Income Tax Considerations....................... 31
Severance Agreements............................................ 32
Other Agreements................................................ 32
Resales of Baxter Common Stock; Affiliates...................... 33
Governmental and Regulatory Approvals........................... 33
Accounting Treatment............................................ 33
Dissenters' Rights.............................................. 33
INFORMATION CONCERNING BAXTER......................................... 36
General......................................................... 36
Industry Segments............................................... 36
Medical Specialties............................................. 36
Medical/Laboratory Products and Distribution.................... 36
Joint Ventures.................................................. 37
Health-Care Environment......................................... 37
Methods of Distribution......................................... 37
Raw Materials................................................... 38
Patents and Trademarks.......................................... 38
Competition..................................................... 39

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Credit and Working Capital Practices............................ 39
Quality Control................................................. 39
Research and Development........................................ 39
Government Regulation........................................... 40
Employees....................................................... 40
Contractual Arrangements........................................ 40
Financial Information about Foreign and Domestic Operations and
Export Sales.................................................. 40
Properties...................................................... 40
Legal Proceedings............................................... 41
Executive Officers and Directors of Baxter...................... 46
BAXTER INFORMATION INCORPORATED BY REFERENCE.......................... 49
INFORMATION CONCERNING INTRAMED....................................... 49
General......................................................... 49
Market Background............................................... 50
Intramed's Endoscopes........................................... 51
Strategy........................................................ 52
Market and Products............................................. 53
Research and Development........................................ 55
Customers and Marketing......................................... 56
Manufacturing................................................... 56
Patents and Proprietary Technology.............................. 57
Competition..................................................... 57
Government Regulation........................................... 58
Reimbursement................................................... 59
Product Liability and Insurance................................. 59
Employees....................................................... 60
Properties...................................................... 60
INTRAMED MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS... 60
EXECUTIVE OFFICERS AND DIRECTORS OF INTRAMED.......................... 63
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT........ 65
INTRAMED INFORMATION INCORPORATED BY REFERENCE........................ 66
DESCRIPTION OF BAXTER CAPITAL STOCK................................... 67
BAXTER DIVIDEND POLICY................................................ 68
DESCRIPTION OF INTRAMED CAPITAL STOCK................................. 68
COMPARISON OF RIGHTS OF HOLDERS OF BAXTER AND INTRAMED
COMMON STOCK........................................................ 69
LEGAL MATTERS......................................................... 75
EXPERTS............................................................... 75
INDEX TO INTRAMED FINANCIAL STATEMENTS................................ 76
REORGANIZATION AGREEMENT..............................................Annex A
FORM OF OPINION OF FINANCIAL ADVISOR..................................Annex B
CHAPTER 13 OF THE CALIFORNIA GENERAL CORPORATION LAW..................Annex C

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AVAILABLE INFORMATION

Baxter and Intramed are each subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith file reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by Baxter and Intramed and the
Registration Statement and exhibits and schedules thereto can be inspected and
copied at the Public Reference section of the Commission at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's
regional offices located at 7 World Trade Center, 13th Floor, New York, New York
10048, and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511.
Copies of such material can also be obtained from the Public Reference section
of the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. Such reports, proxy statements and
other information concerning Baxter can also be inspected at the offices of New
York Stock Exchange at 20 Broad Street, New York, New York 10005.

Baxter has filed with the Commission a Registration Statement on Form S-4
(together with any amendments or supplements thereto, the "Registration
Statement") under the Securities Act of 1933, as amended (the "Act") with
respect to the Merger Shares (as defined herein) offered hereby. This Proxy
Statement/Prospectus omits certain information contained in the Registration
Statement and reference is made to the Registration Statement and the exhibits
and schedules thereto for further information with respect to Baxter, Intramed
and the Merger. Statements contained herein concerning the provisions of any
documents are not necessarily complete, and in each instance reference is made
to the copy of such document filed as an exhibit to the Registration Statement
or incorporated herein by reference. Each such statement is qualified in its
entirety by such reference.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents or portions thereof, filed by Baxter and Intramed
with the Commission under the Exchange Act and the Act, are incorporated herein
by reference:

(a) Baxter's Annual Report on Form 10-K (File No. 1-4448) for the year
ended December 31, 1993;
(b) Baxter's Proxy Statement for the Annual Meeting of Stockholders held
on April 29, 1994;
(c) Baxter's Quarterly Reports on Form 10-Q for the quarters ended March
31, 1994 and June 30, 1994, respectively, filed with the Commission
on May 13, 1994 and August 15, 1994;
(d) Baxter's Registration Statement on Form 8-A dated March 21, 1989;
and
(e) Intramed's Quarterly Reports on Form 10-QSB for the quarters ended
March 31, 1994 and June 30, 1994, respectively, filed with the
Commission on May 13, 1994 and August 15, 1994, respectively.

All documents subsequently filed by Baxter and Intramed pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Proxy Statement/Prospectus shall be deemed to be incorporated by reference in
this Proxy Statement/Prospectus and to be a part of this Proxy
Statement/Prospectus from the date of filing thereof. Any statement contained
in a document incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Proxy Statement/Prospectus to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statements so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Proxy Statement/Prospectus.

Baxter hereby undertakes to provide without charge to each person to whom
a copy of this Proxy Statement/Prospectus has been delivered, upon the written
or oral request of any such person, a copy of any or all of the documents
referred to above which have been or may be incorporated in this Proxy
Statement/Prospectus by reference (other than exhibits). Requests for such
copies should be directed to: Baxter International Inc., One Baxter Parkway,
Deerfield, Illinois, 60015, telephone: (708) 948-2000, Attention: Stockholder
Services. In order to ensure timely delivery of the documents prior to the
Special Meeting, any request should be made prior to October 31, 1994.

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No person has been authorized to give any information or to make any
representation other than as contained herein in connection with the Merger,
and, if given or made, such information or representation must not be relied
upon as having been authorized by Baxter or Intramed. Neither the delivery
hereof nor any distribution of securities made hereunder shall, under any
circumstances, create an implication that there has been no change in the facts
herein set forth since the date hereof. This Prospectus/Proxy Statement does
not constitute an offer to sell or a solicitation of an offer to buy the shares
of Baxter Common Stock offered by this Prospectus/Proxy Statement or a
solicitation of a proxy in any jurisdiction where, or to any person to whom, it
is unlawful to make such an offer or solicitation.

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PROXY STATEMENT/PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS AND NOTES APPEARING ELSEWHERE IN THIS PROXY
STATEMENT/PROSPECTUS AND IN THE DOCUMENTS INCORPORATED IN THIS PROXY
STATEMENT/PROSPECTUS BY REFERENCE.

GENERAL

This Proxy Statement/Prospectus is being furnished to shareholders of
Intramed Laboratories, Inc., a California corporation ("Intramed"), in
connection with the solicitation of proxies by the Board of Directors of
Intramed for use at the Special Meeting of Shareholders of Intramed (the
"Intramed Special Meeting") which is scheduled to be held on November 10, 1994.
At the Intramed Special Meeting, the shareholders of Intramed will be asked to
consider and vote upon the proposed merger (the "Merger") of Intramed with and
into Baxter CVG Sub Inc., a Delaware corporation ("Acquisition"), a wholly-owned
subsidiary of Baxter International Inc., a Delaware corporation ("Baxter"),
pursuant to the terms of the Agreement and Plan of Reorganization dated March
30, 1994 (the "Reorganization Agreement"), among Baxter, Intramed and the prior
holders of a majority of Intramed's outstanding Common Stock (the "Majority
Shareholders"). Baxter acquired 2,081,555 shares, representing 58.5% of
Intramed's outstanding common stock, from the Majority Shareholders, which
included Alpha Venture Partners III, C.R. Bard, two Thomas J. Fogarty Trusts,
the Parrish Family Trust, Robertson, Stephens & Company, Alan J. Schempp,
Stephen Sosnowski and Southern California Ventures II. The Reorganization
Agreement is included in this Proxy Statement/Prospectus as Annex A.
Acquisition, as the surviving entity, will be a wholly-owned subsidiary of
Baxter as of the effectiveness of the Merger (as soon as possible after
obtaining all necessary regulatory and shareholder approvals, and satisfaction
of certain other conditions) (the "Effective Time"). At the Effective Time, the
Majority Shareholders and the remaining shareholders of Intramed (other than
Acquisition) shall receive a per share purchase price of $2.7215 for each share
of Intramed Common Stock previously tendered to Baxter or converted in the
Merger, to be paid in shares of Baxter Common Stock (the "Merger Shares")
according to an exchange ratio determined by the average closing price of Baxter
Common Stock on the New York Stock Exchange for the ten trading days prior to
the Effective Time (the "Exchange Ratio"). Also as a result of the Merger, each
then outstanding option to purchase Intramed Common Stock shall be replaced by
Baxter with substitute options to purchase Baxter Common Stock based upon the
Exchange Ratio. This Proxy Statement/Prospectus constitutes a prospectus of
Baxter with respect to the shares of Baxter Common Stock to be issued in
connection with the Merger. The information in this Proxy Statement/Prospectus
concerning Baxter and Intramed has been furnished by each of such entities,
respectively.

THE COMPANIES

BAXTER INTERNATIONAL INC.

Baxter 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 Baxter in 21
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. Baxter's more than
200,000 products are used primarily by hospitals, clinical and medical research
laboratories, blood and dialysis centers, rehabilitation centers, nursing homes,
doctors' offices and at home under physician supervision. Baxter also
distributes and manufactures a wide range of products for research and
development facilities and manufacturing facilities.

In November 1993, Baxter announced that its Board of Directors had
approved a series of strategic actions to improve stockholder value, to extend
positions of leadership in health-care markets and to reduce costs. These
actions are designed to make Baxter's domestic medical/laboratory products and
distribution segment more efficient and more responsive in addressing the
sweeping changes occurring in the United States health-care system and to
accelerate growth of its medical specialties businesses worldwide. Baxter
recorded a $700 million pre-tax provision to cover costs associated with these
restructuring initiatives. The actions include realigning Baxter's United
States sales organization; restructuring the distribution organization and
investing in new systems to improve manufacturing and distribution efficiencies
worldwide; seeking to divest its diagnostics-products manufacturing businesses
and

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exiting selected non-strategic product lines in other businesses, as well as
reducing corporate staff and layers of management to give business units more
autonomy. These actions are expected to result in a reduction of Baxter's
worldwide work force by approximately 7%, or 4,500 positions, most of which will
occur over the next two to three years.

Baxter is headquartered in Deerfield, Illinois. Its executive offices are
located at One Baxter Parkway, Deerfield, Illinois 60015. Its telephone number
at that address is (708) 948-2000.

BAXTER CVG SUB INC.

Acquisition is a Delaware corporation recently organized by Baxter for the
purpose of effecting the Merger. It has no material assets and has not engaged
in any activities except in connection with such proposed acquisition.
Acquisition's executive offices are located at One Baxter Parkway, Deerfield,
Illinois 60015. Its telephone number at that address is (708) 948-2000.

INTRAMED LABORATORIES, INC.

Intramed develops, manufactures and markets cost-effective miniature
endoscopes and therapeutic devices for minimally invasive surgery, diagnosis and
treatment monitoring. Intramed's proprietary technology and manufacturing
processes enable it to offer a variety of flexible and rigid, single-use
endoscopes with the capabilities of larger, more expensive, reusable endoscopes.
Intramed currently offers an array of angioscopes for the visualization of
arteries and veins, choledochoscopes to locate stones during laparoscopic
gallbladder removal, and ureteroscopes for visualization and treatment of the
kidney and ureter. Intramed is establishing a direct marketing and selling
effort in the vascular surgery market, building on its proprietary products for
peripheral bypass procedures, while simultaneously addressing other markets for
Intramed's cost-effective miniature endoscopic technology through Baxter or
other corporate partnering agreements.

Intramed's products address three important trends in medical care: the
growth in minimally invasive surgery, the increasing need for procedure-specific
endoscopic and therapeutic devices, and the preference for single use rather
than reusable products to minimize the risk of hospital-related patient
infections.

Intramed's executive offices are located at 11100 Roselle Street, San
Diego, California 92121. Its telephone number at that address is (619)
455-5000.

THE MEETING

SPECIAL MEETING OF SHAREHOLDERS OF INTRAMED

The Intramed Special Meeting will be held on November 10, 1994, at 9:00
a.m., local time, at the principal executive offices of Intramed at 11100
Roselle Street, San Diego, California. The purpose of the meeting is to
consider and vote upon the approval and adoption of the Reorganization Agreement
and the approval of the Merger (the "Intramed Proposal"). At the Effective
Time, (i) the Majority Shareholders shall receive their portion of the Merger
Shares (as defined below) based upon the Exchange Ratio, (ii) each then
outstanding share of Intramed Common Stock (other than the shares of Intramed
Common Stock held by Acquisition) will be converted into the right to receive
Merger Shares at the Exchange Ratio, (iii) each then outstanding option to
purchase Intramed Common Stock will be replaced by Baxter with a Merger Option
(as defined below) exercisable for the number of shares of Baxter Common Stock
equal to the number of shares of Intramed Common Stock for which such Intramed
option was exercisable multiplied by the Exchange Ratio (at an exercise price
which has been adjusted such that the aggregate exercise price of all Merger
Options shall equal the aggregate exercise price of all outstanding options to
purchase Intramed Common Stock assumed by Baxter at the Effective Time), and
(iv) Acquisition, as the surviving entity, will be a wholly-owned subsidiary of
Baxter.

Shareholders of record as shown on the books of Intramed at the close of
business on October 5, 1994, (the "Intramed Record Date") are entitled to notice
of, and to vote at, the Intramed Special Meeting or at any adjournment or
postponement thereof. Approval and adoption of the Intramed Proposal requires
the affirmative vote

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of the holders of a majority of the outstanding shares of Intramed Common Stock.
The presence, either in person or by properly executed proxy, of the holders of
a majority of the outstanding shares of Intramed Common Stock is necessary to
constitute a quorum at the Intramed Special Meeting. Abstentions will not be
counted for purposes of determining whether a quorum is present at the Intramed
Special Meeting and will have the effect of a negative vote.

Acquisition holds an aggregate of 2,081,555 shares of Intramed Common
Stock, representing a majority of the shares of Intramed Common Stock as of the
Intramed Record Date, and intends to vote in favor of the Intramed Proposal.
ACCORDINGLY, APPROVAL OF THE INTRAMED PROPOSAL BY HOLDERS OF A MAJORITY OF THE
OUTSTANDING SHARES OF INTRAMED COMMON STOCK IS ASSURED WHETHER OR NOT ANY OTHER
SHAREHOLDER AFFIRMATIVELY VOTES TO APPROVE THE INTRAMED PROPOSAL.

THE MERGER

RISK FACTORS

Before voting in favor of the Intramed Proposal and thereby agreeing to
accept the Merger Shares and the Merger Options offered hereby in exchange for
their Intramed Shares and Intramed Options, the Intramed Shareholders should
carefully consider certain factors including Baxter's ability to successfully
integrate Intramed's business into its own, the fundamental changes occurring in
the health-care marketplace and their impact on Baxter, the risk of certain
recalls or withdrawals of Baxter products from the marketplace, risks related to
Baxter's foreign operations and export sales, competition and the impact of
certain legal proceedings against Baxter. See "Risk Factors."

TERMS OF THE MERGER

At the Effective Time, Intramed will merge with and into Acquisition, with
Acquisition remaining as the surviving entity, and all shares of Intramed Common
Stock (excluding the shares of Intramed Common Stock held by Acquisition) shall
be converted into the right to receive an aggregate of approximately 183,896
shares (based upon the per share purchase price of $2.7215 and assuming an
Exchange Ratio of .124) of Baxter Common Stock. This is the same per share
purchase price to be paid to the Majority Shareholders in connection with the
purchase of their shares of Intramed Common Stock by Baxter pursuant to the
Reorganization Agreement, who will receive an aggregate of approximately 258,113
shares (based upon the per share purchase price of $2.7215 and assuming an
Exchange Ratio of .124) of Baxter Common Stock at the Effective Time. The
442,009 shares of Baxter Common Stock to be received by the Majority
Shareholders and the shareholders of Intramed (other than Acquisition) as of the
Effective Time are referred to as the "Merger Shares." In addition, all
outstanding options to purchase Intramed Common Stock will be replaced by Baxter
at the Effective Time with substitute options exercisable for an aggregate of
approximately 7,440 shares (assuming an Exchange Ratio of .124) of Baxter Common
Stock (the "Merger Options"). See "Intramed Options" below.

EXCHANGE RATIO

The table below sets forth the approximate number of shares of Baxter
Common Stock that would be issued for each share of Intramed Common Stock
previously tendered to Baxter or converted in the Merger assuming the following
Baxter Stock Values (as defined below):

· Download Table

Baxter Stock Values
-----------------------------------------------

$22 $23 $24 $25 $26 $27 $28
--- --- --- --- --- --- ---

Exchange Ratio .124 .118 .113 .109 .105 .101 .097

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The actual number of Merger Shares to be issued at the Effective Time
shall be equal to (a) the number of issued and outstanding shares of Intramed
Common Stock at the Effective Time (including the shares of Intramed Common
Stock purchased by Baxter from the Majority Shareholders pursuant to the
Reorganization Agreement and contributed to Acquisition) multiplied by (b) the
quotient of (i) 2.7215 divided by (ii) the average closing price of a share of
Baxter Common Stock for the ten trading days immediately prior to the Effective
Time as reported on the New York Stock Exchange (the "Baxter Stock Value"), as
adjusted to reflect any stock split, reverse split, stock dividend,
reorganization, recapitalization or like change with respect to Baxter Common
Stock or Intramed Common Stock prior to the Effective Time. Such quotient is
referred to herein as the "Exchange Ratio." The number of Merger Options to be
issued in the Merger shall be equal to (a) the number of issued and outstanding
options to purchase Intramed Common Stock at the Effective Time multiplied by
(b) the Exchange Ratio. On September 30, 1994, the closing price of Baxter
Common Stock as reported on the New York Stock Exchange was $28.13.

CONVERSION OF INTRAMED COMMON STOCK INTO BAXTER COMMON STOCK

Based upon the number of shares of Baxter Common Stock outstanding as of
April 30, 1994 and assuming that an aggregate of 258,113 shares of Baxter Common
Stock are issued to the Majority Shareholders in payment for the shares of
Intramed Common Stock previously tendered to Baxter pursuant to the
Reorganization Agreement, and that an aggregate of 183,896 shares of Baxter
Common Stock and 7,440 Merger Options are issued to Intramed Shareholders and
optionholders in the Merger, 277,598,080 shares of Baxter Common Stock (assuming
the exercise of the Merger Options) will be outstanding immediately after the
Effective Time, of which approximately .16% will be held by the former holders
of Intramed Common Stock and Intramed Options.

No fractional shares will be issued by Baxter in the Merger. Each
Intramed Shareholder otherwise entitled to a fractional share, will receive
instead an amount of cash from Baxter or Acquisition (rounded to the nearest
whole cent) equal to the product of such fraction multiplied by the Baxter Stock
Value.

Upon consummation of the Merger, Acquisition, as a wholly owned subsidiary
of Baxter, will for the foreseeable future continue to operate as a separate
company using "Intramed Laboratories, Inc." as its corporate name.

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MARKET PRICE DATA

BAXTER

Baxter Common Stock is listed on the New York, Midwest and Pacific Stock
Exchanges, on the London Stock Exchange and on the Swiss Stock Exchanges of
Zurich, Basel and Geneva. The New York Stock Exchange ("NYSE") is the principal
market on which Baxter Common Stock is traded under the symbol "BAX." The
following table sets forth for each period indicated the range of high and low
closing sale prices of Baxter Common Stock as reported by the NYSE.

· Download Table

PRICE
--------------------
HIGH LOW
------ -------

Calendar Year 1992
First quarter...................................... $40.50 $34.25
Second quarter..................................... 39.38 33.75
Third quarter...................................... 38.88 31.50
Fourth quarter..................................... 36.63 30.50

Calendar Year 1993
First quarter...................................... 32.75 27.13
Second quarter..................................... 30.63 27.25
Third quarter...................................... 29.00 20.00
Fourth quarter..................................... 24.75 21.38

Calendar Year 1994
First quarter...................................... 24.63 22.13
Second quarter..................................... 26.00 22.00
Third quarter...................................... 28.75 24.38

On March 29, 1994, the last trading day prior to the signing of the
Reorganization Agreement, the closing sale price of Baxter Common Stock as
reported on the NYSE was $23.13 per share. As of September 30, 1994, Baxter's
Common Stock was held by approximately 81,000 stockholders of record. Following
the Merger, Baxter Common Stock will continue to be traded on the NYSE under the
symbol "BAX."

For the fiscal year ended December 31, 1993, Baxter declared cash dividends
of $1.00 per share on its Common Stock and, as of September 30, 1994, Baxter
declared cash dividends at an annualized rate of $1.00 per share on its Common
Stock. Following the Merger, it is expected that the Board of Directors of
Baxter will continue to approve the payment of cash dividends consistent with
Baxter's current policy. Baxter offers an automatic dividend reinvestment
program to holders of Baxter Common Stock.

INTRAMED

Intramed Common Stock is traded in the over-the-counter market and on the
Boston Stock Exchange and is quoted on the Nasdaq Small-Cap Market under the
symbol "ITML." Prior to its initial public offering on June 9, 1992, Intramed's
Common Stock was not publicly traded. The following table sets forth, for each
period after its initial public offering, the high and low sales prices of
Intramed Common Stock as quoted by Nasdaq.

· Download Table

PRICE
--------------------
HIGH LOW
------ -------

Calendar Year 1992
Second Quarter (June 9, 1992 to June 30, 1992)..... $5.50 $3.50
Third Quarter...................................... 4.25 3.25
Fourth Quarter..................................... 7.13 3.25

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Calendar Year 1993
First Quarter...................................... 4.00 2.13
Second Quarter..................................... 2.38 1.50
Third Quarter...................................... 1.88 1.00
Fourth Quarter..................................... 1.13 .50

Calendar Year 1994
First Quarter...................................... 2.31 .81
Second Quarter..................................... 2.56 2.25
Third Quarter...................................... 2.47 2.38

The quotes represent "inter-dealer" prices without retail mark-ups,
mark-downs or commissions and may not necessarily represent actual transactions.
On March 29, 1994, the last trading day prior to the signing of the
Reorganization Agreement, the last sales price of Intramed Common Stock as
quoted on the Nasdaq Small-Cap Market was $1.31 per share. As of September 30,
1994, Intramed's Common Stock was held by approximately 75 shareholders of
record. The equivalent market price per share of Intramed Common Stock, based
upon the Exchange Ratio, would have been $2.72.

Intramed has never paid cash dividends on its shares of Common Stock.
Except as otherwise contemplated in connection with the Merger, the Board of
Directors of Acquisition, as the surviving entity, intends to continue a policy
of retaining earnings to finance the expansion of its business.

REASONS FOR THE MERGER

In discussions which led to the signing of the Reorganization Agreement,
the representatives of the respective management teams of Baxter and Intramed
identified a number of potential joint benefits resulting from the Merger,
including expanded sales, marketing and distribution opportunities and
capabilities, shared industry expertise and information, expansion of specialty
product lines and the availability to the combined entity of an expanded pool of
experienced management. See "The Merger and Related Transactions - Reasons for
the Merger," " - Baxter's Reasons for the Merger," and "- Intramed's Reasons for
the Merger."

RECOMMENDATION OF THE INTRAMED BOARD OF DIRECTORS

The Board of Directors of Intramed has unanimously approved the
Reorganization Agreement and the transactions contemplated thereby and has
determined that the Merger is in the best interests of Intramed and its
Shareholders. The Board of Directors recommends that the Shareholders of
Intramed vote in favor of the Intramed Proposal. The directors of Intramed have
certain conflicts of interest with respect to the transaction. See "The Merger
and Related Transactions -- Reasons for the Merger," " -- Intramed's Reasons
for the Merger," " -- Intramed's Board Recommendation" and " -- Conflicts of
Interest of Intramed's Directors and Officers in the Merger."

CONFLICTS OF INTEREST OF INTRAMED'S DIRECTORS AND OFFICERS IN THE MERGER

Each of the officers of Intramed and John Walker, a director, owned
options to purchase Intramed Common Stock which was canceled by such option
holders in exchange for a payment by Intramed of $.50 per share of Intramed
Common Stock underlying the options. Pieter Halter and John Walker, directors
of Intramed, are affiliated with Southern California Ventures II and Alpha
Venture Partners III, respectively, which were prior shareholders of Intramed
who agreed to sell their shares of Intramed Common Stock to Baxter with the
other Majority Shareholders. Stephen Sosnowski, an officer and director, and
Dr. Thomas Fogarty, a director, also sold substantially all of their shares of
Intramed Common Stock to Baxter as part of the Majority Shareholders. Each of
the officers of Intramed also has entered into a severance agreement with
Intramed (to be assumed by Baxter in the Merger) which provides for severance
payments to them if Baxter terminates their employment within one year following
the closing of the Merger. Baxter intends to continue the employment of these
officers following the effectiveness of the Merger. See "Severance Agreements."
Dr. Fogarty is a consultant to Intramed and receives royalties from Intramed
under license agreements. Dr. Fogarty is also a consultant to Baxter and
receives royalties

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under license agreements. For a more complete description of these
transactions, see "The Merger and Related Transactions - Conflicts of Interest
of Intramed's Directors and Officers in the Merger."

The following table summarizes the aggregate amount of economic benefits
to be received by the Officers and Directors of Intramed.

· Download Table

Value to be
received for Value of
Received Intramed Severance
for Options Stock (1) Agreement (2)
----------- ----------- -------------

Stuart Foster (5)(6) $69,921 $ 33,817 $89,800
Stephen Sosnowski (5)(6) 5,000 401,149 84,834
Pieter Halter (3)(6) 1,594,459
John Walker (4)(6) 17,500 1,306,250
Thomas Fogarty M.D. (6) 185,625
Alan Schempp (5) 5,000 444,878 82,167
Kerry Pope (5) 30,000 40,823 85,000
Steven McGowan (5) 16,356 5,250 58,533

<FN>

(1) Indicates value to be received in Baxter Common Stock for the tender of
Intramed Common Stock held. Computed by multiplying the number of shares
of Intramed Common Stock held by $2.7215.

(2) Each of the officers of Intramed has entered into a severance agreement
with Intramed (to be assumed by Baxter in the Merger) which provides for
severance payments to them if Baxter terminates their employment within
one year following the effectiveness of the Merger.

(3) Mr. Halter is a general partner in Southern California Ventures II.
Southern California Ventures II owned 585,875 shares of Intramed's Common
Stock which it sold to Baxter as a Majority Shareholder. Southern
California Ventures II will receive the value of $1,594,459 in Baxter
Common Stock at the completion of the Merger.

(4) Mr. Walker is a limited partner in Alpha Venture Partners III. Alpha
Venture Partners III owned 474,974 shares of Intramed's Common Stock which
it sold to Baxter as a Majority Shareholder. Alpha Venture Partners III
will receive the value of $1,292,642 in Baxter Common Stock at the
completion of the merger. Mr. Walker held options to purchase 35,000
shares of Intramed's Common Stock, which Intramed acquired for $17,500.
Mr. Walker owns 5,000 shares of Intramed Common Stock for which he will
receive the value of $13,608 in Baxter Common Stock at the completion of
the Merger.

(5) The person indicated is an officer of Intramed.

(6) The person indicated is a director of Intramed.

OPINION OF FINANCIAL ADVISOR

On March 30, 1994, Houlihan, Lokey, Howard & Zukin, Inc. ("Houlihan
Lokey") delivered its written opinion dated March 30, 1994 to the Intramed Board
of Directors that the consideration to be paid to the Intramed Shareholders in
connection with the Merger is fair to the Intramed Shareholders from a financial
point of view. Houlihan Lokey based its opinion in part on discussions with,
and financial projections for the years ended December 31, 1994 through 1998
provided to Houlihan Lokey by, Intramed's management. On October 5, 1994,

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Houlihan Lokey reconfirmed such opinion as of October 5, 1994 to the Intramed
Board of Directors. See "The Merger and Related Transactions -- Opinion of
Financial Advisor."

EFFECTIVE DATE OF THE MERGER

The Merger will become effective upon the filing of the Agreement of
Merger contemplated by the Reorganization Agreement with the Secretaries of
State of the States of Delaware and California (the "Effective Date"). Assuming
all conditions to the Merger are met or waived prior thereto, it is anticipated
that the Effective Date will occur on or about November 10, 1994, immediately
following the Intramed Special Meeting.

MANNER AND BASIS OF CONVERTING SHARES AND OPTIONS

At the closing of the Reorganization Agreement (the "Closing"), the
Majority Shareholders delivered to Baxter certificates representing 2,081,555
shares of Intramed Common Stock to be exchanged for shares of Baxter Common
Stock, duly endorsed in blank form or accompanied by stock powers duly endorsed
in blank. As of the Closing, all right, title and interest in and to the
2,081,555 shares of Intramed Common Stock (representing a majority of the
outstanding shares of Intramed Common Stock as of the Closing) passed to Baxter,
which shares Baxter subsequently assigned to Acquisition as a capital
contribution. The per share purchase price to be paid to the Majority
Shareholders, $2.7215 (payable in shares of Baxter Common Stock at the Effective
Time) is the same per share purchase price to be paid to the Intramed
Shareholders (other than Acquisition) participating in the Merger. The number
of shares of Baxter Common Stock payable to each Majority Shareholder in
exchange for such Majority Shareholder's shares of Intramed Common Stock so
tendered shall be determined using the Exchange Ratio, and such shares of Baxter
Common Stock will be delivered to the Majority Shareholders at the Effective
Time.

At the Effective Time, by virtue of the Merger and without any action on
the part of any party, (i) each share of common stock of Acquisition outstanding
immediately prior to the Effective Time shall remain outstanding and be
unaffected by the Merger, (ii) each share of Intramed Common Stock held by
Acquisition prior to the Effective Time shall be cancelled without
consideration, and (iii) each share of Intramed Common Stock outstanding
immediately prior to the Effective Time, other than the shares held by
Acquisition, shall be converted into the right to receive the number of shares
of Baxter Common Stock equal to the Exchange Ratio.

Promptly after the Effective Time, Acquisition shall cause to be mailed to
each holder of record of a certificate or certificates which immediately prior
to the Effective Time represented the outstanding shares of Intramed Common
Stock whose shares converted into the right to receive the Merger Shares a
letter of transmittal and instructions for tendering such certificates to
Chemical Trust Company of California, as registrar and transfer agent (the
"Exchange Agent"). As soon as practicable after the Effective Time, Baxter will
deliver to the Exchange Agent for each holder of Intramed Common Stock,
certificates representing the number of shares of Baxter Common Stock payable in
connection with the Merger as consideration to such holders of Intramed Common
Stock. Upon surrender of the certificates for cancellation to the Exchange
Agent, together with such letter of transmittal, duly completed and validly
executed in accordance with the instructions thereto, the holder of such
certificate shall be entitled to receive in exchange therefor a certificate
representing the number of whole shares of Baxter Common Stock and the
certificate representing Intramed Common Stock so surrendered shall be
cancelled.

INTRAMED OPTIONS

Pursuant to the Reorganization Agreement, all outstanding Intramed Options
as of the Effective Time will be replaced by Baxter with Merger Options. In
lieu of the issuance of the Merger Options, the Reorganization Agreement
provides that Intramed shall offer to each optionholder the right to cancel such
optionholder's option in exchange for a payment by Intramed of $.50 per share
for each share of Intramed Common Stock underlying such option (whether vested
or unvested). As of September 30, 1994, there were options to purchase
approximately 60,000 shares of Intramed Common Stock outstanding and holders of
options to purchase approximately 359,533 shares of Intramed Common Stock had
accepted the offer to cancel their options in exchange for $.50 per share
underlying such options. Each of the officers and directors of Intramed who
held an Intramed

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option has canceled such option in exchange for a payment by
Intramed of $.50 per share. See "The Merger and Related Transactions -
Conflicts of Interest of Intramed's Directors and Officers in the Merger" and
"Terms of the Merger -- Manner and Basis of Converting Shares and Options."

INTRAMED WARRANTS

Upon the Effective Date, outstanding warrants to purchase an aggregate of
105,000 shares of Intramed Common Stock held by Alpha Venture Partners III
(19,800 shares), Southern California Ventures II (25,200 shares) and C.R. Bard
(60,000 shares) shall expire and, in addition, outstanding warrants to purchase
84,000 shares of Intramed Common Stock (the "Intramed Warrants") at an exercise
price of $6.60 per share will be assumed by Baxter and converted into warrants
to purchase Baxter Common Stock (the "Merger Warrants"). The Merger Warrants
shall continue to have, and be subject to, the same terms and conditions set
forth in the Intramed Warrants, except that the Merger Warrants will be
exercisable for that number of shares of Baxter Common Stock equal to 84,000
multiplied by the Exchange Ratio. The exercise price per share of the Merger
Warrants shall equal $6.60 divided by the Exchange Ratio.

CONDITIONS TO THE MERGER AND MODIFICATIONS TO THE REORGANIZATION AGREEMENT

The effectiveness of the Merger will occur upon the satisfaction or waiver
of various conditions set forth in the Reorganization Agreement. The
Reorganization Agreement constitutes the final agreement among the parties and
may not be modified, and no waiver of any provision or condition may be made,
except in writing and signed by the party against whom such variation,
modification, waiver or consent is sought, at any time before or after the
approval and adoption of the Merger by the Shareholders of Intramed. After such
shareholder approval and adoption has been obtained, no modifications of any of
the agreements executed in connection with the Merger may be made which by law
requires the further approval of the Shareholders of Intramed, without obtaining
such further approval.

CERTAIN FEDERAL INCOME TAX CONSIDERATIONS

The Merger will qualify as a tax-free reorganization pursuant to Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code"), provided
that the "continuity of interest" requirement is met through the stock ownership
of Baxter by the former Intramed Shareholders following the Merger. If the
continuity of interest requirement is met, the holders of Intramed Common Stock
would not recognize any taxable gain or loss upon their receipt in the Merger of
Baxter Common Stock, their aggregate tax basis in the Baxter Common Stock they
receive would equal their aggregate tax basis of the Intramed Common Stock they
surrender in the Merger and their holding period in the Baxter Common Stock they
receive would include the holding period of the Intramed Common Stock they
surrender in the Merger, provided that the Intramed Common Stock was held as a
capital asset.

The delivery by Brobeck, Phleger & Harrison, counsel to Baxter, of a
reasoned opinion that the Merger will qualify as a tax-free reorganization
pursuant to Section 368(a) of the Code for tax purposes is a condition to the
obligations of Baxter, Acquisition and Intramed to consummate the Merger.

Notwithstanding delivery of such opinion, a successful challenge by the
Internal Revenue Service to such tax-free reorganization status of the Merger
would result in the Intramed Shareholders recognizing taxable gain or loss with
respect to each share of Intramed Common Stock surrendered in the Merger equal
to the difference between the holder's basis in such shares of Intramed Common
Stock surrendered and the fair market value of the Baxter Common Stock received
in the Merger. In such event, a holder's aggregate tax basis in the Baxter
Common Stock so received would equal its fair market value and the holding
period for such share of Baxter Common Stock would begin the day after the
Merger. See "Terms of the Merger -- Certain Federal Income Tax Considerations."
Furthermore, a successful challenge to the tax status of the Merger could cause
taxable gain to be recognized by Intramed, measured by the excess of the fair
market value of the Baxter Common Stock transferred and the liabilities of
Intramed being assumed, over Intramed's aggregate tax basis in its assets.

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Counsel has rendered no opinion as to the tax consequences of the Merger
to the Majority Shareholders.

SEVERANCE AGREEMENTS

Intramed has entered into a separate severance agreement with each of its
executive officers effective as of April 1, 1994. Among other things, each
severance agreement allows Intramed or Acquisition (following the Effective
Time) to terminate such officer's employment at any time for any reason,
provided that certain severance payments are made to such officer by Intramed or
Acquisition, as the case may be. The officers of Intramed would be entitled to
the following severance payments if their employment with Baxter is terminated
within one year after the effective date of the Merger: Stuart Foster
($89,800), Stephen Sosnowski ($84,834), Alan Schempp ($82,167), Kerry Pope
($85,000) and Steven McGowan ($58,533).

OTHER AGREEMENTS

Effective May 1, 1994, Baxter and Intramed entered into a distribution
agreement under which Intramed granted exclusive distribution rights to Baxter
for its products in the United States and its territories and possessions
(including Puerto Rico). Baxter and Intramed also entered into a representative
agreement, effective May 1, 1994, whereunder Baxter appointed Intramed as its
sales representative for certain of its products in the United States and its
territories and possessions (including Puerto Rico).

ACCOUNTING TREATMENT

Baxter intends to treat the Merger as a "purchase" transaction for
financial reporting purposes. See "Terms of the Merger -- Accounting
Treatment."

RESALES OF BAXTER COMMON STOCK; AFFILIATES

GOVERNMENTAL AND REGULATORY APPROVALS

Under applicable law, Intramed, prior to the Effective Date, or
Acquisition, after the Effective Date, may be required to give notification to
various state and federal governmental entities of the Merger and to apply for
new licenses and permits in the name of Acquisition. Intramed believes that it
or Acquisition, as the case may be, will be able to obtain such licenses upon
application therefor in the ordinary course. Baxter and Intramed are aware of
no other governmental or regulatory approvals required for consummation of the
Merger, other than compliance with applicable federal and state securities laws.

DISSENTERS' RIGHTS

Pursuant to Chapter 13 of the California General Corporation Law, holders
of shares of Intramed Common Stock are entitled to rights of dissent and
appraisal of the value of their shares of Intramed Common Stock in connection
with the Merger. The failure of a dissenting shareholder to follow the
appropriate procedures in connection with the Merger may result in the
termination or waiver of such dissenters' rights. See "Terms of the Merger --
Dissenters' Rights."

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SUMMARY HISTORICAL FINANCIAL INFORMATION

BAXTER SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA

The following summary historical consolidated financial data of Baxter has
been derived from Baxter's historical financial statements and should be read in
connection with such financial statements and notes thereto, which are
incorporated by reference in this Proxy Statement/Prospectus. No pro forma
financial information is presented in this Proxy Statement/Prospectus because
the Merger is not material to Baxter.

BAXTER SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA
(In millions, except per share and statistical data)

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SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
------------------------------------------------------ -----------------
1989 1990(1) 1991 1992 1993(2) 1993 1994
---- ---- ---- ---- ---- ---- ----

STATEMENT OF
INCOME DATA:
Net sales . . . . . . . . . . . $ 6,740 $ 7,234 $ 7,799 $ 8,471 $ 8,879 $ 4,256 $ 4,509
Income (loss) from continuing 410 (24) 507 561 (268) 189 275
operations . . . . . . . . . .
Net income (loss) . . . . . . . 446 40 591 441 (198) 259 275

Per common share data
Income (loss) from continuing
operations. . . . . . . . . . 1.37 (0.30) 1.73 1.99 (0.97) 0.68 0.99
Net Income (loss) . . . . . . 1.50 (0.05) 2.03 1.56 (0.72) 0.93 0.99

Cash dividends declared per
common share . . . . . . . . 0.56 0.64 0.74 0.86 1.00 0.50 0.50

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DECEMBER 31,
----------------------------------------------------- JUNE 30,
1989 1990(1) 1991 1992 1993(2) 1994
---- ---- ---- ---- ---- ----

BALANCE SHEET DATA:
Working capital . . . . . . . . . . . $ 1,378 $ 1,007 $ 1,470 $ 1,221 $ 1,489 $ 1,501
Capital expenditures (3) . . . . . . 370 417 592 640 605 189
Net property, plant and equipment . . 2,058 2,122 2,387 2,647 2,655 2,645
Total assets . . . . . . . . . . . . 8,401 8,407 9,171 9,155 10,545 10,281
Net debt (4) . . . . . . . . . . . . 2,388 2,143 2,336 2,901 3,143 2,912
Long-term obligations . . . . . . . . 2,048 1,727 2,246 2,433 2,800 2,565
Stockholders' equity . . . . . . . .
Continuing operations . . . . . . . 4,032 3,877 4,086 3,795 3,185 3,503
Discontinued operations . . . . . . 214 215 287 -- -- --
Total . . . . . . . . . . . . . . . 4,246 4,092 4,373 3,795 3,185 3,503
Total capitalization . . . . . . . . 6,294 5,819 6,619 6,228 5,985 6,068

____________
<FN>

(1) Results include a provision for restructuring program costs of $562
million.
(2) Results include a provision for restructuring charges of a pre-tax amount
of $700 million and a provision for litigation charges of a pre-tax amount
of $330 million.
(3) Includes additions to the pool of equipment leased or rented to customers.
(4) Total debt and lease obligations net of cash and equivalents.

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INTRAMED SUMMARY HISTORICAL FINANCIAL DATA

The following summary financial data of Intramed has been derived from
Intramed's historical financial statements and should be read in connection with
such financial statements and notes thereto, which are included elsewhere in
this Proxy Statement/Prospectus or incorporated by reference herein.

INTRAMED SUMMARY HISTORICAL FINANCIAL DATA
(In thousands, except per share and statistical data)

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SIX MONTHS
YEAR ENDED JUNE 30, ENDED JUNE 30,
------------------------------------ ---------------
1989 1990 1991 1992 1993 1993 1994
---- ---- ---- ---- ---- ---- ----

STATEMENT OF OPERATIONS DATA:
Revenues................ $ 366 $ 2,260 $3,126 $3,260 $3,077 $1,823 $1,571
Net loss................ (1,336) (1,717) (1,579) (2,135) (2,145) (1,098) (1,722)
Net loss per share...... (1.28) (1.45) (0.84) (0.74) (0.60) (0.31) (0.48)

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DECEMBER 31, JUNE 30,
----------------------------------------------------- ------------
1989 1990 1991 1992 1993 1994
----- ---- ---- ---- ---- ----

BALANCE SHEET DATA:
Total assets . . . . . . . . . . $ 378 $ 1,361 $ 1,358 $ 5,706 $ 3,390 $ 2,308
Advances from C.R. Bard, Inc. . . 300 829 835 -- -- --
Redeemable, convertible preferred
shares . . . . . . . . . . . . . 1,213 3,180 4,190 -- -- --

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RISK FACTORS

In addition to other information in this Prospectus, the following factors
should be considered carefully by Intramed Shareholders in evaluating Baxter and
its business before voting on the matters described herein and thereby agreeing
to accept the Merger Shares and Merger Options offered hereby in exchange for
their Intramed Common Stock and Intramed Options.

UNCERTAINTIES RELATED TO THE MERGER

There can be no assurance that Baxter will be successful in integrating
Intramed's business into its own, that the combined companies will retain their
key technical and management personnel or that Baxter will realize any of the
other anticipated benefits of the Merger.

INCREASED COMPETITION AMONG HEALTH-CARE SUPPLIERS

In the United States, a fundamental change is occurring in the health-care
system and significant change is occurring in Baxter's marketplace. Competition
to gain patients on the basis of price, quality and service is intensifying
among health-care providers, who are under pressure to decrease the costs of
health-care delivery, which is expected to continue. Baxter and its competitors
have experienced increased consolidation in their customer bases and these
trends are expected to continue. As a result, in recent years Baxter's overall
price increases have been below the increases in the Consumer Price Index, and
these industry trends may inhibit Baxter's ability to increase its supply prices
in the future. Such fundamental changes in the marketplace may adversely effect
Baxter's operations generally.

Although no single company competes with Baxter in all of its industry
segments, Baxter is faced with substantial competition in all of its markets.
The future financial success of suppliers, such as Baxter, will depend on their
ability to work with hospitals and other health-care providers to help them
enhance their competitiveness.
PROPOSED HEALTH-CARE COST CONTAINMENT MEASURES

The United States Congress is considering a set of legislative and regulatory
reforms that may impose pricing, profitability or other restrictions on
companies in the health-care industry in the United States.

RISKS RELATED TO FOREIGN OPERATIONS AND EXPORT SALES

Baxter's international operations are subject to certain additional risks
inherent in conducting business outside the United States. Such risks include
changes in currency exchange rates, price and currency exchange controls, import
restrictions, nationalization, expropriation and other governmental action.
While Baxter cannot predict the incidence of such events which could adversely
impact its foreign operations, there can be no assurance that such events will
not occur.

GOVERNMENT REGULATION; PRODUCT WITHDRAWALS AND RECALLS

As a provider of health-care supplies and services, Baxter is subject to
certain federal and state laws and regulations. Most products manufactured or
sold by Baxter in the United States are subject to regulation by the Food and
Drug Administration ("FDA"), as well as by other federal and state agencies.
The FDA regulates the introduction and advertising of new drugs and devices as
well as manufacturing procedures, labeling and record keeping with respect to
drugs and devices. The FDA has the power to seize adulterated or misbranded
drugs and devices or to require the manufacturer to remove them from the market
and the power to publicize relevant facts. From time to time, Baxter has
removed products from the market that were found not to meet acceptable
standards. This may occur in the future. Similar product regulatory laws are
found in most other countries where Baxter does business.

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LEGAL PROCEEDINGS

Baxter is involved in significant litigation and anticipates this trend to
continue. See "Information Concerning Baxter -- Business - Legal Proceedings."
The risks to Baxter of ongoing or anticipated litigation include loss of product
revenues, liability for damages, significant legal fees and withdrawal or
removal of products from the market.

THE MEETING, VOTING AND PROXIES

SPECIAL MEETING OF SHAREHOLDERS OF INTRAMED

DATE, TIME AND PLACE OF SPECIAL MEETING

The Intramed Special Meeting will be held at the principal executive offices
of Intramed located at 11100 Roselle Street, San Diego, California at 9:00 a.m.,
local time on November 10, 1994.

PURPOSE OF THE MEETING

The purpose of the Intramed Special Meeting is to consider and vote upon the
approval and adoption of the Reorganization Agreement and the approval of the
Merger (the "Intramed Proposal"). The Reorganization Agreement provides that
Intramed shall be merged with and into Acquisition, a wholly-owned subsidiary of
Baxter, which has acquired a controlling interest in Intramed from the Majority
Shareholders and contributed such shares to Acquisition. At the Effective Time,
(i) the Majority Shareholders shall receive their portion of the Merger Shares
based upon the Exchange Ratio, (ii) each then outstanding share of Intramed
Common Stock (other than the shares of Intramed Common Stock held by
Acquisition) will be converted into the right to receive Merger Shares at the
Exchange Ratio, (iii) each then outstanding option to purchase Intramed Common
Stock will be replaced by Baxter with a Merger Option exercisable for the number
of shares of Baxter Common Stock equal to the number of shares of Intramed
Common Stock for which such Intramed option was exercisable multiplied by the
Exchange Ratio (at an exercise price which has been adjusted such that the
aggregate exercise price of all Merger Options shall equal the aggregate
exercise price of all outstanding options to purchase Intramed Common Stock
assumed by Baxter at the Effective Time), and (iv) Acquisition, as the surviving
entity, will be a wholly-owned subsidiary of Baxter.

INTRAMED RECORD DATE AND OUTSTANDING SHARES

Shareholders of record as shown on the books of Intramed as of the Intramed
Record Date are entitled to consider the Intramed Proposal. On the Intramed
Record Date, there will be approximately 75 holders of Intramed Common Stock,
with 1,483,034 shares of Intramed Common Stock issued and outstanding (other
than the 2,081,555 shares of Intramed Common Stock held by Acquisition) and one
holder of options to purchase Intramed Common Stock, with options to purchase
approximately 60,000 shares of Intramed Common Stock outstanding.

VOTING OF PROXIES

All properly executed proxies that are not revoked will be voted at the
Intramed Special Meeting in accordance with the instructions contained therein.
Proxies returned and containing no instructions regarding the Intramed Proposal
will be voted "for" such proposal in accordance with the recommendation of the
Intramed Board of Directors. A Shareholder who has executed and returned a
proxy may revoke it at any time before it is voted at the Intramed Special
Meeting by executing and returning a proxy bearing a later date, by filing
written notice of such revocation with the Secretary of Intramed stating that
the proxy is revoked or by attending the Intramed Special Meeting and voting in
person.

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VOTE REQUIRED

The Intramed Board of Directors is soliciting the affirmative vote of a
majority of the outstanding shares of Intramed Common Stock for approval of the
Intramed Proposal. The presence, either in person or by properly executed
proxy, of the holders of a majority of the outstanding shares of Intramed Common
Stock constitutes a quorum at the Intramed Special Meeting. Abstentions will
not be counted for purposes of determining whether a quorum is present at the
Intramed Special Meeting and will have the effect of a negative vote.

Acquisition holds an aggregate of 2,081,555 shares of Intramed Common Stock,
representing a majority of the shares of Intramed Common Stock as of the
Intramed Record Date, and intends to vote in favor of the Intramed Proposal.
ACCORDINGLY, APPROVAL OF THE INTRAMED PROPOSAL BY HOLDERS OF A MAJORITY OF THE
OUTSTANDING SHARES OF INTRAMED COMMON STOCK IS ASSURED WHETHER OR NOT ANY OTHER
SHAREHOLDER AFFIRMATIVELY VOTES TO APPROVE THE INTRAMED PROPOSAL.

DISSENTERS' RIGHTS

Pursuant to Chapter 13 of the California General Corporation Law, holders of
Intramed Common Stock are entitled to rights of dissent and appraisal of the
value of their shares of Intramed Common Stock in connection with the Merger.
The failure of a dissenting shareholder to follow the appropriate procedures in
connection with the Merger may result in the termination or waiver of such
dissenters' rights. See "Terms of the Merger -- Dissenters' Rights."

THE MERGER AND RELATED TRANSACTIONS

REASONS FOR THE MERGER

In discussions which led to the signing of the Reorganization Agreement, the
representatives of the respective management teams of Baxter and Intramed
identified a number of potential joint benefits resulting from the Merger that
they believe will contribute to the success of the combined entity. The members
of Baxter management that participated in discussions with Intramed were Mr.
Olav Bergheim, President, Cardiovascular Group and Group Vice President, Baxter
World Trade Corporation and Baxter Healthcare Corporation, Mr. John Kehl, Vice
President, Finance and Controller, Cardiovascular Group, Mr. Ken Jones, Vice
President, Human Resources, Cardiovascular Group and Ms. Esther Kim, corporate
counsel. The Finance Committee of the Board of Directors also discussed the
proposed transactions with Mr. Bergheim and Mr. Kehl as part of their
consideration and approval of the Merger. Mr. Bergheim and Mr. Kehl also
discussed the potential benefits of the Merger with certain other Baxter
officers. The members of Intramed management that participated in the
discussions with Baxter were Mr. Stuart Foster, President and Chief Executive
Officer, and Mr. Steven McGowan, Vice President, Finance and Administration and
Chief Financial Officer. Mr. Foster and Mr. McGowan also discussed the
potential benefits of the Merger with the other executive officers of Intramed,
Mr. Stephen Sosnowski, Mr. Alan Schempp and Mr. Kerry Pope. The specific
potential benefits of the Merger identified by Baxter and Intramed include:

* EXPANDED MARKETING AND DISTRIBUTION OPPORTUNITIES AND CAPABILITIES. The
Merger is expected to broaden the marketing and distribution capabilities of the
combined entity on a worldwide basis. For example, the combination of
Intramed's and Baxter's sales forces in the United States will provide expanded
coverage for both companies' product lines. In addition, Baxter's international
presence will provide sales coverage in countries not currently addressed by
Intramed.

* PRODUCT LINE EXPANSION. The product lines of Intramed and Baxter are
complementary. The Merger should allow the combined entity to provide a broader
line of products, an increasingly important benefit in today's health-care
environment.

* SHARED EXPERTISE. The combined entity will have the ability to share
technical and industry expertise and information, and to focus resources on
emerging technologies. The combined entity will also have access to an expanded
pool of experienced management from both Baxter and Intramed.

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BAXTER'S REASONS FOR THE MERGER

In addition to the anticipated benefits described above, Baxter's management
believes that the acquisition is a significant strategic opportunity for Baxter.
Among the factors considered by the Finance Committee of Baxter's Board of
Directors (which is empowered under Baxter's Bylaws to approve the Merger) in
discussions with Mr. Bergheim and Mr. Kehl in evaluating the Merger prior to
their vote approving the Merger were the following:

* AUGMENTATION OF SALES FORCE. Intramed currently has direct sales
representatives for the domestic distribution of its vascular surgery products.
Baxter anticipates that the addition of Intramed's sales capabilities to its
existing direct sales force will build a sufficient critical mass for direct
sales of its vascular products.

* EXPANSION OF VASCULAR PRODUCT LINE. Although Baxter currently
manufactures and sells a portfolio of vascular products, the addition of
Intramed's specialty vascular products will broaden the range of products
offered by Baxter. By adding this new range of specialty vascular products,
Baxter's strategy is to differentiate its vascular product line from the
competition and to increase market share.

* MANAGEMENT STRENGTH. The strength of Intramed's management team, led by
Mr. Foster, was considered by Baxter as an important component of the value of
Intramed to Baxter. It is anticipated that Intramed's management team will
remain substantially in place following the effectiveness of the Merger.

INTRAMED'S REASONS FOR THE MERGER

As a result of the Merger, the Intramed Shareholders of will receive Baxter
Common Stock and be able to participate in the growth of the combined Baxter and
Intramed business. Since Baxter has a much greater market capitalization than
Intramed, Intramed Shareholders will receive significantly greater liquidity in
the Baxter Common Stock they receive in the Merger than they had in their
Intramed Common Stock prior to the Merger. In addition, the growth of the
Intramed business, which will be a very small part of the overall Baxter
business, will be enhanced for a number of additional reasons as noted below.
In addition to considering the potential Merger with the executive officers of
Intramed and evaluating alternatives for Intramed such as raising additional
equity capital to fund the growth of Intramed's business, the directors of
Intramed retained a financial advisor as described below and reviewed and
considered the opinion of such advisor as to the fairness from a financial point
of view of the Merger to the Intramed Shareholders. This fairness opinion was a
factor considered by the Intramed Board of Directors in its decision to
recommend the Merger. Additional reasons for the Merger include:

* EXPANSION OF U.S. SALES AND MARKETING. The Merger will provide Intramed
with access to increased resources to allow expansion of the U.S. sales and
marketing efforts in Intramed's primary vascular surgery market.

* PRODUCT AND MARKETING SYNERGIES. The combination of Baxter's vascular
surgery products with Intramed's products will provide greater flexibility to
Intramed in effectively marketing its products and in establishing customer
relationships in the vascular surgery market.

* ACCESS TO INTERNATIONAL MARKETS. The Merger will provide sales coverage
for Intramed's products in international markets (which Intramed has not
addressed) through Baxter's international sales organizations.

* ADDITIONAL RESOURCES TO DEVELOP NEW PRODUCTS. The Merger will provide
additional resources to focus on new development programs which can add
significantly to future sales growth.

INTRAMED BOARD RECOMMENDATION

Intramed's Board of Directors believes that the Merger is in the best
interests of Intramed and its Shareholders and therefore has unanimously
approved the Reorganization Agreement and the transactions contemplated thereby.
The Board of Directors recommends that the Shareholders of Intramed vote in
favor of the Intramed Proposal. The directors of Intramed have certain
interests in the transaction. See "Reasons for the Merger," "Intramed's Reasons
for the Merger" and "Conflicts of Interest of Intramed's Directors and Officers
in the Merger."

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CONFLICTS OF INTEREST OF INTRAMED'S DIRECTORS AND OFFICERS IN THE MERGER

The directors and executive officers of Intramed have certain conflicts of
interest with respect to the Merger as a result of their ownership of Common
Stock and options of Intramed, their severance agreements entered into with
Intramed (to be assumed by Baxter in the Merger) in the case of the executive
officers (whose employment Baxter intends to continue following the
effectiveness of the Merger), and their relationship with certain of the
Majority Shareholders. In addition, Dr. Thomas Fogarty, a director of Intramed,
has certain consulting and license agreements with Intramed under which he
receives royalties and is also a consultant and has license agreements with
Baxter under which he receives royalties.

Mr. Stuart Foster is an officer and director of Intramed. Mr. Foster held
options to purchase 139,842 shares of Intramed's Common Stock, which Intramed
acquired for $69,921. Mr. Foster owns 12,426 shares of Intramed Common Stock
which will be sold to Baxter as part of the Merger. He has entered into a
severance agreement with Intramed (to be assumed by Baxter in the Merger) under
which he would receive $89,800 if he left Intramed under certain circumstances.

Mr. Stephen Sosnowski is an officer and director of Intramed. Mr. Sosnowski
held options to purchase 10,000 shares of Intramed's Common Stock, which
Intramed acquired for $5,000. Mr. Sosnowski owned 147,400 shares of Intramed's
Common Stock of which he sold 128,548 to Baxter as a Majority Shareholder. The
remaining shares will be sold to Baxter in the Merger. He has entered into a
severance agreement with Intramed (to be assumed by Baxter in the Merger) under
which he would receive $84,834 if he left Intramed under certain circumstances.

Mr. Pieter Halter is a director of Intramed and a general partner in Southern
California Ventures II. Southern California Ventures II owned 585,875 shares of
Intramed's Common Stock which it sold to Baxter as a Majority Shareholder.
Southern California Ventures II holds warrants to purchase 25,200 shares of
Intramed's Common Stock at $5.00 per share which will expire unexercised at the
time of the Merger.

Mr. John Walker is a director of Intramed and limited partner of Alpha
Venture Partners III. Alpha Venture Partners III owned 474,974 shares of
Intramed's Common Stock, which it sold to Baxter as a Majority Shareholder.
Alpha Venture Partners III holds warrants to purchase 19,800 shares of
Intramed's Common Stock at $5.00 per share which will expire unexercised at the
time of the Merger. Mr. Walker held options to purchase 35,000 shares of
Intramed's Common Stock, which Intramed acquired for $17,500.

Dr. Thomas Fogarty is a director of Intramed. Dr. Fogarty owned 68,207
shares of Intramed's Common Stock, of which he sold 61,779 shares to Baxter as a
Majority Shareholder. The remaining shares will be sold to Baxter in the
Merger. Dr. Fogarty is a consultant to Intramed and to Baxter. In 1993 and
1994, both Intramed and Baxter have paid royalties to Dr. Fogarty and have
reimbursed him for engineering fees.

Mr. Alan Schempp is an officer of Intramed. Mr. Schempp held options to
purchase 10,000 shares of Intramed's Common Stock, which Intramed acquired for
$5,000. Mr. Schempp owned 163,468 shares of Intramed's Common Stock, all of
which shares he sold to Baxter as a Majority Shareholder. He has entered into a
severance agreement with Intramed (to be assumed by Baxter in the Merger) under
which he would receive $82,167 if he left Intramed under certain circumstances.

Mr. Kerry Pope is an officer of Intramed. Mr. Pope held options to purchase
60,000 shares of Intramed's Common Stock, which Intramed acquired for $30,000.
Mr. Pope owns 15,000 shares of Intramed's Common Stock which will be sold to
Baxter in the Merger. He has entered into a severance agreement with Intramed
(to be assumed by Baxter in the Merger) under which he would receive $85,000 if
he left Intramed under circumstances.

Mr. Steven McGowan is an officer of Intramed. Mr. McGowan held options to
purchase 32,712 shares of Intramed's Common Stock which Intramed acquired for
$16,356. He has entered into a severance agreement with Intramed (to be assumed
by Baxter in the Merger) under which he would receive $58,533 if he left
Intramed under certain circumstances.

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OPINION OF FINANCIAL ADVISOR

Intramed has engaged Houlihan, Lokey, Howard & Zukin, Inc. ("Houlihan Lokey")
to render an opinion to the Board of Directors of Intramed as to the fairness to
the Intramed Shareholders, from a financial point of view, of the Merger Shares
to be paid to the Intramed Shareholders pursuant to the terms of the
Reorganization Agreement.

The Board of Directors decided at its meeting on February 22, 1994, to
obtain a fairness opinion. The Board discussed several potential financial
advisors and requested Mr. Foster to contact three advisors to obtain bids from
them to provide a fairness opinion. The Board and Management selected three
potential advisors based on the personal experience of members of the Board,
Management and legal counsel in working with one or more of such prospective
advisors in other transactions involving the sale of a company and
recommendations they had received from others. Mr. Foster and Mr. Taylor
contacted the three advisors and received bids from each advisor. Two of the
advisors required a minimum fee for a fairness opinion of $100,000. Houlihan
Lokey proposed to provide a fairness opinion for $60,000 to $75,000, depending
on the timing of the delivery of the fairness opinion and the need to update
the opinion. Since each of the three prospective advisors was considered
equally qualified, the Board selected Houlihan Lokey to render a fairness
opinion. Houlihan Lokey is a nationally recognized investment banking firm that
is continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings,
competitive bids, secondary distributions of listed and unlisted securities,
private placements and valuations for estate, corporate and other purposes.
Houlihan Lokey is not affiliated with either Baxter or Intramed.

On March 30, 1994, Houlihan Lokey delivered to the Board of Directors of
Intramed its written opinion dated March 30, 1994 that, based upon and subject
to the matters set forth in the opinion, the consideration to be paid to the
Intramed Shareholders in the Merger is fair to the Intramed Shareholders from a
financial point of view. On October 5, 1994, Houlihan Lokey reconfirmed such
opinion as of October 5, 1994 to the Intramed Board of Directors.

THE SUMMARY OF THE MARCH 30, 1994 OPINION OF HOULIHAN LOKEY SET FORTH IN
THIS PROXY STATEMENT/PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
FULL TEXT OF SUCH OPINION. THE FORM OF THE OPINION OF HOULIHAN LOKEY DATED
MARCH 30, 1994 AND THE LETTER DATED OCTOBER 5, 1994 RECONFIRMING SUCH OPINION
ARE ATTACHED HERETO AS ANNEX B. HOLDERS OF INTRAMED COMMON STOCK ARE URGED TO
READ THE HOULIHAN LOKEY OPINION IN ITS ENTIRETY FOR FURTHER INFORMATION AS TO
THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND OTHER ASPECTS OF THE REVIEW BY
HOULIHAN LOKEY.

Houlihan Lokey did not, and was not requested by the Board of Directors of
Intramed to, make any recommendations as to the form or amount of consideration
to be paid to the Intramed Shareholders in the Merger, which issues were
resolved in arm's-length negotiations between Baxter and Intramed. Houlihan
Lokey did not participate in these negotiations. Houlihan Lokey's opinion does
not constitute an opinion as to the price at which the Baxter Common Stock will
actually trade at any time. No restrictions or limitations were imposed by the
Intramed Board of Directors upon Houlihan Lokey with respect to the
investigations made or the procedures followed by Houlihan Lokey in rendering
its opinions.

In arriving at its opinion, Houlihan Lokey reviewed the Reorganization
Agreement and also reviewed financial and other information that was publicly
available or furnished to Houlihan Lokey by Baxter or Intramed, including
information provided during discussions with the management of Intramed, audited
financial statements and other information of Intramed for the fiscal years
ended December 31, 1992 through 1993 and company-prepared interim financial
statements for the two month periods ended February 28, 1993 and 1994. Houlihan
Lokey also reviewed the historical market prices and trading volume for
Intramed's publicly traded securities, a February 1, 1994 letter from Mr. Olav
Bergheim, President, Cardiovascular Group and Group Vice President, Baxter World
Trade Corporation and Baxter Healthcare Corporation, to Mr. Stuart Foster,
President and Chief Executive Officer of Intramed, presenting certain proposed
terms under which Baxter would consider acquiring Intramed and forecasts and
projections prepared by Intramed's management with respect to Intramed for the
years ended December 31, 1994 through 1998. Houlihan Lokey also visited certain
facilities and business offices of Intramed and conducted such other studies,
analyses and inquiries as Houlihan Lokey deemed appropriate.

Houlihan Lokey used three methodologies to estimate the value of Intramed's
Common Stock (the "Stock Value") and compare it to the fair market value of the
Merger Shares. The first methodology was a market pricing analysis: after
considering such factors as Intramed's Common Stock trading volume, analyst
coverage, public announcements, disclosure and price movements, the Stock Value
was estimated by multiplying the total number of shares of Common Stock
outstanding by the market price per share. The second methodology was a market
multiple analysis: the Stock Value was estimated by calculating the
capitalization multiples for certain balance sheet items and income and cash
flows of a peer group of companies and then applying a selected multiple based
on a comparative financial analysis of Intramed and the peer group of companies.
The third methodology was a discounted cash flow analysis: the Stock Price was
estimated by discounting to the present, using a market-based risk-adjusted
discount rate, the projected cash flows to be generated from Intramed's
business. The Stock Price estimates generated by each methodology, which as
discussed below ranged from $1.9 million to $8.9 million, were all lower
than the value of the Merger Shares of $9.7 million, leading Houlihan Lokey to
conclude that the consideration to be paid the Intramed Shareholders in the
Merger was fair to them from a financial point of view.

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In reaching its conclusions, Houlihan Lokey utilized three primary valuation
methodologies, as described below.

MARKET PRICING ANALYSIS. Because Intramed's Common Stock is publicly
traded, its market price is an indicator of its "fair market value," or the
amount at which stock would change hands between a willing buyer and a willing
seller, with each having reasonable knowledge of all relevant facts and neither
being under any compulsion to act. Houlihan Lokey reviewed the price history
for Intramed Common Stock for the prior twelve months and noted that the highest
closing price was $2.75 on April 21, 1993 and the lowest closing price was $0.50
on December 14, 1993. After considering certain limitations of the reliability
of the market price of Intramed Common Stock as an indicator of its fair market
value, such as lack of coverage by securities analysts, very low trading volumes
and sporadic trading, Houlihan Lokey multiplied the total number of shares of
Common Stock outstanding by the average of the 25 closing prices up to and
including March 24, 1994, resulting in an average price per share of $1.1875
which was then multiplied by the number of outstanding shares of Intramed Common
Stock of 3,557,000. Because the Company's public stock price on any particular
day can be influenced by the amount of purchase orders (demand) and the amount
of sell orders (supply) as well as overall market factors, Houlihan Lokey
elected to follow the common practice of using an average of the market price
over a 20 to 30-day period. For the Intramed valuation Houlihan Lokey used the
average trading price over the last 25 days Intramed stock was traded, which was
the middle of the range of common practice. Based on this market pricing
analysis, Intramed's implied Stock Value was estimated to be approximately $4.2
million.

MARKET MULTIPLE ANALYSIS. The value of any operating enterprise can be
expressed as a function of its earnings and/or cash-generating capacity, which
is then capitalized at appropriate risk-adjusted rates. The capitalization
rates employed are generally derived from prices paid for stock of public
companies engaged in the same or similar businesses. Consideration is therefore
given to the informed investor and what such an investor is willing to pay for
the stock for comparative public companies, adjusted for the specific
circumstances of the subject company. Another form of the capitalization of
earnings and/or cash flow approach is the capitalization of revenues, book value
and total assets; however, they are not as directly correlated to earnings and
cash generation. Houlihan Lokey calculated the capitalization multiples for
certain balance sheet items and income and cash flows of a peer group of
companies and then applied a selected multiple based on a comparative financial
analysis of Intramed and the peer group of companies. Such multiples included
total invested capital to revenues, total invested capital to total assets and
market capitalization to book value. Intramed's negative earnings and cash
flows precluded using capitalization multiples of these indicators directly.
Houlihan Lokey conducted a search for companies which were comparable to
Intramed in terms of its operating and financial characteristics. Key search
criteria were participation in the manufacture of endoscopes or other
instruments for minimally invasive surgery. The results of this search
indicated that the following 13 public companies met this search criteria and
were most comparable to Intramed: Medivators, Inc., Advanced Surgical, Inc.,
EP Technologies, Inc., Target Therapeutics, Inc., Bio Vascular, Inc.,
Endosonics Corp., American Biomed, Inc., Circon Corp., Becton Dickinson & Co.,
Boston Scientific Corp., US Surgical Corp., and St. Jude Medical, Inc.
Houlihan Lokey noted that most of the 13 comparable companies are much larger,
more profitable, and more diversified with respect to their product offering
than Intramed. However, all of the 13 selected companies are engaged the
manufacture of endoscopes or other, similar instruments for minimally invasive
surgery procedures Houlihan Lokey also selected Baxter for comparison
purposes. Houlihan Lokey did not identify any one company which it considered
relatively more comparable to Intramed than the others in the peer group and
none were directly comparable. Accordingly, Houlihan Lokey relied upon the
entire peer group, taken as a whole, for comparison purposes.

Houlihan Lokey calculated the Total Invested Capital to Revenues ratio for
the peer group, resulting in a mean ratio of 4.16 and a median ratio of 4.14.
Houlihan Lokey calculated the Total Invested Capital to Total Assets ratio for
the peer group, resulting in a mean ratio of 2.68 and a median ratio of 2.43.
Houlihan Lokey calculated the Market Value of Equity to Book Value ratio for
the peer group, resulting in a mean ratio of 3.65 and a median ratio of 2.62.
Houlihan Lokey noted that Intramed is smaller, less profitable, has weaker
historic growth, is less diverse in terms of product offering, and overall has
a weaker historic track record that the peer group. Intramed also has greater
uncertainty with respect to future revenues and profitability than the
peer group. Accordingly, Intramed represents a greater investment risk than
the peer group taken as a whole. However, because the market multiples
exhibited by the peer group best indicate investors' sentiment for companies
similar to Intramed, Houlihan Lokey selected the median multiple of Total
Invested Capital to Revenues and Total Assets, and Market Value of Equity to
Book Value for capitalization purposes. By selecting the median multiple,
rather than a more appropriate risk adjusted multiple which would be lower
than the median to reflect Intramed's relatively greater investment risk,
Houlihan Lokey has assumed that investors would consider Intramed to be a
similar investment risk as the peer group. Or, stated differently, the use of
the median multiple for capitalization purposes provides Intramed with a
relatively higher valuation, as investors would most likely pay relatively
less than the peer group's median multiple given Intramed's higher risk.
Based on this market multiple analysis, Intramed's implied Stock
Value ranged from approximately $7.4 million to approximately $8.9 million.

DISCOUNTED CASH FLOW ANALYSIS. This approach uses a procedure of
discounting to the present value the projected cash flows to be generated
from the business. Houlihan Lokey discounted to the present, using market-based
risk-adjusted discount rates ranging from 15% to 35%, the projected cash flows
to be generated from Intramed's business over a five-year period form 1994 to
1998. The sum of all discounted net cash flows, including the residual or
terminal value, yields an indication of value for the enterprise as a whole.
To account for the enterprise or residual value at the end of the projection
period, a terminal value is calculated from the free cash flow value and
multiplied it by a capitalization rate determined by the following formula,
referred to as the Gordon Growth Formula: (1 plus the growth rate) divided by
the required rate of return minus the growth rate. This formula determines the
present value of a company with the stated rates of return and expected growth.
This is a commonly used formula to estimate the potential value of an entity at
the end of a future period.

The terminal growth rate selected is reflective of the overall future growth
prospects for Intramed over the five-year period, of 1994 to 1998, which based
on growth rates exhibited by the peer group is approximately 4.0% to 8.5%.
Based on this discounted cash flow analysis, Intramed's implied Stock Value
ranged from approximately $1.9 million to approximately $5.7 million.

Because the total Merger Consideration of $9.7 million to be paid by Baxter
was higher than each of the implied Stock Values generated by the above
analyses, Houlihan Lokey concluded that the Merger Consideration was fair to the
Intramed shareholders from a financial point of view.

Houlihan Lokey also considered using an analysis of selected comparable
merger and acquisition transactions, which would have entailed analyzing certain
income statement and balance sheet parameters of the acquired company relative
to the consideration offered. Houlihan Lokey evaluated over 100 merger and
acquisition transactions completed during 1993 and over 70 merger and
acquisition transactions completed during the first two quarters of 1994 as
possible candidates for such a valuation approach. However, in Houlihan Lokey's
judgment, none of these was sufficiently comparable to the Merger to be of use
in a comparable transaction analysis.

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The aforementioned analyses required studies of the overall market, economic
and industry conditions in which Intramed operates, and Intramed's operating
results. Research into, and consideration of, these conditions was incorporated
into the analyses.

Houlihan Lokey's opinion is based on business, economic, market and other
conditions as they existed as of March 30, 1994. In rendering its opinion,
Houlihan Lokey relied upon and assumed, without independent verification, that
the financial forecasts and projections provided to Houlihan Lokey by Intramed's
management have been reasonably prepared and reflect the best currently
available estimates of the future financial results and condition of Intramed.
Upon the instruction of Intramed, Houlihan Lokey also assumed that the market
price of the Baxter Common Stock at the Effective Time represents the cash value
equivalent of $9.7 million. Houlihan Lokey did not independently verify the
accuracy and completeness of the information supplied to it with respect to
Intramed and does not assume any responsibility with respect to it. Houlihan
Lokey did not make any physical inspection or independent appraisal of any of
the specific properties or assets of Intramed.

The preparation of a fairness opinion is a complex analytical process
involving various determinations as to the most appropriate and relevant methods
of financial analysis and application of those methods to the particular
circumstances and is therefore not readily susceptible to summary description.
In arriving at its opinion, Houlihan Lokey did not attribute any particular
weight to any analysis or factor considered by it, but rather made qualitative
judgments as to the significance and relevance of each analysis and factor.
Accordingly, Houlihan Lokey believes that its analyses and the summary set forth
below must be considered as a whole and that selecting portions of its analyses,
without considering all analyses, or portions of this summary, without
considering all factors and analyses, could create an incomplete view of the
processes underlying the analyses set forth in the Houlihan Lokey presentation
to the Intramed Board of Directors and its opinion. In its analyses, Houlihan
Lokey made numerous assumptions with respect to Intramed, industry performance,
general business, economic, market and financial conditions and other matters,
many of which are beyond the control of Intramed. The estimates contained in
such analyses are not necessarily indicative of actual values or predictive of
future results or values, which may be more or less favorable than suggested
by such analyses. Additionally, analyses relating to the value of businesses or
securities are not appraisals. Accordingly, such analyses and estimates are
inherently subject to substantial uncertainty.

BACKGROUND AND NEGOTIATIONS LEADING TO THE MERGER

Initial discussions between Mr. Foster and Mr. Bergheim concerning the
possibility of a business combination took place on August 20, 1993. At the
suggestion of Dr. Thomas Fogarty, a director of Intramed and a consultant to
Baxter, Mr. Bergheim called Mr. Foster and the first meeting was held. As a
result of that meeting, several members of Baxter Cardiovascular Group
management, including Mr. Bergheim, visited Intramed on August 20, 1993 to
continue discussions, meet Intramed's executive officers and tour the facility.
At that meeting, Mr. Bergheim and Mr. Foster agreed that further discussions
should occur to determine the strategic fit between the Intramed vascular
product line and the goals for the Vascular Systems Division of Baxter
Cardiovascular Group. Mr. Bergheim and Mr. Foster agreed to explore the options
to take advantage of this potential strategic fit, including a possible
acquisition of Intramed by Baxter.

These events were discussed by the Intramed Board of Directors at a meeting
on September 9, 1993 and agreement was reached to continue discussions. Mr.
Bergheim and John Kehl, Baxter Cardiovascular Vice President/Controller, met on
September 10, 1993 with Mr. Foster and John Walker, Intramed Chairman, to
further explore the situation. That meeting resulted in execution of a
Confidentiality Agreement between the two companies on September 22, 1993 in
order for Intramed to provide Baxter with certain non-public information.

From September 23, 1993 through November 4, 1993, the senior management of
the two companies held three formal meetings and numerous telephone
conversations. The parties made presentations to each other concerning each
company's business and their respective views of the strategic benefits of a
combination. Also discussed was the potential impact of a combination on their
respective businesses, as well as the risks it would pose that Intramed would
lose key employees and its separate identity which could adversely impact the
growth of the Intramed business.

On November 30, 1993, at a regularly scheduled Intramed Board meeting, Mr.
Foster briefed the Intramed Board of Directors regarding the possibility of an
acquisition of Intramed by Baxter. The Intramed Board appointed an executive
committee consisting of Mr. Foster, Mr. Walker, and Barry Taylor of Wilson,
Sonsini, Goodrich & Rosati, legal counsel to Intramed, to continue discussions
with Baxter. In addition, the Board requested Mr. Foster to explore with two
other companies the possibility for an acquisition of Intramed and to pursue as
a separate alternative raising additional equity capital which was needed in the
immediate future. The executive committee was authorized to negotiate proposed
terms and conditions with Baxter and the terms and conditions of the definitive
acquisition agreement, in all cases subject to final review and approval by the
full Board of Directors. Between the November 30, 1993 Board of Directors
meeting and the final approval of the definitive agreement on March 28,

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1994, the members of the executive committee discussed the proposed transaction
before and after meetings with Baxter. Mr. Foster and Mr. Walker also
periodically updated the other directors as to the status of the discussions.

From that time through January 1994, additional telephone conversations took
place between Mr. Foster and Mr. Bergheim regarding the terms of a possible
acquisition. A telephonic meeting with the Intramed Board of Directors was held
on January 14, 1994 to consider the potential terms of the proposed
transactions. This meeting resulted in Mr. Foster contacting Baxter and asking
for a letter of interest outlining principal terms.

On February 1, 1994, Mr. Bergheim sent a letter to Mr. Foster which outlined
the principal terms under which Baxter was prepared to negotiate a letter of
intent or definitive agreement. Mr. Bergheim stated that Baxter would propose
the acquisition of all of the outstanding stock, warrants and options of
Intramed or all of the assets and certain liabilities of Intramed for an
aggregate purchase price of $9.9 million payable in Common Stock of Baxter.
Baxter intended to retain the current Intramed management and employees and was
prepared to proceed quickly toward a transaction. However, the proposed
purchase price was subject to satisfactory due diligence and verification of
assets, liabilities and business of Intramed and the proposal was not a binding
offer or commitment, but was subject to negotiation and execution of mutually
satisfactory legal documentation and completion of due diligence.

On February 8, 1994, an initial meeting was held in Irvine to discuss
Baxter's proposal of the principal terms for the acquisition. In attendance at
the meeting were Mr. Foster and Mr. Taylor representing Intramed, Mr. Bergheim,
Mr. Kehl and Esther Kim, Corporate Counsel, representing Baxter and Alan Pettis
of Pettis, Tester, Kruse & Krinsky, counsel for Baxter. Intramed advised Baxter
that it would only proceed with the transaction as a stock-for-stock exchange
that would not be taxable to the Intramed Shareholders. Intramed also advised
Baxter that it would not agree to structure the transaction as a sale of assets
because a sale of assets by Intramed to Baxter would be subject to double
taxation: (1) the sale of assets would be taxable to Intramed, and (2) the
distribution by Intramed of the remaining after-tax proceeds to the Intramed
Shareholders would again be taxed to the Intramed Shareholders to the extent the
amount each Intramed Shareholder received exceeded such shareholder's basis in
the Intramed Stock held by such shareholder. Thus, the double tax attributable
to an asset sale would result in less after-tax value to the Intramed
Shareholders. Intramed also requested assurances that it would have adequate
funding if Baxter did not sign a definitive agreement at the end of the
negotiations. Accordingly, the parties discussed the terms under which Baxter
would provide interim funding to Intramed. The Intramed Board believed it was
in the best interests of Intramed to pursue the negotiations with Baxter
regarding a possible acquisition in February 1994, rather than proceed with a
private sale of equity securities which would have been quite dilutive based on
the price of Intramed Common Stock. Accordingly, if the acquisition were
completed, Intramed would not need to sell equity in February 1994. On the
other hand, if the acquisition discussions were not successfully concluded,
Intramed would require additional capital and, while such capital was available
in February 1994, there was no assurance that additional capital would be
available at the end of the discussions or under what terms. Therefore,
Intramed required Baxter to agree, as a condition of proceeding with
negotiations, that Baxter would provide interim funding to Intramed which would
enable Intramed to meet its operating capital requirements for several months
after termination of negotiations while Intramed raised additional capital.

Following this meeting, Mr. Foster discussed the proposed transactions with
Mr. Walker and also contacted the other directors. Mr. Foster also informed the
directors of the results of his efforts in December 1993 and January 1994 to
raise additional equity capital, which indicated the Company could raise $1.0 to
$1.5 million of additional capital at $.75 to $1.00 per share together with
warrants. Mr. Foster also noted that he was unable to obtain a proposal from
any other company to acquire Intramed.

As a result of these discussions, Baxter and Intramed negotiated and executed
a funding agreement dated February 21, 1994, pursuant to which Baxter committed
to either purchase stock or provide a $500,000 bridge loan to Intramed to be
repaid in 90 days if Baxter did not enter into a definitive agreement by April
1, 1994. The parties then commenced negotiations leading to the execution of
the Reorganization Agreement.

On February 22, 1994, the Intramed Board of Directors met to continue
discussion of the proposed terms. The Board directed that a fairness opinion be
solicited and that the proposed terms be considered as compared to the option of
raising additional funding through a private placement. On March 18, 1994,
Houlihan Lokey was engaged to render an opinion regarding the fairness of the
transaction from a financial point of view.

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Negotiations toward execution of a definitive agreement continued. As a
result of the continued negotiations between Baxter and Intramed, including
Baxter's due diligence of Intramed's financial condition and business
operations, the parties agreed to final terms of the acquisition, including the
final purchase price of $2.7215 per share representing a final price of
approximately $9.68 million which Baxter was prepared to pay for Intramed.
The Board of Directors of Intramed reviewed the final form of definitive
agreement, received the final draft of the fairness opinion from Houlihan Lokey,
and unanimously approved the terms of a definitive agreement at a meeting on
March 28, 1994. On March 30, 1994, Houlihan Lokey delivered its fairness
opinion dated March 30, 1994 to Intramed. The directors noted that they had not
received any other proposals to acquire Intramed and that the Company's
alternative was to raise $1.0 million to $1.5 million of capital at $.75 to
$1.00 per share together with warrants. The directors believed that the better
alternative for the Intramed Shareholders was a sale to Baxter at $2.7215 per
share rather than a dilutive equity financing after which Intramed would have
had to increase its stock price approximately 172% to obtain the same price per
share as provided by the Baxter transaction. In addition, because Intramed
Shareholders would receive Baxter Common Stock, they would be able to
participate in the overall Baxter business which provided the opportunity for
increased value in their holdings and also greater liquidity since Baxter has a
very large market capitalization and is traded on the New York Stock Exchange,
whereas Intramed was traded in the over-the-counter market.

In the latter part of March 1994, the Finance Committee of Baxter's Board of
Directors (which is empowered under Baxter's Bylaws to approve the Merger)
determined during discussions with Mr. Bergheim and Mr. Kehl that the Merger
represented a significant strategic opportunity for Baxter and discussed the
terms of the proposed transactions. On March 30, 1994, Baxter's Finance
Committee of the Board of Directors approved the transactions and the
Reorganization Agreement was executed by Baxter, Intramed and the Majority
Shareholders. A press release was issued describing the Merger and related
transactions that afternoon.

TERMS OF THE MERGER

EFFECTIVE DATE OF THE MERGER

The Reorganization Agreement provides that the Merger will become effective
upon the filing of an Agreement of Merger contemplated therein with the
Secretaries of State of the States of Delaware and California in accordance with
the Delaware General Corporation Law and the California General Corporation Law.
It is anticipated that if the Reorganization Agreement is approved and adopted
at the Intramed Special Meeting and all other conditions of the Merger have been
fulfilled or waived, the Effective Date will occur on the date on which the
Intramed Special Meeting has been scheduled, or on a date as soon as practicable
thereafter.

MANNER AND BASIS OF CONVERTING SHARES AND OPTIONS

TERMS OF THE MERGER

At the Effective Time, Intramed will merge with and into Acquisition, with
Acquisition remaining as the surviving entity, and all shares of Intramed Common
Stock (excluding the shares of Intramed Common Stock held by Acquisition) will
be converted into an aggregate of approximately 183,896 shares (based upon the
per share purchase price of $2.7215 and assuming an Exchange Ratio of .124) of
Baxter Common Stock. This is the same per share purchase price to be paid to
the Majority Shareholders in connection with the purchase of their shares of
Intramed Common Stock by Baxter pursuant to the Reorganization Agreement, who
will receive an aggregate of approximately 258,113 shares (based upon the per
share purchase price of $2.7215 and assuming an Exchange Ratio of .124) of
Baxter Common Stock at the Effective Time. The 442,009 shares of Baxter Common
Stock to be received by the Majority Shareholders and the shareholders of
Intramed (other than Acquisition) as of the Effective Time are referred to as
the "Merger Shares." In addition, all outstanding options to purchase Intramed
Common Stock will be replaced by Baxter at the Effective Time with options
exercisable for an aggregate of approximately 7,440 shares (assuming an Exchange
Ratio of .124) of Baxter Common Stock (the "Merger Options"). See "Intramed
Options" below.

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EXCHANGE RATIO

The table below sets forth the approximate number of shares of Baxter Common
Stock that would be issued for each share of Intramed Common Stock assuming the
following Baxter Stock Values (as defined below):

· Download Table

Baxter Stock Values
----------------------------------------------

$21 $22 $23 $24 $25 $26 $27
--- --- --- --- --- --- ---

Exchange Ratio .130 .124 .118 .113 .109 .105 .101

The actual number of Merger Shares to be issued at the Effective Time
shall be equal to (a) the number of issued and outstanding shares of Intramed
Common Stock at the Effective Time (including the shares of Intramed Common
Stock purchased by Baxter from the Majority Shareholders pursuant to the
Reorganization Agreement and contributed to Acquisition) multiplied by (b) the
quotient of (i) 2.7215 divided by (ii) the average closing price of a share of
Baxter Common Stock for the ten trading days immediately prior to the Effective
Time, as reported on the New York Stock Exchange (the "Baxter Stock Value"), as
adjusted to reflect any stock split, reverse split, stock dividend,
reorganization, recapitalization or like change with respect to Baxter Common
Stock or Intramed Common Stock prior to the Effective Time. Such quotient is
referred to herein as the "Exchange Ratio." The number of Merger Options to be
issued in the Merger shall be equal to (a) the number of issued and outstanding
options to purchase Intramed Common Stock at the Effective Time multiplied by
(b) the Exchange Ratio. On September 5, 1994, the closing price of Baxter
Common Stock as reported on the New York Stock Exchange was $28.25.

CONVERSION OF INTRAMED COMMON STOCK INTO BAXTER COMMON STOCK

Based upon the number of shares of Baxter Common Stock outstanding as of
April 30, 1994 and assuming that an aggregate of 258,113 shares of Baxter Common
Stock are issued to Majority Shareholders in payment for the shares of Intramed
Common Stock previously tendered to Baxter pursuant to the Reorganization
Agreement, and that an aggregate of 183,896 shares of Baxter Common Stock and
7,440 Merger Options are issued to Intramed Shareholders and optionholders in
the Merger, 277,598,080 shares of Baxter Common Stock (assuming the exercise of
the Merger Options) will be outstanding immediately after the Effective Time, of
which approximately .16% will be held by the former holders of Intramed Common
Stock and Intramed Options.

MANNER AND BASIS OF CONVERTING SHARES AND OPTIONS

At the closing pursuant to the Reorganization Agreement (the "Closing"),
the Majority Shareholders delivered to Baxter certificates representing
2,081,555 shares of Intramed Common Stock to be exchanged for shares of Baxter
Common Stock, duly endorsed in blank form or accompanied by stock powers duly
endorsed in blank. As of the Closing, all right, title and interest in and to
the 2,081,555 shares of Intramed Common Stock (representing a majority of the
outstanding shares of Intramed Common Stock as of the Closing) passed to Baxter,
which shares Baxter subsequently assigned to Acquisition as a capital
contribution. The per share purchase price to be paid to the Majority
Shareholders, $2.7215 (payable in shares of Baxter Common Stock at the Effective
Time) is the same per share purchase price to be paid to the Intramed
Shareholders (other than Acquisition) participating in the Merger. The number
of shares of Baxter Common Stock payable to each Majority Shareholder in
exchange for such Majority Shareholder's shares of Intramed Common Stock so
tendered shall be determined using the Exchange Ratio, and such shares will be
delivered to the Majority Shareholders at the Effective Time.

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At the Effective Time, by virtue of the Merger and without any action on
the part of any party, (i) each share of common stock of Acquisition outstanding
immediately prior to the Effective Time shall remain outstanding and be
unaffected by the Merger, (ii) each share of Intramed Common Stock held by
Acquisition prior to the Effective Time shall be cancelled without
consideration, and (iii) each share of Intramed Common Stock outstanding
immediately prior to the Effective Time (other than the shares held by
Acquisition) shall be converted into the right to receive the number of shares
of Baxter Common Stock equal to the Exchange Ratio.

EMPLOYEE BENEFIT PLANS

Baxter intends to provide Intramed employees employee benefit plans that
taken as a whole will be substantially consistent with those provided by Baxter
to its employees and that taken as a whole will not be materially less favorable
than those currently provided by Intramed.

INTRAMED OPTIONS

Pursuant to the Reorganization Agreement, all outstanding compensatory
options to purchase Intramed Common Stock at the Effective Time (such options
being those which will, upon their exercise (after consummation of the Merger),
entitle Baxter to a tax deduction under Section 162 of the Internal Revenue Code
of 1986, as amended (the "Code"), for an ordinary and necessary business
expense) (the "Intramed Options") will be replaced by Baxter with Merger
Options. In lieu of issuance of the Merger Options, the Reorganization
Agreement provides that Intramed shall offer to each optionholder the right to
cancel such optionholder's option in exchange for a payment by Intramed of $.50
per share for each share of Intramed Common Stock subject to such option
(whether vested or unvested). As of the Intramed Record Date, there were
options to purchase 60,000 shares of Intramed Common Stock outstanding and
holders of options to purchase 359,533 shares of Intramed Common Stock had
accepted the offer to cancel their options in exchange for $.50 per share
underlying such options. Each of the officers and directors of Intramed who
held an Intramed option has cancelled such option in exchange for a payment by
Intramed of $.50 per share. See "The Merger and Related Transactions --
Conflicts of Interest of Intramed's Directors and Officers in the Merger" and
"Terms of the Merger -- Manner and Basis of Converting Shares and Options."
Each Merger Option shall have terms and conditions substantially similar to
those set forth in the Intramed Options, except that each such Merger Option
will be exercisable for that number of shares of Baxter Common Stock equal to
the product of the number of shares of Intramed Common Stock that were issuable
upon exercise of such Intramed Option multiplied by the Exchange Ratio, rounded
up or down to the nearest whole number of shares of Baxter Common Stock. The
per share exercise price for the shares of Baxter Common Stock issuable upon
exercise of such Merger Option will be equal to the quotient determined by
dividing the exercise price per share at which such Intramed Option was
exercisable immediately prior to the Effective Time by the Exchange Ratio. See
"Terms of the Merger -- Employee Benefit Plans -- Intramed Options."

INTRAMED WARRANTS

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Baxter and converted into warrants to purchase Baxter Common Stock (the "Merger
Warrants"). The Merger Warrants shall continue to have, and be subject to, the
same terms and conditions set forth in the Intramed Warrants, except that the
Merger Warrants will be exercisable for that number of shares of Baxter Common
Stock equal to 84,000 multiplied by the Exchange Ratio. The exercise price per
share of the Merger Warrants shall equal $6.60 divided by the Exchange Ratio.

CONDUCT OF THE BUSINESS OF THE COMBINED COMPANIES FOLLOWING THE MERGER

Once the Merger is consummated, Intramed will cease to exist as a
corporation, and all of the business, assets, liabilities and obligations of
Intramed will be merged into Acquisition with Acquisition remaining as the
surviving corporation.

Pursuant to the Reorganization Agreement, the Certificate of Incorporation
and Bylaws of Acquisition as in effect immediately prior to the Effective Date
will become the Certificate of Incorporation and Bylaws of the surviving
corporation. The directors of Intramed in office immediately prior to the
Effective Date (which include two nominees of Baxter) will be the directors of
the surviving corporation. The officers of Intramed in office immediately prior
to the Effective Date will be the officers of the surviving corporation.

After the consummation of the Merger, the officers of Intramed will manage
Acquisition as a wholly-owned subsidiary of Baxter. It is intended that, upon
consummation of the Merger, substantially all of the employees of Intramed will
continue as employees of the surviving corporation or another subsidiary or
division of Baxter.

The integration of Baxter and Intramed effected by the Merger may result
in the consolidation of certain facilities or changes in the operations of the
companies following the Effective Date, although there are no specific plans to
effect any such changes at the present time.

CERTAIN FEDERAL INCOME TAX CONSIDERATIONS

The following discussion summarizes certain federal income tax
consequences of the Merger to the Intramed Shareholders. The discussion does
not address all aspects of federal income taxation that may be relevant to
particular Shareholders and may not be applicable to Intramed Shareholders who
are not citizens or residents of the United States, nor does the discussion
address the effect of any applicable foreign, state, local or other tax laws.
This discussion assumes that the Intramed Shareholders hold their Intramed
Common Stock as capital assets within the meaning of Section 1221 of the Code.
(All references to Sections herein are to the Code unless otherwise indicated.)
EACH INTRAMED SHAREHOLDER SHOULD CONSULT HIS OR HER OWN TAX ADVISOR AS TO THE
PARTICULAR TAX CONSEQUENCES TO HIM OR HER OF THE MERGER, INCLUDING THE
APPLICABILITY AND EFFECT OF FOREIGN, STATE, LOCAL AND OTHER TAX LAWS.

SUMMARY OF TAX OPINION

In the opinion of Brobeck, Phleger & Harrison, counsel to Baxter ("Tax
Counsel"), and subject to the discussion set forth below, "Tax Treatment of
Merger," the Merger will, under current law, constitute a "reorganization"
within the meaning of Section 368(a)(1) of the Code. The following discussion
is based on Tax Counsel's interpretation of the Code, applicable Treasury
Regulations, judicial authority and administrative rulings and practice, all as
of the Effective Time. No ruling has been sought from the Internal Revenue
Service (the "Service") as to the federal income tax consequences of the Merger.
Intramed Shareholders should be aware that the opinions of Tax Counsel will not
bind the Service or any court, and the Service is therefore not precluded from
successfully asserting a contrary position. In addition, there can be no
assurance that future legislative, judicial or administrative changes or
interpretations will not adversely affect the accuracy of the statements and
conclusions set forth herein. Any such changes or interpretations could be
applied retroactively and could affect the tax consequences of the Merger to
Baxter, Intramed and the Intramed Shareholders. In addition, the opinion of Tax
Counsel is subject to certain assumptions, including but not limited to the
truth and accuracy of certain representations made by Baxter, Intramed and the
Majority Shareholders (the "Representations"). Of particular importance are
certain Representations relating to the "continuity of interest" requirement, as
discussed herein.

Subject to the limitations and qualifications referred to herein, as a
result of qualifying as a reorganization within the meaning of Section
368(a)(1), the Merger will have the following federal income tax consequences
for the Intramed Shareholders, Intramed and Baxter:

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1. No gain or loss will be recognized by the Intramed Shareholders as a
result of the exchange of shares of Intramed Common Stock for shares of Baxter
Common Stock pursuant to the Merger, except that gain or loss will be recognized
on cash, if any, received in lieu of fractional shares.

2. The aggregate tax basis of the shares of Baxter Common Stock
received by the Intramed Shareholders pursuant to the Merger will equal the
aggregate tax basis of shares of Intramed Common Stock exchanged in the Merger
reduced by any amount allocable to fractional share interests for which cash is
received.

3. The holding period for the shares of Baxter Common Stock received by
each Intramed Shareholder pursuant to the Merger will include the holding period
for the shares of Intramed Common Stock of such Shareholder exchanged in the
Merger.

4. An Intramed Shareholder who exercises dissenters' rights with
respect to a share of Intramed Common Stock and receives payment for such share
in cash will generally recognize gain or loss for federal income tax purposes,
measured by the difference between the holder's basis in such share and the
amount of cash received, provided that the payment is neither essentially
equivalent to a dividend within the meaning of Section 302 nor has the effect of
a distribution of a dividend within the meaning of Section 356(a)(2)
(collectively, "a Dividend Equivalent Transaction"). A sale of Intramed Common
Stock pursuant to an exercise of dissenters' rights will generally not be a
Dividend Equivalent Transaction if, as a result of such exercise, the dissenter
owns no shares of Baxter Common Stock (either actually or constructively within
the meaning of Section 318 such as through attribution of stock ownership
through family members). If, however, an Intramed Shareholder's sale for cash
of Intramed Common Stock is a Dividend Equivalent Transaction, then such
Shareholder will generally recognize ordinary income for federal income tax
purposes in an amount equal to the entire amount of the cash so received.

5. Neither Baxter nor Intramed will recognize gain or loss as a result
of the issuance of Baxter Common Stock to the Shareholders of Intramed pursuant
to the Merger.

Counsel has rendered no opinion as to the tax consequences of the Merger
to the Majority Shareholders.

TAX TREATMENT OF MERGER

The treatment of the Merger as a reorganization within the meaning of
Section 368(a)(1) is premised in part upon the satisfaction of the statutory
requirements of Sections 368(a)(1)(A) and 368(a)(2)(D). Based upon the terms of
the Reorganization Agreement and the Agreement of Merger, and the factual
statements set forth in the Representations, and as further qualified in its
opinion, Tax Counsel has concluded that each of the statutory tests has been
satisfied with respect to the Merger.

In addition to meeting these statutory tests, in order to qualify as a
"reorganization" within the meaning of Section 368(a)(1), the Merger must also
satisfy certain regulatory and judicial requirements. Subject to the discussion
below regarding the "continuity of interest" requirement, Tax Counsel has also
concluded that these requirements have been satisfied with respect to the
Merger.

The Service interprets the continuity of interest requirement for advance
ruling purposes to require that there must be a continuing interest through
stock ownership in the acquiring corporation on the part of former shareholders
of the acquired corporation equal in value on the date of the reorganization to
at least 50% of the value of all of the outstanding stock of the acquired
corporation as of such date. In addition, a number of court decisions, which
are assumed by Tax Counsel to be controlling for purposes of its opinion, have
held that the continuity of interest requirement can be satisfied with acquiring
corporation stock equal in value to somewhat less than the 50% required for
advance ruling purposes. See, e.g., JOHN A. NELSON CO. V. HELVERING, 296 U.S.
374 (1935) (38% stock sufficient for continuity of interest).

If the acquisition of Intramed Common Stock from the Majority Shareholders
in exchange for Common Stock (the "Exchange") and the Merger (collectively, the
Exchange and the Merger are referred to as the "Reorganization") are treated as
two parts of a single integrated transaction, then the Majority Shareholders and
the remaining Shareholders will receive solely shares of Baxter Common Stock for
100% of the Intramed Common Stock held before the Reorganization (other than
cash for fractional shares and dissenters' shares). In the event

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of this characterization, the continuity of interest test should be satisfied,
assuming the accuracy of the Representations. It is not clear whether the shares
of Baxter Common Stock received by the Majority Shareholders in the Exchange
will be combined with the shares of Baxter Common Stock received in the Merger
for purposes of determining whether the continuity of interest requirement has
been satisfied. However, even if the shares received by the Majority
Shareholders are not so included, the consideration received by the Intramed
Shareholders in the Merger should still satisfy the continuity of interest
requirement, based upon the authority set forth above and assuming the accuracy
of the Representations.

The continuity of interest test also requires that the former shareholders
of the acquired corporation not dispose of their stock interest in the acquiring
corporation pursuant to a plan or intention which existed on the date of the
reorganization. To satisfy this aspect of the continuity of interest
requirement, the Intramed Shareholders must not, pursuant to a plan or intent
existing at or prior to the Merger, dispose of or transfer so much of either (i)
their Intramed Common Stock in anticipation of the Merger or (ii) the Baxter
Common Stock to be received in the Merger, such that the Intramed Shareholders,
as a group, would no longer have a significant equity interest in the Intramed
business being conducted by Baxter and Acquisition after the Merger. The
opinion of Tax Counsel is conditioned upon the assumption, as indicated by the
Representations, that no such plan or intention exists. However, no assurance
can be given that the continuity of interest requirement will be satisfied, and
if such requirement is not satisfied, the Merger would not be treated as a
reorganization within the meaning of Section 368(a)(1).

A successful challenge to the tax status of the Merger by the Service (as
a result of a failure to satisfy the continuity of interest requirement or
otherwise) would result in an Intramed Shareholder recognizing gain or loss with
respect to each share of Intramed Common Stock surrendered equal to the
difference between the Intramed Shareholder's basis in such share and the fair
market value, as of the Effective Time, of the Baxter Common Stock received in
exchange therefor. In such event, an Intramed Shareholder's aggregate basis in
the Baxter Common Stock so received would equal its fair market value, and the
Intramed Shareholder's holding period for such stock would begin the day after
the Merger. Furthermore, a successful challenge to the tax status of the Merger
could cause taxable gain to be recognized by Intramed, measured by the excess of
the fair market value of the Baxter Common Stock transferred and the liabilities
of Intramed being assumed, over Intramed's aggregate tax basis in its assets.

Even if the Merger qualifies as a reorganization within the meaning of
Section 368(a)(1) of the Code, a recipient of shares of Baxter Common Stock
would recognize gain to the extent that such shares were considered to be
received in exchange for services or property (other than solely stock of
Intramed). All or a portion of such gain may be taxable as ordinary income.
Gain would also have to be recognized to the extent that a Shareholder was
treated as receiving (directly or indirectly) consideration other than Baxter
Common Stock in exchange for the shares of Intramed Common Stock.

SEVERANCE AGREEMENTS

OTHER AGREEMENTS

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RESALES OF BAXTER COMMON STOCK; AFFILIATES

The Baxter Common Stock to be issued to the Majority Shareholders and the
remaining Intramed Shareholders (other than Acquisition) pursuant to the
Reorganization Agreement will be freely transferable under the Securities Act of
1933, as amended (the "Act"), except for shares issued to any person who may be
deemed to be an "affiliate" of Intramed within the meaning of Rule 145 under the
Act. Persons who may be deemed to be affiliates of Intramed generally include
individuals or entities that, directly or indirectly through one or more
intermediaries, control, are controlled by or are under common control with
Intramed and may include certain officers, directors and principal shareholders
of Intramed. Affiliates of Intramed will not be permitted to sell, pledge or
otherwise transfer any Baxter Common Stock issued pursuant to the Reorganization
Agreement, except pursuant to an effective registration statement or in
compliance with Rule 145 or another exemption from the registration requirements
of the Act. The certificates evidencing Baxter Common Stock issued to
affiliates pursuant to the Reorganization Agreement will bear a legend
summarizing the foregoing restrictions unless the affiliate has furnished to
Baxter an affidavit to the effect that such affiliate meets certain exemptive
provisions of Rule 145 of the Act.

Persons who are affiliates of Intramed may choose to sell some or all of
their Baxter Common Stock in transactions that are not covered by this Proxy
Statement/Prospectus. Such transactions would be required to comply with the
provisions of Rule 145(d) under the Act. Persons who are not affiliates of
Intramed may sell their Baxter Common Stock without restrictions and without the
necessity to deliver this Proxy Statement/Prospectus.

GOVERNMENTAL AND REGULATORY APPROVALS

Under applicable law Intramed, prior to the Effective Date, or
Acquisition, after the Effective Date, may be required to give notification to
various state and federal governmental entities of the Merger and apply for new
licenses and permits in the name of Acquisition. Intramed believes that it or
Acquisition, as the case may be, will be able to obtain such licenses upon
application therefor in the ordinary course of business. Baxter and Intramed
are aware of no other governmental or regulatory approvals required for
consummation of the Merger, other than compliance with applicable federal and
state securities laws.

ACCOUNTING TREATMENT

Baxter intends to treat the Merger as a "purchase" transaction for
financial reporting purposes. Under such method of accounting, the book value
of the assets, liabilities and shareholders' equity of Intramed, as reported on
its balance sheet, will be increased to their fair market value on the Effective
Date and goodwill will be reported to the extent that the purchase price exceeds
the fair market value of the net assets. The income (loss) of Intramed will be
included in the consolidated income of Baxter from the Effective Date, and not
for the entire fiscal year.

DISSENTERS' RIGHTS

Pursuant to Chapter 13 of the California General Corporation Law ("CGCL"),
holders of shares of Intramed Common Stock are entitled to rights of dissent and
appraisal of the value of their shares of Intramed Common Stock in connection
with the Merger. The failure of a dissenting shareholder to follow the
appropriate procedures may result in the termination or waiver of such
dissenters' rights.

Pursuant to the terms of the Reorganization Agreement, if holders of
Common Stock of Intramed have exercised dissenters' rights in connection with
the Merger under Sections 1300-1312 of the CGCL, any Dissenting Shares (as
defined below) will not be converted into Baxter Common Stock but will be
converted into the right to receive such consideration as may be determined to
be due with respect to such Dissenting Shares pursuant to the laws of the State
of California.

The following summary of the provisions of Section 1300 of the CGCL is not
intended to be a complete statement of such provisions and is qualified in its
entirety by reference to the full text of Section 1300, a copy of which is
attached to this Prospectus/Proxy Statement as Appendix C.

If the Merger is approved by the required vote of the Intramed
Shareholders and is not abandoned or terminated, each holder of shares of Common
Stock of Intramed who does not vote in favor of the Merger and who follows the
procedures set forth in Section 1300 will be entitled to have his or her shares
of Intramed Common

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Stock purchased by Intramed for cash at their fair market value. The fair
market value of shares of Intramed Common Stock will be determined as of the day
before the first announcement of the terms of the proposed Merger, excluding any
appreciation or depreciation in consequence of the proposed Merger. The last
sales price of Intramed Common Stock on the last trading day prior to the
signing of the Reorganization Agreement was $1.31 per share as quoted on Nasdaq.
In contrast, holders of Intramed Common Stock participating in the Merger will
receive $2.7215 per share of Intramed Common Stock exchanged in the Merger
(payable in shares of Baxter Common Stock). The shares of Intramed Common Stock
with respect to which holders have perfected their purchase demand in accordance
with Section 1300 and have not effectively withdrawn or lost such dissenters'
rights are referred to in this Prospectus/Proxy Statement as the "Dissenting
Shares."

Within ten days after approval of the Merger by the Intramed Shareholders,
Intramed must mail a notice of such approval (the "Approval Notice") to all
Shareholders who have not voted in favor of approval and adoption of the
Reorganization Agreement, together with a statement of the price determined by
Intramed to represent the fair market value of the applicable Dissenting Shares
(determined in accordance with the immediately preceding paragraph), a brief
description of the procedures to be followed in order for the Shareholder to
pursue his or her dissenters' rights, and a copy of Sections 1300-1304 of the
CGCL. The statement of price by Intramed constitutes an offer by Intramed to
purchase all Dissenting Shares at the stated amount. Only a holder of record of
shares of Common Stock of Intramed at October 5, 1994, (or his or her duly
appointed representative) is entitled to assert a purchase demand for the shares
registered in that holder's name.

A Shareholder of Intramed electing to exercise dissenters' rights must,
within 30 days after the date on which the Approval Notice is mailed to such
Shareholder, demand in writing from Intramed the purchase of his or her shares
of Intramed Common Stock and payment to the Shareholder of their fair market
value and must submit the certificate representing the Dissenting Shares to
Intramed for endorsement as Dissenting Shares. A holder who elects to exercise
dissenters' rights should mail or deliver his or her written demand to Intramed
at 11100 Roselle Street, San Diego, California 92121, directed to the attention
of Stuart Foster, President. The demand should specify the holder's name and
mailing address, the number of shares of Intramed capital stock owned by such
Shareholder and state that such holder is demanding purchase of his or her
shares and payment of their fair market value and must also contain a statement
as to what the shareholder claims to be the fair market value of such shares,
determined in accordance with the second preceding paragraph. Such statement of
the fair market value of the shares constitutes an offer by the Shareholder to
sell the shares to Intramed at that price.

If Intramed and the Shareholder agree that the shares are Dissenting
Shares and agree upon the purchase price of the shares, the dissenting
Shareholder is entitled to the agreed upon price with interest thereon at the
legal rate on judgments from the date of such agreement. Payment for the
Dissenting Shares must be made within 30 days after the later date of such
agreement or the date on which all statutory and contractual conditions to the
Merger are satisfied, and is subject to surrender to Intramed of the
certificates for the Dissenting Shares.

If Intramed denies that the shares are Dissenting Shares, or if Intramed
and the Shareholder fail to agree upon the fair market value of the shares, then
within six months after the date of Approval Notice was mailed to Shareholders,
any Shareholder who has made a valid written purchase demand and who has not
voted in favor of approval and adoption of the Reorganization Agreement may file
a complaint in the Superior Court of San Diego County (the "Court") requesting a
determination as to whether the shares are Dissenting Shares or as to the fair
market value of such holder's shares of Intramed Common Stock, or both, or may
intervene in any pending action brought by any other Intramed Shareholder.

Any holder of Dissenting Shares who has duly demanded the purchase of his
or her shares under Section 1300 of the CGCL will not, after the Effective Time
of the Merger, be entitled to vote the shares subject to such demand for any
purpose or be entitled to the payment of dividends or other distributions on
such Dissenting Shares (except dividends or other distributions payable to
shareholders of record as of the date prior to the Effective Time of the
Merger).

If any holder of shares of Intramed Common Stock who demands the purchase
of his or her shares under Section 1300 of the CGCL fails to perfect, or
effectively withdraws or loses his or her right to such purchase, the shares of
such holder will be converted into a right to receive that number of shares of
Baxter Common Stock equal to the Exchange Ratio times the number of shares of
Intramed Common Stock held by such person in accordance with the Reorganization
Agreement. Dissenting Shares lose their status as Dissenting Shares if (a) the
Merger is

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abandoned; (b) the shares are transferred prior to their submission for the
required endorsement; (c) the dissenting Shareholder fails to make a written
demand for purchase, along with a statement of fair market value; (d) the
dissenting Shareholder votes for approval and adoption of the Reorganization
Agreement; (e) the dissenting Shareholder and Intramed do not agree upon the
status of the shares as Dissenting Shares or do not agree on the purchase price,
but neither Intramed nor the Shareholder files a complaint or intervenes in a
pending action within six months after mailing of the Approval Notice; or (f)
with Intramed's consent, the Shareholder delivers to Intramed a written
withdrawal of such Shareholder's demand for purchase of his or her shares.

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INFORMATION CONCERNING BAXTER

BUSINESS

GENERAL

In November 1993, Baxter announced that its Board of Directors approved a
series of strategic actions to improve shareholder value, to extend positions of
leadership in health-care markets and to reduce costs. These actions are
designed to make Baxter's domestic medical/laboratory products and distribution
segment more efficient and more responsive in addressing the sweeping changes
occurring in the United States health-care system and accelerate growth of its
medical specialties businesses worldwide. Baxter recorded a $700 million
pre-tax provision to cover costs associated with these restructuring
initiatives. The actions include realigning the Company's United States sales
organization; restructuring the distribution organization and investing in new
systems to improve manufacturing and distribution efficiencies worldwide;
seeking to divest its diagnostics-products manufacturing businesses and exiting
selected non-strategic product lines in other businesses, as well as reducing
corporate staff and layers of management to give business units more autonomy.
These actions are expected to result in a reduction of Baxter's worldwide work
force by approximately 7%, or 4,500 positions, most of which will occur over the
next two to three years.

INDUSTRY SEGMENTS

Baxter is a world leader in global manufacturing and distribution of
health-care products and services for use in hospitals and other health-care and
industrial settings. It offers a broad array of products and services.
Baxter's operations are reported in the following two industry segments. For
financial information regarding Baxter's operations by industry segments, see
Baxter's 1993 Annual Report or Form 10-K (File No. 1-4448) which is incorporated
by reference in this Proxy Statement/Prospectus.

MEDICAL SPECIALTIES

Baxter develops, manufactures and markets on a global basis highly
specialized medical products for treating kidney and heart disease and blood
disorders and for collecting and processing blood. These products include
dialysis equipment and supplies; prosthetic heart valves and cardiac catheters;
blood-clotting therapies; and machines and supplies for collecting, separating
and storing blood. These products require extensive research and development and
investment in worldwide distribution, marketing, and administrative
infrastructure. Baxter's International Hospital unit, which manufactures and
distributes intravenous solutions and other medical products outside the United
States, is also included in this segment because it shares facilities, resources
and customers with the other medical specialty businesses in several locations
worldwide.

MEDICAL/LABORATORY PRODUCTS AND DISTRIBUTION

Baxter manufactures medical and laboratory supplies and equipment,
including intravenous fluids and pumps, diagnostic-testing equipment and
reagents, surgical instruments and procedure kits, and a range of disposable and
reusable medical products. These self-manufactured products, as well as a
significant volume of third party manufactured medical products, are primarily
distributed through Baxter's extensive distribution system to United States
hospitals, alternate-site care facilities, medical laboratories, and industrial
and educational facilities.

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JOINT VENTURES

Baxter conducts a portion of its business through joint ventures,
including a joint venture with Nestle, S.A. to develop, market and distribute
clinical nutrition products worldwide. Baxter also conducts a joint venture
with International Business Machines Corporation to provide computer software
and services to hospitals and other health-care providers. These joint ventures
are accounted for under the equity method of accounting and therefore, are
excluded from the two industry segments in which Baxter operates. In April
1994, Baxter entered an agreement to sell its interest in IBAX, a joint venture
with International Business Machines which provides computer software and
services to hospitals and other health-care providers. This agreement is
consistent with Baxter's program to exit selected non-strategic businesses.

HEALTH-CARE ENVIRONMENT

A decade ago, significant changes began taking place in the funding and
delivery of health-care throughout the world. Continuing cost containment
efforts by national governments and other health-care payors are restructuring
health-care delivery systems; and accelerating cost pressures on hospitals are
resulting in increased out-patient and alternate-site health-care service
delivery and a focus on cost-effectiveness and quality. These forces
increasingly shape the demand for, and supply of medical care.

The changes in the United States market began when Congress adopted
legislation to limit reimbursement for treatment of Medicare patients. The
previous system reimbursed hospitals for the reasonable costs of services. Under
the prospective reimbursement system, hospitals are reimbursed at a fixed rate
based on the patient's particular diagnosis, regardless of actual costs
incurred.

Many private health-care payors have adopted similar reimbursement plans
and are providing other incentives for consumers to seek lower cost care outside
the hospital. Many corporations' employee health plans have been restructured to
provide financial incentives for patients to utilize the most cost-effective
forms of treatment (managed care programs, such as health maintenance
organizations, have become more common); and physicians have been encouraged to
provide more cost-effective treatments.

With the change of administrations in Washington, and continuing
throughout 1994, significant national attention is being focused on the costs
and shortcomings of the United States' health-care financing and delivery
system. Specifically, and as a result of this attention, the administration is
in the process of proposing legislation aimed at restructuring health-care
funding in the United States. Based on information presently available to
Baxter, there will be no material adverse impact upon Baxter's business or
financial condition if these measures are enacted. Baxter continues to believe
that its strategy of providing unmatched service to its health-care customers
and achieving the best overall cost in its delivery of health-care products and
services is compatible with any restructuring of the United States health-care
system which may ultimately occur.

The future financial success of suppliers, such as Baxter, will depend on
their ability to work with hospitals to help them enhance their competitiveness.
Baxter believes it can help hospitals achieve savings in the total supply system
by automating supply-ordering procedures, optimizing distribution networks,
improving materials management and achieving economies of scale associated with
aggregating supply purchases.

METHODS OF DISTRIBUTION

Baxter 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. Distribution centers, which may serve
more than one division, are stocked with adequate inventories to facilitate
prompt customer service. Sales and distribution methods include frequent contact
by sales representatives, automated hospital communications via versions of the
ASAP-R- automated purchasing system, circulation of catalogs and merchandising
bulletins, direct mail campaigns, trade publications and advertising.

Baxter is expanding the use of versions of the ASAP system. These versions
allow customers to order supplies directly using a telephone-linked terminal.
The system can be tailored to individual customer needs, enabling hospitals,
laboratories and other customers to order products in predetermined groupings,
as well as

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individually. The ASAP system can also provide the customer with computerized
price information and order confirmation.

Baxter's Corporate program provides large hospitals and multi-hospital
systems with a single point of contact for all of the Company's products,
services and special value-added programs. The Company is allied with other
companies through its ACCESS -TM- program. Through this program, Baxter
provides its Corporate customers with products and services from leading
companies in related industries which go beyond the Company's scope of
proprietary product offerings. Baxter maintains ACCESS alliances with a
subsidiary of WMX Technologies, Inc. (formerly Waste Management of America,
Inc.) for handling and disposal of medical waste; with Comdisco, Inc. for high
technology asset management and contingency services; with Kraft Foodservice
Inc., a subsidiary of Kraft General Foods, Inc., to distribute and market a
broad array of hospital food service products; with the Graphics and Technology
Group, a division of North American Paper Company; and with various divisions of
Trammell Crow Company for facilities management and real estate planning
services.

Baxter's ValueLink -R- hospital inventory management service is designed
to deliver health-care products in ready-to-use packaging directly to individual
hospital departments on a "just-in-time" basis. As of the end of 1993, 53
hospitals were participating in the Company's ValueLink program. With ValueLink
services, hospitals reduce their inventories and the related warehousing costs
for medical-surgical supplies and rely on Baxter for frequent, standardized
deliveries and improved service levels. The Company has distribution facilities
across the United States to serve the nation's hospitals.

In late 1991, Baxter developed the Quality Enhanced Discription Services
-TM- program, reducing the time it takes for a hospital to receive and store
supplies and to process accounts payable. Based on each customer's unique
requirements, Baxter's products are delivered in a manner which facilitates
efficient processing of products and related documents by the hospital's
personnel. As a result, many hospital customers have been able to reduce the
amount of labor associated with the receipt and storage of supplies. As of the
end of 1993, 724 Enhanced Distribution Services initiatives were serving United
States hospital customers.

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 Australia,
Austria, Belgium, Brazil, Canada, China, Colombia, Czech Republic, Denmark,
Finland, France, Germany, Greece, Hong Kong, Hungary, Italy, Japan, Korea,
Malaysia, Mexico, the Netherlands, New Zealand, Norway, Poland, Portugal,
Republic of Ireland, Singapore, Spain, Sweden, Switzerland, Taiwan, Thailand,
Turkey, the United Kingdom, Venezuela and Zimbabwe. In other countries, sales
are made through independent distributors or sales agents.

RAW MATERIALS

Raw materials essential to Baxter'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 Baxter's
products can be obtained only from a small number of suppliers.

In some of these situations, Baxter has long-term supply contracts with
such suppliers, although it does not consider its obligations under such
contracts to be material. Baxter does not always recover cost increases through
customer pricing due to contractual limits on such price increases. See
"Contractual Arrangements."

PATENTS AND TRADEMARKS

Baxter owns a number of patents and trademarks throughout the world and is
licensed under patents owned by others. While it seeks patents on new
developments whenever feasible, Baxter does not consider any one or more of its
patents, or the licenses granted to or by it, to be essential to its business.

Products manufactured by Baxter are sold primarily under its own
trademarks and trade names. Some products purchased and resold by Baxter are
sold under Baxter's trade names while others are sold under trade names owned by
its suppliers.

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COMPETITION

Baxter is a major factor in the distribution and manufacture of hospital
and laboratory products and services and medical specialties. Although no
single company competes with Baxter in all of its industry segments, Baxter is
faced with substantial competition in all of its markets.

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. Baxter 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
Baxter, Baxter believes that its research and development effort will permit it
to remain competitive in all presently material product areas.

The changing health-care environment in recent years has led to
increasingly intense competition among health-care suppliers. Competition is
focused on price, service and product performance. Pressure in these areas is
expected to continue. See "Health-Care Environment." In part through the 1993
restructuring program, Baxter continues to increase its efforts to minimize
costs and better meet accelerating price competition. Baxter believes that its
cost position will continue to benefit from improvements in manufacturing
technology and increased economies of scale. Baxter continues to emphasize its
investments in innovative technologies and the quality of its products and
services.

CREDIT AND WORKING CAPITAL PRACTICES

Baxter's debt ratings of A3 on senior debt by Moody's, A- by Standard &
Poor's and A by Duff & Phelps were reaffirmed by each rating agency after the
1993 restructuring announcement. Standard & Poors and Duff & Phelps have
indicated that continuation of these ratings in the future is dependent on the
Company's successful implementation of the restructuring program announced in
November 1993, and the reduction of its financial leverage which is expected to
result from the planned divestiture of its diagnostics-products manufacturing
businesses.

Although Baxter's credit practices and related working capital needs vary
across industry segments, they are comparable to those of other market
participants. Collection periods tend to be longer for sales outside the United
States.

Customers may return defective merchandise for credit or replacement. In
recent years, such returns have been insignificant.

QUALITY CONTROL

Baxter places great emphasis on providing quality products and services to
its customers. An integrated network of 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 raw material and finished
goods suppliers to provide the highest value to customers. On a statistical
sampling basis, a quality assurance organization tests components and finished
goods at different stages in the manufacturing process to assure that exacting
standards are met.

RESEARCH AND DEVELOPMENT

Baxter is actively engaged in research and development programs to develop
and improve products, systems and manufacturing methods. These activities are
performed at 35 research and development centers located around the world and
include facilities in Australia, Belgium, Germany, Italy, Japan, Malaysia,
Malta, the Netherlands, Switzerland, the United Kingdom and the United States.
Expenditures for Baxter-sponsored research and development activities were $337
million in 1993, $317 million in 1992 and $288 million in 1991.

Baxter'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 Baxter's research effort as applied to the
human body's circulatory systems. In addition, research relating to the
performance and purity of

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plastic materials has resulted in advances that are applicable to a large number
of Baxter's products. Principal areas of strategic focus for research are
treatments for kidney failure, blood disorders and cardiovascular disease.

GOVERNMENT REGULATION

Most products manufactured or sold by Baxter in the United States are
subject to regulation by the Food and Drug Administration ("FDA'), as well as by
other federal and state agencies. The FDA regulates the introduction and
advertising of new drugs and devices as well as manufacturing procedures,
labeling and record keeping with respect to drugs and devices. The FDA has the
power to seize adulterated or misbranded drugs and devices or to require the
manufacturer to remove them from the market and the power to publicize relevant
facts. From time to time, Baxter has removed products from the market that were
found not to meet acceptable standards. This may occur in the future. Similar
product regulatory laws are found in most other countries where Baxter does
business.

Environmental policies of Baxter 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 1993 and similar expenditures are planned for 1994.

EMPLOYEES

As of December 31, 1993, Baxter employed approximately 60,400 people,
including approximately 35,500 in the United States and Puerto Rico.

CONTRACTUAL ARRANGEMENTS

A substantial portion of Baxter's products are sold through contracts with
purchasers, both international and domestic. 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.

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.

PROPERTIES

Baxter owns or has long-term leases on substantially all of its major
manufacturing facilities. Baxter maintains 48 manufacturing facilities in the
United States, including nine in Puerto Rico, and also manufactures in
Australia, Belgium, Brazil, Canada, Colombia, Costa Rica, the Dominican
Republic, France, Germany, Italy, Japan, Malaysia, Malta, Mexico, the
Netherlands, Republic of Ireland, Singapore, Spain, Switzerland and the United
Kingdom. Many of the major manufacturing facilities are multi-product and
manufacture items for both of Baxter's industry segments.

Baxter owns or operates 98 distribution centers in the United States and
Puerto Rico and 55 located in 22 foreign countries. Many of these facilities
handle products for both of Baxter's industry segments.

Baxter 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 $516 million in 1993, $537 million in 1992 and $503 million in 1991. In
addition, the Company added to the pool of equipment leased or rented to
customers, spending $89 million in 1993, $103 million in 1992 and $89 million in
1991.

Baxter's facilities are suitable for their respective uses and, in
general, are adequate for the Company's current needs.

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LEGAL PROCEEDINGS

As of June 30, 1994, Baxter was a defendant, together with other
defendants, in 5,153 lawsuits and had 1,772 pending claims from individuals, all
of which seek damages for injuries allegedly caused by silicone mammary
prostheses ("mammary implants") manufactured by the American Heyer-Schulte
division of American Hospital Supply Corporation ("American"). Baxter's
responsibility for mammary implants results from the American Heyer-Schulte
division of American which manufactured these products from 1974 until 1984, at
which time the products and related assets were sold to Mentor Corporation.
American retained the product liability responsibility for products sold before
the divestiture, and that responsibility was assumed by a subsidiary of Baxter
as part of its 1985 acquisition of American. Baxter has never manufactured this
product nor does it have any of the product in its inventory.

The typical case or claim alleges that the individual's mammary implants
caused one or more of a wide range of ailments, including non-specific
autoimmune disease, scleroderma, lupus, rheumatoid arthritis, fibromyalgia,
mixed connective tissue disease, Sjogren's Syndrome, dermatomyositis,
polymyositis, and chronic fatigue. The comparable number of cases and claims
was 137 as of December 31, 1991; 1,612 as of December 31, 1992; 4,870 as of
December 31, 1993; and 6,206 as of March 31, 1994. In 1991, 76 cases and claims
were disposed of; in 1992, 309 cases and claims were disposed of; in 1993, 634
cases and claims were disposed of; and in the first and second quarters of 1994,
211 cases and claims were disposed of.

In addition to the individual suits against Baxter, a class action on
behalf of all women with mammary implants filed against all manufacturers of
such implants has been conditionally certified and is pending in the United
States District Court for the Northern District of Alabama (DANTE, ET AL., V.
DOW CORNING, ET AL., U.S.D.C., N. Dist., Ala., 92-2589; part of IN RE:
SILICONE GEL BREAST IMPLANT PRODUCT LIABILITY LITIGATION, U.S.D.C., N. Dist.
Ala., MDL 926, (U.S.D.C., N. Dist. Ala., CV 92-P-10000-S)). Another class
action has been certified and is pending in state court in Louisiana
(SPITZFADDEN, ET AL., V. DOW CORNING CORP., ET AL., Dist. Ct., Parish of
Orleans, 92-2589). Baxter also has been named in three purported additional
class actions, none of which is currently certified. (BARCELLONA, ET AL., V.
DOW CORNING, ET AL., U.S.D.C., Mich., 9300 72045 DT and MOSS, ET AL., V. DOW
CORNING, ET AL., U.S.D.C., Minn., 92-P-10560-S, both of which have been
transferred to and are part of IN RE: SILICONE GEL BREAST IMPLANT PRODUCT
LIABILITY LITIGATION, U.S.D.C., N. Dist. Ala., MDL-926 for discovery purposes,
and DOE, ET AL., V. INAMED CORPORATION, ET AL., Circuit Ct., Dade County,
Fla., 92-07034.) A suit seeking class certification on behalf of all residents
of the Province of Ontario, Canada, who received Heyer-Schulte implants has also
been filed (BURKE, ET AL. V. AMERICAN HEYER-SCHULTE, ET AL., Ontario Prov.
Court, Gen. Div., 15981/93.)

Additionally, Baxter has been served with a purported class action brought
on behalf of children allegedly exposed to silicone in utero and through breast
milk. (FEUER, ET AL., V. MCGHAN, ET AL., U.S.D.C., E. Dist. N.Y., 93-0146.)
The suit names all mammary implant manufacturers as defendants and seeks to
establish a medical monitoring fund.

These implant cases and claims generally raise difficult and complex
factual and legal issues and are subject to many uncertainties and complexities,
including, but not limited to, the facts and circumstances of each particular
case or claim, the jurisdiction in which each suit is brought, and differences
in applicable law. Many of the cases and claims are at very preliminary stages,
and Baxter has not been able to obtain information sufficient to evaluate each
case and claim.

There also are issues concerning which of Baxter's insurers is responsible
for covering each matter and the extent of Baxter's claims for contribution
against third parties. Baxter believes that a substantial portion of the
liability and defense costs related to mammary implant cases and claims will be
covered by insurance, subject to self-insurance retentions, exclusions,
conditions, coverage gaps, policy limits and insurer solvency. Most of Baxter's
insurers have reserved (i.e., neither admitted nor denied), and may attempt to
reserve in the future, the right to deny coverage, in whole or in part, due to
differing theories regarding, among other things, the applicability of coverage
and when coverage may attach. Baxter has been, and will continue to be, engaged
in active negotiations with its insurers concerning coverages and the settlement
described below. Also, some of the mammary implant cases pending against Baxter
seek punitive damages and compensatory damages arising out of alleged
intentional torts. Depending on policy language, applicable law and agreements
with insurers, the damages awarded pursuant to such claims may or may not be
covered, in whole or in part, by insurance. On February 7, 1994, Baxter filed

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suit against all of the insurance companies which issued product liability
policies to American, American Heyer-Schulte and Baxter for a declaratory
judgment that: the policies cover each year of injury or claim; Baxter may
choose among multiple coverages; coverage begins with the date of implant; and
legal fees and punitive damages are covered. Subsequently, certain of Baxter's
product liability insurance carriers filed suit against Baxter and all of its
other carriers for a declaratory judgment to define various terms in Baxter's
insurance policies, the extent of Baxter's coverage, the date of the occurrences
giving rise to coverage, and the relative liabilities of the various insurance
carriers involved.

Representatives of the plaintiffs and defendants in these cases have
negotiated a global settlement of the issues under the jurisdiction of the Court
in the DANTE V. DOW CORNING, ET AL. case (now known as LINDSAY, ET AL. V. DOW
CORNING, ET AL.) The monetary provisions of the settlement proposal providing
compensation for all present and future plaintiffs and claimants based on a
series of specific funds and scheduled medical conditions have been agreed upon
by most of the significant defendants and representatives of the plaintiffs.
The total of all of the specific funds, which would be paid-in and made
available over approximately thirty years following final approval of the
settlement by the Courts, is capped at $4.75 billion. The settling defendants
have agreed to fund $4.255 billion of this amount. Baxter's share of this
settlement has been established by the settlement negotiations at $556 million.
The global settlement is subject to a series of court proceedings, including a
court review of its fairness, and the opportunity for individual plaintiffs and
claimants to elect to remove themselves from the settlement ("opt-out"). On
April 11, 1994, the court began the process of notifying all potential claimants
of the class action settlement and their rights to opt-out. The initial opt-out
period ended July 1, 1994. As of July 28, 1994, 14,849 individuals have opted
out of the global settlement, of which 4,322 appear to have claims against
Baxter. Of the opt-outs who previously filed claims, inquiries or lawsuits
against Baxter, 1,502 represent U.S. claimants, 2,608 represent foreign
claimants and 212 are currently unidentified. The number of opt-outs against
Baxter will change as some claimants elect to rescind their opt-out notice and
other opt-outs are identified as having claims against Baxter. At present,
Baxter is not able to estimate the nature and extent of its potential future
liability with respect to opt-outs. Baxter believes that most of its potential
future liability with respect to opt-outs is covered by insurance.

In the fourth quarter of 1993, Baxter accrued $556 million for its
estimated liability resulting from the global settlement of the mammary implant
class action and recorded a receivable for estimated insurance recovery of $426
million, resulting in a net charge of $130 million. The reserves for the
settlement do not include any provisions for opt-outs and are in addition to the
general reserves for the mammary implant cases discussed below.

In connection with its acquisition of American, Baxter had established
reserves at the time of the merger for product liability, including mammary
implant cases and claims. At June 30, 1994, the reserve allocated to mammary
implant cases and claims was approximately $14 million. This reserve has been
significantly reduced in the past quarter. Based on current information,
management believes that this reserve represents Baxter's remaining minimum net
exposure in connection with future mammary implant cases and claims beyond the
effect of the global settlement described above, and that most of such future
claims, if any, are covered by Baxter's insurance.

Upon resolution of any of the uncertainties concerning these cases, Baxter
may ultimately incur charges in excess of presently established reserves. While
such a future charge could have a material adverse impact on Baxter's net income
in the period in which it is recorded, management believes that any outcome of
this litigation will not have a material adverse effect on Baxter's consolidated
financial position.

As of June 30, 1994, Baxter was a defendant, together with other
defendants, in 157 lawsuits, and had one pending claim, in the United States
involving individuals who have hemophilia, or their representatives. Those
cases and claim seek damages for injuries allegedly caused by anti-hemophilic
factor concentrates VIII and IX derived from human blood plasma processed and
sold by Baxter. Furthermore, 58 lawsuits seeking damages based on similar
allegations are pending in Ireland, Japan and Germany.

The typical case or claim alleges that the individual with hemophilia was
infected with HIV by infusing Factor VIII or Factor IX concentrates ("Factor
Concentrates") containing HIV. The total number of cases and claims asserted
against Baxter as of December 31, 1991, was 16, as of December 31, 1992, was 52,
and as of December 31, 1993, was 178. In 1991, 11 cases and claims were
disposed of; in 1992, 9 cases and claims were

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disposed of; in 1993, 11 cases and claims were disposed of; and in the first and
second quarters of 1994, 26 cases and claims were disposed of.

All Federal Court cases have been transferred to the United States
District Court for the Northern District of Illinois for case management under
Multi District Litigation (MDL) rules. In addition to the individual suits
against Baxter, a purported class action was filed on September 30, 1993, on
behalf of all U.S. residents with hemophilia (and their families) who were
treated with Factor Concentrates and who allegedly are infected with HIV as a
result of the use of such Factor Concentrates. This lawsuit was filed in the
United States District Court for the Northern District of Illinois (WADLEIGH,
ET AL., V. RHONE-POULENC RORER, ET AL., U.S.D.C., N. Dist., Ill. 93C 5969).
The court has certified the class for purposes of determining whether the
defendants' actions were negligent. Baxter has also been named in three
purported class actions, none of which have been certified. ALVAREZ V. ARMOUR,
ET AL., U.S.D.C. 94-0649(E)(4); MARTIN V. RHONE POULENC, ET AL., U.S.D.C. ND
CV-94-B-0537 and STANGER V. BAYER, ET AL., U.S.D.C. AZ CIV-94-392-TUC, all of
which will be or have been transferred to the MDL for discovery purposes.

Many of the cases and claims are at very preliminary stages, and Baxter
has not been able to obtain information sufficient to evaluate each case and
claim. In most states, Baxter's potential liability is limited by laws which
provide that the sale of blood or blood derivatives, including Factor
Concentrates, is not the sale of a "good," and thus is not covered by the
doctrine of strict liability. As a result, each claimant will have to prove
that his or her injuries were caused by Baxter's negligence. The WADLEIGH
case alleges that Baxter was negligent in failing: to use available
purification technology; to promote research and development for product safety;
to withdraw Factor Concentrates once it knew or should have known of viral
contamination of such concentrates; to screen plasma donors properly; to recall
contaminated Factor Concentrates; and to warn of risks known at the time the
product was used. Baxter denies these allegations and has filed a challenge to
the class proceedings.

Baxter believes that a substantial portion of the liability and defense
costs related to anti-hemophilic factor concentrates cases and claims will be
covered by insurance, subject to self-insurance retentions, exclusions,
conditions, coverage gaps, policy limits and insurer solvency. Most of Baxter's
insurers have reserved (i.e., neither admitted nor denied), and may attempt to
reserve in the future, the right to deny coverage, in whole or in part, due to
differing theories regarding, among other things, the applicability of coverage
and when coverage may attach. Zurich Insurance Co. ("Zurich"), one of Baxter's
comprehensive general liability insurance carriers, has filed a suit against
Baxter seeking a declaratory judgment that the policies it had issued do not
cover the losses that Baxter has notified it of for a number of reasons,
including that Factor Concentrates are products, not services, and are,
therefore, excluded from the policy coverage, and that Baxter has failed to
comply with various obligations of tender, notice and the like under the
policies. Baxter has filed suit against all of the insurance companies which
issued comprehensive general liability and product liability policies to Baxter
for a declaratory judgment that the policies of all the excess carriers provide
coverage. In that suit, Baxter also sued Zurich for failure to defend it and
Zurich and Columbia Casualty Company for failure to indemnify it. Subsequently,
Baxter's excess product liability insurance carriers also brought suit for a
declaratory judgment as to the parties respective liabilities.

Baxter has notified its insurers concerning coverages and the status of
the cases. Also, some of the anti-hemophilic factor concentrate cases pending
against Baxter seek punitive damages and compensatory damages arising out of
alleged intentional torts. Depending on policy language, applicable law and
agreements with insurers, the damages awarded pursuant to such claims may or may
not be covered, in whole or in part, by insurance. Accordingly, Baxter is not
currently in a position to estimate the amount of its potential future
recoveries from its insurers, but has estimated its recovery with respect to the
reserves it has established.

Baxter is vigorously defending each of the cases and claims against it.
At the same time, Baxter will continue to seek ways to resolve pending and
threatened litigation concerning these issues through a negotiated resolution.

Representatives of the plaintiffs and Baxter and Rhone-Poulenc Rorer
("RPR") negotiated a tentative settlement of the issues as to them under the
jurisdiction of the court in the WADLEIGH case. The terms of the Memorandum
of Understanding were to be incorporated into a settlement agreement to be filed
with the court. The settlement is currently in question due to the court's
certification of the class action negligence issue. It is unclear whether
settlement will proceed on the terms originally reached. Baxter and RPR had
agreed to fund jointly $140

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to $160 million for the settlement, based on the number of claimants seeking
reimbursement, of which Baxter's share was to be 49.2%.

In Canada, the provincial governments created a settlement fund to which
all of the fractionators, including Baxter, have contributed. Baxter's
contribution to the fund was approximately $3 million. Those Canadian claimants
who availed themselves of this fund signed releases in favor of Baxter against
further litigation. The period in which to file a claim against the fund
expired on March 15, 1994.

In the fourth quarter of 1993, Baxter accrued $131 million for its
estimated worldwide liability for litigation and settlement expenses involving
anti-hemophilic Factor Concentrate cases, and recorded a receivable for
insurance coverage of $83 million, resulting in a net charge of $48 million.
The expense of the Canadian settlement is and the anticipated expenses of the
settlement of the WADLEIGH case was to be covered by this reserve.

Upon resolution of any of the uncertainties concerning these cases, or if
Baxter, along with the other defendants, enters into a comprehensive settlement
of the class actions described above, Baxter may incur charges in excess of
presently established reserves. While such a future charge could have a
material adverse impact on Baxter's net income in the period in which it is
recorded, management believes that any outcome of this litigation will not have
a material adverse effect on Baxter's consolidated financial position.

On February 21, 1994, Baxter began the voluntary withdrawal worldwide of
its Gammagard-R- IGIV (intravenous immune globulin) because of indications that
it might be implicated in Hepatitis C infections occurring in users of the
product. Gammagard-R- is a concentration of antibodies derived from human plasma
and is used to treat immune-suppressed patients. A new immune globulin product,
Gammagard-R- S/D, produced with an additional viral inactivation process was
introduced by Baxter after licensure in the United States and certain other
countries.

As of July 8, 1994, Baxter had received reports of Hepatitis C
transmission from 133 patients from five countries (U.S., U.K., Spain, Sweden
and Germany). The exact cause for these reports has not been determined;
however, all reports have been associated with Gammagard-R- injection produced
from plasma which was screened for antibodies to the Hepatitis C virus through
second generation testing. The number of patients receiving Gammagard-R- IGIV
produced from the second generation screened plasma is not yet known, nor is the
number of patients claiming exposure to Hepatitis C known.

As of August 5, 1994, two suits resulting from this incident (BORDONARO
V. BAXTER, ET. AL, Sup. Ct., MA 94-11454-DPW; and AREFFEEN V. BAXTER,
U.S.D.C., MN 4-94 Civil 670), have been served upon Baxter. The suits allege
infection with the Hepatitis C virus from the use of Gammagard-R-. Baxter is
defending against these cases.

At this time, Baxter cannot estimate its level of exposure to claims or
lawsuits stemming from the market withdrawal. Baxter does not, however, at this
time expect the exposure to have a material adverse effect on Baxter's
operations or its consolidated financial condition.

Most of the individuals who served as directors of American in 1985,
including Mr. Cathcart and Ms. Evans, who currently are directors of Baxter, are
defendants in a pending lawsuit filed as a derivative action. LEWIS V. BAYS,
ET AL. was filed on March 23, 1990, in the Circuit Court of Cook County,
Illinois. The plaintiffs allege breach of fiduciary duty claims relating to
American's buyout of an agreement with Hospital Corporation of American ("HCA")
in connection with Baxter's merger with American in 1985.

On April 12, 1994, the parties in this case filed a settlement agreement
with the court for approval. The Court entered a preliminary order of fairness,
and, on April 26, 1994, Baxter began notifying its stockholders of the
settlement. The settlement order was entered on June 15, 1994, and the time for
appeal has expired. The terms of the settlement did not have a material adverse
effect on Baxter's results of operations or consolidated financial position.

Baxter Healthcare Corporation ("BHC") was one of ten defendants named in a
purported class action filed in August 1993, on behalf of all medical and dental
personnel in the State of California who suffered allergic reactions to natural
rubber latex gloves and other protective equipment or who have been exposed to
natural rubber latex products. (KENNEDY, ET AL., V. BAXTER HEALTHCARE
CORPORATION, ET AL., Sup. Ct., Sacramento Co., Cal., #535632). The case
alleges that users of various natural rubber latex products, including medical
gloves made and

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sold by BHC and other manufacturers, suffered allergic reactions to the products
ranging from skin irritation to systemic anaphylaxis. The Court granted the
defendants' demurrer to the class action allegations. This is currently on
appeal. In April 1994, a similar purported class action, GREEN, ET AL. V.
BAXTER HEALTHCARE CORPORATION, ET AL., (Cir. Ct., Milwaukee Co., WI) was filed
in Wisconsin against Baxter and three other defendants. The class action
allegations have been withdrawn, but Leave to Amend was granted allowing
additional plaintiffs to be added. Baxter will vigorously defend these actions.
Management believes that the outcome of these matters will not have a material
adverse effect on Baxter's results of operations or consolidated financial
position.

All of the individuals who served as directors of Baxter as of
September 1, 1993, as well as Lester B. Knight, executive vice president of
Baxter, are named as defendants in a pending lawsuit ostensibly filed as a
"demand excused" derivative action. SEIGEL V. LOUCKS, ET AL., was filed
September 15, 1993, in the Court of Chancery in New Castle County, Delaware Cir.
Ct., New Castle Co., Del., Cir. Act #13130. On October 24, 1993, a
substantially identical complaint was filed in the same court by Bartholomew J.
Millano. The two complaints have been consolidated. The plaintiffs allege,
among other things, that the directors failed to oversee management in
connection with actions which are the basis for the dispute between Baxter and
the DVA which are described above, failed to prevent such actions, and failed to
create a compliance program to prevent or detect such actions. The complaint
seeks to recover alleged damages incurred by Baxter as the result of lost sales
due to the proposed debarment discussed above, as well as the compensation paid
to Messrs. Gantz, Knight, Loucks and Tobin since 1991. Baxter and its directors
have filed motions to dismiss the suit, have answered the complaint and have
filed a counterclaim seeking to permanently bar and enjoin the plaintiff from
prosecuting this case because her claims have been disposed of and barred in a
prior suit against Baxter.

As of July 1, 1994, Baxter has been named as a potentially responsible
party for clean-up costs at 17 hazardous waste sites. Baxter was a significant
contributor to waste disposed on only one of these sites, the Thermo-Chem site
in Muskegon, Michigan. Baxter expects that the total clean-up costs for this
site will be between $37 million and $82 million, of which Baxter's share will
be approximately $5 million. This amount has been reserved and reflected in
Baxter's financial statements.

In all of the other sites, Baxter was a minor contributor and, therefore,
does not have information on the total clean-up costs. Baxter has, however, in
most of these cases been advised by the potentially responsible party of its
roughly estimated exposure at these sites. Those estimated exposures total
approximately $5 million. This amount has been reserved and reflected in
Baxter's financial statements.

Baxter is a defendant in a number of other claims, investigations and
lawsuits. Based on the advice of counsel, management does not believe that the
other claims, investigations and lawsuits individually or in the aggregate, will
have a material adverse effect on Baxter's operations or its consolidated
financial condition.

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EXECUTIVE OFFICERS AND DIRECTORS OF BAXTER

The following table sets forth certain information with respect to the
executive officers and directors of Baxter:

Name Age Position with Baxter
---- --- --------------------

William B. Graham 82 Senior Chairman of
the Board

Vernon R. Loucks, Jr. 59 Chairman of the
Board and Chief
Executive Officer

Lester B. Knight 35 Executive Vice
President

Tony L. White 47 Executive Vice
President

Henry R. Autry 45 Senior Vice
President and Chief
Administrative
Officer

Harry M. Jansen Kraemer, Jr. 39 Senior Vice
President and Chief
Financial Officer

Arthur F. Staubitz 54 Senior Vice
President, Secretary
and General Counsel

Barbara Y. Morris 48 Senior Vice
President

Herbert E. Walker 59 Senior Vice
President

Dale A. Smith 62 Group Vice President

Ronald H. Abrahams 51 Vice President

David J. Aho 44 Vice President

James H. Taylor, Jr. 55 Vice President

Brian P. Anderson 43 Controller

Lawrence D. Damron 47 Treasurer

Silas S. Cathcart 67 Director

David C.K. Chin, M.D. 44 Director

John W. Colloton 63 Director

Susan Crown 35 Director

James D. Ebert 72 Director

Mary Johnston Evans 64 Director

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Frank R. Frame 64 Director

David W. Grainger 66 Director

Martha R. Ingram 58 Director

Georges C. St. Laurent, Jr. 57 Director

Fred L. Turner 61 Director

WILLIAM B. GRAHAM, age 82, has been senior chairman of the board of
directors since 1985. Mr. Graham became president of the Company in 1953 and
chief executive officer in 1960 and continued in these positions until 1971.
From 1971 to 1980 he was chairman of the board and chief executive officer, and
thereafter he served as chairman until he became senior chairman.

VERNON R. LOUCKS, JR., age 59, has been a director since 1975. Mr. Loucks
has been chairman of the Board of Directors since 1987 and chief executive
officer of the Company since 1980. Mr. Loucks was first elected an officer of
the Company in 1971. Mr. Loucks also serves as a director of Anheuser-Busch
Companies, Inc., The Dun & Bradstreet Corporation, Emerson Electric Co. and The
Quaker Oats Company.

LESTER B. KNIGHT, age 35, has been an executive vice president of Baxter
since 1992, and a vice president since 1990. Mr. Knight previously was president
of a division of a subsidiary of Baxter, and prior to that was employed in
various management capacities with the same subsidiary.

TONY L. WHITE, age 47, has been an executive vice president of Baxter
since 1992, and a vice president since 1986, when he was first elected an
officer.

HENRY R. AUTRY, age 45, has been senior vice president and chief
administrative officer of Baxter since 1993. Mr. Autry previously was president
of a division of a subsidiary of Baxter. Before joining the Company, Mr. Autry
was vice president of international sales at Federal Express Corporation.

HARRY M. JANSEN KRAEMER, JR., age 39, has been senior vice president and
chief financial officer of Baxter since 1993. Mr. Kraemer previously was the
vice president of finance and operations for a subsidiary of Baxter. Prior to
that he was employed as controller, group controller, and president of various
divisions of subsidiaries of Baxter.

ARTHUR F. STAUBITZ, age 54, has been senior vice president, secretary and
general counsel of Baxter since 1993. Mr. Staubitz previously was vice
president/general manager of the ventures 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.

BARBARA Y. MORRIS, age 48, has been a senior vice president of Baxter
since 1992. Ms. Morris was first elected an officer of Baxter in 1986.

HERBERT E. WALKER, age 59, has been senior vice president of Baxter since
1993. Mr. Walker previously was vice president of human resources of a division
of a subsidiary of Baxter.

DALE A. SMITH, age 62, has been a group vice president of Baxter since
1979, when he was first elected an officer.

RONALD H. ABRAHAMS, age 51, has been a vice president of Baxter since
1990. Mr. Abrahams previously was vice president - quality assurance and
regulatory affairs of a subsidiary of Baxter.

DAVID J. AHO, age 44, has been a vice president of Baxter since 1989. Mr.
Aho previously was vice president of government affairs of a subsidiary of
Baxter.

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JAMES H. TAYLOR, JR., age 55, has been a vice president of Baxter since
1992. Mr. Taylor previously was the general manager of operations of a division
of a subsidiary of Baxter, and prior to that was vice president of manufacturing
of that division.

BRIAN P. ANDERSON, age 43, has been the controller of Baxter since 1993.
Mr. Anderson previously was the vice president of corporate audit of a
subsidiary of Baxter, and prior to that was a partner in the international
accounting firm of Deloitte & Touche.

LAWRENCE D. DAMRON, age 47, has been treasurer of Baxter since 1992. Mr.
Damron previously was a vice president and controller of a division of a
subsidiary of Baxter, and prior to that was the corporate auditor of another
subsidiary. Prior to that, he was vice president and controller of a division of
that subsidiary.

SILAS S. CATHCART, age 67, has been a director since 1990. Mr. Cathcart
is a director of General Electric Company, Illinois Tool Works, Inc. and The
Quaker Oats Company. Mr. Cathcart is also a trustee of Northern Funds Mutual
Fund. From 1985 to 1987, Mr. Cathcart served as a director of the Company; from
1970 to 1985 he served as a director of American Hospital Supply Corporation.
Mr. Cathcart served as chairman of the board and chief executive officer of
Kidder, Peabody Group Inc., an investment banking firm, from 1988 to 1989, and
as president and chief executive officer from 1987 to 1988. From 1972 to 1986,
he was chairman of Illinois Tool Works, Inc.

DAVID C.K. CHIN, M.D., age 44, has been a director since 1992. Dr. Chin
is president and chief operating officer of Novalis Corporation, which
integrates software technology, health benefit designs and provider organization
models into turnkey managed care programs for health-care organizations. From
1987 to 1992, Dr. Chin was the president and medical director of the Health
Centers Division of the Harvard Community Health Plan, Inc., a health
maintenance organization. Since 1981, he has also been an instructor in
medicine at the Harvard Medical School.

JOHN W. COLLOTON, age 63, has been a director since 1989. From 1971 to
1993, Mr. Colloton served as the director of the University of Iowa Hospitals
and Clinics, and since 1993 he has been vice president of the University of Iowa
for Statewide Health Services. Mr. Colloton also serves as a director of Iowa
State Bank & Trust, Premier Anesthesia, Iowa-Illinois Gas and Electric Company
and Iowa-South Dakota Blue Cross and Blue Shield (IASD).

SUSAN CROWN, age 35, has been a director since 1993. Since 1984, Ms.
Crown has been a vice president of Henry Crown and Company, which includes
diversified manufacturing operations, real estate and securities. Ms. Crown
also serves as a director of Caribbean International News Corporation and as a
trustee of Northern Funds Mutual Fund.

JAMES D. EBERT, age 72, has been a director since 1989. Dr. Ebert has
been a professor of biology at The Johns Hopkins University since 1992. From
1987 to 1992, he served as the director of the Chesapeake Bay Institute of The
Johns Hopkins University. Dr. Ebert previously was president of the Carnegie
Institution of Washington, an educational institution.

MARY JOHNSTON EVANS, age 64, has been a director since 1986. Mrs. Evans
is a director of Household International, Inc., Sun Company, Delta Air Lines,
Inc. The Dun & Bradstreet Corporation and Scudder New Europe Fund.

FRANK R. FRAME, age 64, has been a director since 1992. Mr. Frame is an
adviser to the board of directors of HSBC Holdings Inc., a financial
institution. Between 1976 and 1990, Mr. Frame held various senior management
positions in The Hongkong and Shanghai Banking Corporation Limited, a financial
institution from which he retired in 1990, including group legal adviser,
executive director and deputy chairman. Mr. Frame also serves as chairman of
Wallem Limited and deputy chairman of Time Products plc.

DAVID W. GRAINGER, age 66, has been a director since 1990. Mr. Grainger
is chairman of the board, president and chief executive officer of W.W.
Grainger, Inc., a nationwide distributor of equipment, components and supplies.
He joined W.W. Grainger, Inc. in 1952.

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MARTHA R. INGRAM, age 58, has been a director since 1987. Ms. Ingram is
the director of public affairs and member of the board of directors of Ingram
Industries Inc., a diversified transportation and energy company and distributor
of consumer products. Ms. Ingram also serves as a director of First American
Corporation.

GEORGES C. ST. LAURENT, JR., age 57, has been a director since 1992.
Since 1988, Mr. St. Laurent has been chairman of the board and chief executive
officer of Western Bank, a financial institution. He was first elected a
director of Western Bank in 1987.

FRED L. TURNER, age 61, has been a director since 1982. Mr. Tuner is
senior chairman of the board of directors and chairman of the executive
committee of McDonald's Corporation, a restaurant licensor. Mr. Turner
previously was chairman of the board and chief executive officer of McDonald's
Corporation. He joined McDonald's in 1956. Mr. Tuner also serves as a director
of Avon Corporation and W.W. Grainger, Inc.

All executive officers 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.

The board of directors has three classes of directors serving staggered
three-year terms. Directors are nominated by the board of directors.
Stockholders who want to nominate directors to the board must comply with
certain procedures set forth in Baxter's Bylaws.

BAXTER INFORMATION INCORPORATED BY REFERENCE

For certain information with respect to Baxter, its business strategy,
historical consolidated financial information, management, directors, principal
shareholders and other information see Baxter's Annual Report on Form 10-K for
the year ended December 31, 1993 and Baxter's Quarterly Reports on Form 10-Q for
the quarters ended March 31, 1994 and June 30, 1994, respectively, and the other
documents incorporated by reference in this Proxy Statement/Prospectus. See
"Incorporation of Certain Documents by Reference."

INFORMATION CONCERNING INTRAMED

BUSINESS

GENERAL

Intramed develops, manufactures and markets cost-effective, miniature
endoscopes and therapeutic devices for minimally invasive surgery, diagnosis and
treatment monitoring. Intramed's proprietary technology and manufacturing
processes enable it to offer a variety of flexible and rigid, single use
endoscopes with the capabilities of larger, more expensive, reusable endoscopes.
Intramed currently offers an array of angioscopes for the visualization of
arteries and veins, choledochoscopes to locate stones during laparoscopic
gallbladder removal, and ureteroscopes for visualization and treatment of the
kidney and ureter. Intramed's corporate plan is twofold. Intramed is
establishing a direct marketing and selling effort in the vascular surgery
market, building on its proprietary products for peripheral bypass procedures,
while simultaneously addressing other markets for Intramed's cost-effective
miniature endoscopic technology through corporate partnering agreements.

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MARKET BACKGROUND

MINIMALLY INVASIVE SURGERY

In recent years, major changes have occurred in methods of performing
surgery. Historically, a surgeon has made a relatively large incision in the
patient to gain physical and visual access for the removal, repair,
reconstruction or inspection of internal body structures. Performing surgery in
this manner can lead to large scars, long hospital stays and extended
recuperative periods. More recently, improvements in technologies such as
optics, video cameras and miniaturization and specialization of surgical
instruments have enabled the development of new surgical procedures performed
through small incisions. These "minimally invasive" procedures offer many
advantages to patients, surgeons, hospitals and health-care reimbursers,
including reduced trauma, less scarring and faster recovery for the patient,
shorter operating time for the surgeon, and reduced hospital stays and overall
costs.

Minimally invasive procedures have been developed in a number of different
surgical fields. Vascular surgeons are using minimally invasive procedures to
examine, remove or bypass arterial blockages. Urologists are using minimally
invasive techniques to diagnose defects in the urinary tract and to remove
stones from the kidney and ureter. Orthopedic surgeons are using minimally
invasive surgical procedures such as arthroscopy to repair or reconstruct
damaged joints by observing a joint through a small puncture and inserting and
manipulating therapeutic instruments through additional puncture sites.

In recent years, the number of minimally invasive procedures performed has
grown rapidly. Intramed believes that the benefits of reduced patient trauma,
faster healing time and reduced costs have provided an impetus for surgeons,
third party payors and patients to convert from traditional open surgery to
newer minimally invasive procedures. For example, of the approximately 600,000
gallbladder removals done domestically each year, the minimally invasive
"laparoscopic" procedure has grown from a few procedures, if any, in 1989 to an
estimated 300,000 procedures in 1991. This rapid conversion reflects the fact
that the traditional open procedure generally requires a six- to seven-day
hospital stay with a six-week recovery time, while the minimally invasive
procedure typically requires a one- to two-day hospital stay with a one-week
recovery time.

THERAPEUTICS AND VISUALIZATION

Generally, minimally-invasive procedures involve two components:
therapeutics and visualization. Minimally invasive therapeutics consist of the
delivery or application of medical instruments, devices, drugs or other
therapies through a hollow tube, or catheter, to an internal body structure.
Such instruments can include cutters, graspers, lasers and a variety of other
surgical tools.

In order to choose the correct therapy and apply it in the most effective
manner, the surgeon must be able to visualize the body structure in question.
Visualization can be indirect, such as through ultrasound or X-ray techniques,
or direct by use of an endoscope. Intramed believes direct visualization is
superior to indirect for many minimally invasive procedures, because indirect
visualization generally provides only a two-dimensional black and white image,
while direct visualization provides a color view that reveals the type, surface
characteristics and shape of internal body structures.

ENDOSCOPY

An endoscope is a tubular device which allows a surgeon to view an
internal body structure remotely through optical elements coupled to an eyepiece
or a video camera. Fiber optic endoscopes, like those Intramed manufactures,
generally have a group of lenses and optical fibers to observe the body
structure in question and another group of optical fibers to provide
illumination for observation. The fiber optic image may be observed through an
eyepiece attached to the endoscope or, with the use of a video camera and
coupler, on a television monitor. Depending on the location and type of
procedure being performed, endoscopes may be either short or long, rigid or
flexible.

Intramed believes the performance of an endoscope depends upon the
following characteristics:

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OPTICAL CAPABILITIES. Endoscopes for minimally invasive procedures
require a high quality visual image. The surgeon must be able to visualize the
body structure clearly, both to guide the endoscope to the affected area, and to
apply therapy in the most effective manner.

STEERABILITY. In many cases, the success of a new minimally invasive
procedure is dependent on the ability to manipulate the endoscope in the body to
allow direct visualization of the area to be treated. Many endoscopes contain
steering or deflecting mechanisms to permit the surgeon to achieve better
visualization by maneuvering the tip of the endoscope through curved body
structures such as the kidney, ureter and biliary tract, while reducing the risk
of injury to these structures.

COORDINATION WITH THERAPEUTICS. In order to achieve effective results,
the use of the endoscope must be well coordinated with the use of the
therapeutic instruments which provide the desired treatment. Many endoscopes
combine the function of endoscopic observation with the ability to deliver
therapeutic instruments or infuse medication through a "working channel" within
the endoscope. Intramed believes that the combination of endoscopic observation
with the delivery of therapeutics within one device has made the surgeons' task
easier.

MINIATURIZATION. Typically, reusable endoscopes used in urology,
gynecology and orthopedics have been relatively large, with diameters of at
least 3.0 mm, in order to permit the inclusion of complex optics and steering
mechanisms and large working channels. Many new minimally invasive techniques,
however, involve entry and direct visualization of structures that are
substantially smaller than 3.0 mm. Intramed believes that the technology
generally utilized to construct traditional large, reusable endoscopes makes it
difficult to reduce such endoscopes in size successfully while still maintaining
important endoscopic features. For example, as overall endoscope size is
reduced, it becomes increasingly difficult to maintain optical quality,
steerability and an adequately sized working channel to deliver therapy.

INTRAMED'S ENDOSCOPES

TECHNOLOGY

Intramed's proprietary technology and manufacturing processes enable it to
produce miniature, single use, flexible or rigid, endoscopic products, with
diameters as small as 0.7 mm, which have optic capabilities, steering mechanisms
and working channels comparable to those of larger endoscopes.

Optical quality is provided through advanced fiber optic technology and
sophisticated lens systems. Intramed's patented design provides for up to 180
degrees of tip deflection for steerability. Intramed's proprietary manufacturing
process for endoscope body construction permits miniaturization while retaining
adequately sized working channels so that visualization and therapeutics can be
coordinated. Intramed's camera coupler allows its products to be used with
generally available video hardware systems currently in place. By varying an
endoscope's degree of deflection, length and outer body diameter, Intramed is
able to design products to address specific surgical procedures.

Intramed is continuing its research and development efforts to further
miniaturize its products and to add new features such as multidirectional
steerability. Intramed also believes that its current technology provides it
with a base from which to develop new products to address new market
opportunities.

SINGLE USE VS. REUSABLE ENDOSCOPES

Substantially all of the endoscopes available on the market today are
reusable. Intramed believes that its single use endoscopes have a number of
advantages over reusable endoscopes. A reusable endoscope must be both cleaned
and sterilized prior to each patient use, processes which are labor and cost
intensive and require special handling due to the fragility of the endoscope.
In addition, an ineffective cleaning or sterilization procedure could result in
cross-contamination from one patient to another, potentially exposing the other
patient to bacterial and viral infections transmitted through blood or body
fluids. Furthermore, during the time required to clean and sterilize the
endoscope, it is unavailable for use with other patients. Intramed's products,
which are provided in sterile packages, minimize these disadvantages.

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By their nature, reusable endoscopes must be sufficiently sturdy to
withstand repeated uses and cleanings. Generally, such endoscopes are expensive
to construct and are large in size. Furthermore, the performance of reusable
endoscopes may deteriorate with use, requiring refurbishment or repair. In
contrast, Intramed's single use endoscopes provide consistent quality and
reliable performance for each use;

The initial price of reusable endoscopes is substantially higher than
those of single use endoscopes. Prices for reusable fiber optic endoscopes
typically range from $6,000 to $12,000, while prices for Intramed's single use
endoscopes range from $250 to $700. In addition to these initial costs,
hospitals may incur other substantial expenses for the cleaning, sterilization,
repair and refurbishment of reusable endoscopes. Furthermore, manufacturers of
reusable endoscopes generally design their products to be compatible exclusively
with their own video hardware system. As a result, hospitals could be required
to make an additional investment for video hardware systems which are compatible
with a particular endoscope. Intramed's single use endoscopes, on the other
hand, are designed to be compatible with generally available video hardware
systems.

Intramed believes the substantially lower initial price of its single use
endoscopes is a significant advantage to hospitals because it allows them to
adopt new minimally invasive procedures without making large capital
expenditures. Furthermore, a hospital can afford to have available a variety of
procedure-specific, single use endoscopes, providing a choice of lengths, outer
body diameters and deflection capabilities most appropriate for each particular
procedure.

STRATEGY

Intramed's strategy is to develop cost-effective miniature endoscopic and
therapeutic devices based on its proprietary technology in order to become a
leading supplier of products for multiple segments of the minimally invasive
surgical marketplace. Key elements of Intramed's strategy include:

* ESTABLISH VASCULAR SURGERY VERTICAL MARKET. Intramed is expanding
its direct marketing and sales efforts to vascular surgeons. Intramed offers its
products to this market through direct sales representatives in most areas and
through some distributor representatives domestically, and through vascular
surgery distributors in Europe and the Asia-Pacific. Intramed has expanded its
product offering in this market by varying product features, developing
additional therapeutic devices, and introducing cost-effective reusable
angioscope for the international market.

* EDUCATE CUSTOMERS TO INCREASE ACCEPTANCE OF MINIMALLY INVASIVE,
ENDOSCOPIC PROCEDURES. An important factor in Intramed's success is the
acceptance by surgeons of minimally invasive surgical procedures using
Intramed's miniature endoscopes. Intramed believes that such procedures are
being used in only a small percentage of surgical procedures for which
Intramed's products could be used. Intramed's customer education efforts
include supporting and attending a variety of medical education programs for
endoscopy, both domestically and internationally. Intramed believes these
programs, which provide reports on a product's clinical performance to surgeons,
have proven effective in introducing particular minimally invasive procedures
and in positioning Intramed's products for these procedures. Intramed plans to
expand its educational efforts.

* COMBINE VISUALIZATION AND THERAPEUTIC CAPABILITY. In many
minimally invasive procedures, instruments such as catheters, lasers, and
retrieval and ablation devices are directed to a specific body site while being
viewed through an endoscope. Most often, these instruments are inserted through
the working channel of the endoscope. Intramed has developed products which
combine both visualization and therapeutic functionality in either single
devices or in procedure-specific kits which include an endoscope and the
specialized therapeutic instruments necessary to perform a particular minimally
invasive procedure. These products include a single device for viewing and
cutting venous valves in vascular surgery and a procedure-specific kit for
removing stones from the biliary tract during laparoscopic gallbladder surgery.
Intramed plans to focus future development efforts on additional endoscopically
guided therapeutic devices.

* FORM PARTNERSHIPS WITH LEADING SURGEONS AND ESTABLISHED SUPPLIERS.
Intramed has established close relationships with leading surgeons in the
advancement of minimally invasive surgery. Intramed regularly consults with its
Scientific Advisory Board to determine the effectiveness of existing products,
guide product development activities and develop new ideas for utilizing
miniature endoscopy. In addition, Intramed actively

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supports research into new applications of its miniature endoscopic products and
assists with training programs by surgeons in minimally invasive procedures.

Intramed believes that the Merger will provide Intramed with access to
increased resources to allow expansion of the U.S. sales and marketing efforts
in Intramed's primary vascular market. The combination of Baxter's vascular
surgery products with Intramed's products will provide greater flexibility to
Intramed in effectively marketing its products through Baxter and in
establishing customer relationships in the vascular surgery market. The Merger
will also provide sales coverage for Intramed's products in international
markets through Baxter's international sales organization. Additionally,
Intramed may establish other corporate partnerships, if desirable, with
established medical device suppliers complementary to Baxter to enter new
markets. Intramed has already established a relationship for the development
and distribution of products with C.R. Bard, Inc., a leading provider of
urologic products worldwide, for urology.

MARKETS AND PRODUCTS

Intramed currently offers a variety of angioscopes for the visualization
of arteries and veins, choledochoscopes to remove stones during laparoscopic
gallbladder removal, and ureteroscopes for visualization and treatment of the
kidney and ureter.

VASCULAR SURGERY - ANGIOSCOPY

Angioscopy is the observation of a blood vessel through the insertion of
an endoscope into the vessel. Angioscopy has been made possible by the
development of miniature endoscopes small enough to fit into blood vessels -
generally smaller than 3.0 mm in diameter. The size of the vessel determines the
maximum size of the endoscope.

Intramed's angioscopes are currently used by vascular surgeons to
diagnose, select treatment techniques for, and confirm results of treatment of
peripheral vascular diseases which cause a blockage in patient arteries.
Intramed estimates that there are approximately 300,000 cases of peripheral
vascular disease treated in the U.S. each year. Until recently, X-ray
angiography has been the standard technique for selecting and confirming
treatments, but it suffers from the limits of indirect visualization.

Minimally invasive techniques have been developed to reduce the
invasiveness of bypass surgery to treat peripheral vascular disease blocking a
patient's artery. Traditionally, a large incision is made in the patient's leg
through which either a synthetic graft or a vein of the patient taken from
another place in the body is inserted to bypass the diseased section of artery.
A minimally invasive alternative is to use one of the patient's veins in place,
or in situ, for the bypass. However, in order for this procedure to be
effective, the valves of the vein ("venous" valves), which normally prevent
reverse blood flow, must be removed. Intramed has developed a single use
combination device for viewing and removing venous valves during an in site
bypass procedure. This angioscopic valvulotome device has the advantage of
replacing the two devices currently required to perform this procedure, thus
making the procedure faster and easier and enhancing its minimally invasive
nature.

In addition to the angioscopic valvulotome, Intramed markets five models
of endoscopes used for angioscopy, which vary in size from 0.7 mm to 3.0 mm in
diameter and which have.either a passive or a 30 degree deflecting tip to
provide steerability through curved vessels. The current list prices of
Intramed's angioscopes range from $250 to $700.

All these devices are inserted directly into the patient's bloodstream,
resulting in potential contact with blood-borne diseases. As a result, Intramed
believes its angioscopic products are particularly well suited to the vascular
surgery market. The single use nature of these products avoids this potential
for cross-contamination between patients. Furthermore, the lower initial cost
and hardware compatibility of Intramed's products allows vascular surgeons to
begin using Intramed's angioscopes without substantial capital outlay.

Intramed is currently developing additional therapeutic devices for
vascular surgery which would be used in conjunction with its angioscopes. In
addition, a reusable angioscope has been introduced by Intramed for distribution
in markets outside the United States, in which disposable devices are not
generally used.

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GENERAL SURGERY - CHOLEDOCHOSCOPY

In recent years, general surgeons have performed an increasing number of
gallbladder removals using minimally invasive techniques. An integral part of
this "laparoscopic" gallbladder removal is the examination of the biliary tract,
which connects the gallbladder to the liver and small intestine, in search of
gallstones. Stones are discovered in approximately 10% of the cases and must be
removed so that they do not obstruct bile flow from the liver to the small
intestine. Generally, to remove the stones, the surgeon has had to abandon the
minimally invasive laparoscopic procedure and convert to a traditional open
procedure. Alternatively, the surgeon may have referred the patient to a
gastroenterologist to have the stones removed by a separate procedure which,
though still minimally invasive, requires additional hospitalization.

The difficulties associated with these procedures for locating and
removing gallstones from the biliary tract has led to the development of a
minimally invasive method by which the general surgeon can remove stones without
additional hospitalization or patient trauma. Using this method, upon
confirmation of stones, an endoscope is inserted into the biliary tract to
locate the stone and a basket device is inserted through the endoscope's working
channel to grasp and retrieve the stone.

Endoscopes for biliary tract exploration - called choledochoscopes -
require several key features. The diameter must be as small as possible for ease
of insertion, while the working channel must be large enough to accommodate the
stone retrieval devices. In addition, in order to facilitate movement of the
scope through the biliary tract, the tip of the choledochoscope must be
steerable. Intramed has developed a single use choledochoscope with a diameter
of 3.0 mm, and, a tip which deflects up to 90 degrees in one direction and 30
degrees in the other. Intramed believes this product provides the best available
ratio of outside diameter (3.0 mm) to working channel diameter (1.2 mm), plus
tip steerability and flexibility. Reusable choledochoscopes with
comparably-sized working channels are generally 4.0 mm to 5.0 mm in outside
diameter. Intramed also offers a basket which is inserted through the working
channel of the endoscope to retrieve the stones from the biliary tract during
laparoscopic gallbladder removal.

In September 1992, Intramed entered into an agreement with Linvatec, a
subsidiary of Bristol-Myers Squibb, which granted to Linvatec the exclusive
rights to Intramed's technology and products for the general and thoracic
surgery markets. This worldwide agreement covered the distribution of Intramed's
current products in these markets including the choledochoscope and stone
retrieval basket. Linvatec began distribution of these products in December
1992. In September 1993, Linvatec chose to relinquish the exclusive distribution
rights.

UROLOGY - URETHROSCOPY

Endoscopes have long been used in urology to examine the bladder. With the
advent of flexible fiber optics, endoscopes are also being used to examine both
the kidney and ureter as well. These endoscopes - called ureteroscopes - are
used to assist in the diagnosis of defects in and the removal of stones from
these structures. There are approximately 170,000 urethroscopies performed by
urologists each year in the United States.

Ureteroscopes must contain the largest possible working channel to
accommodate devices to treat or remove stones, while still maintaining a small
outside diameter to ease entry and manipulation. Intramed's ureteroscopes are
designed to provide an optimal ratio of outside diameter to working channel
diameter. In addition, Intramed believes the low cost of its single use products
make adoption of endoscopic techniques attractive to urologists who have not
previously used them. Furthermore, given the high volume of urethroscopic
examinations generally performed by each urologist, the use of cost-effective,
single use ureteroscopes eliminates delays caused by the cleaning and
sterilization of reusable ureteroscopes.

All of Intramed's urology products are distributed exclusively worldwide
by Bard, a leading supplier to the urology market. Through 1991, Intramed
produced two models of flexible ureteroscopes, a 3.0 mm diameter, 180 degree
deflecting tip urethroscope and a 2.3 mm diameter, non-reflecting urethroscope.
In January 1992, Bard commenced marketing Intramed's 2.7 mm diameter rigid
urethroscope. Over this time, however, the demand for Intramed's flexible
urology products declined. Intramed believes that the market for urology
endoscopes in general has shifted to a greater emphasis on rigid scopes. Nearly
all 1992 and 1993 sales of urology endoscopes to Bard were rigid scopes. In
January 1993, Bard discontinued sales of the deflecting tip flexible
urethroscope. Primarily due to the higher level of competition in the urology
market, Intramed is not planning on significant growth in this market. Intramed
anticipates that its future research and development activities in the urology
market, if any, would

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be funded by Bard or other third parties. The current list prices of the
ureteroscopes range from $250 to $350. The current list price of the reusable
eyepiece is $1,000.

REUSABLE SUPPORT PRODUCTS

In addition to endoscopes, Intramed offers a number of reusable products
to assist the surgeon in the use of its endoscopes. Such products include pumps
to clear blood and other body fluids away from the endoscope's field of view
during the procedure and a variety of camera and light source adapters for
adapting to generally available hospital video hardware systems. The current
list price of the pump is $6,500, and list prices of the adapters range from $50
to $250.

FUTURE MARKETS AND PRODUCTS

Intramed believes that market opportunities exist for its products outside
the three markets in which it currently competes. The adoption by surgeons of
minimally invasive techniques in such other markets offers the same benefits of
reduced patient trauma, shortened operating time, faster healing and overall
cost reduction that such techniques offer for current applications. Intramed is
seeking partners to help it to expand its product offerings to include products
for a number of these markets, including those described below. Intramed will
initiate development of the products described below once a corporate
partnership with an established medical device supplier has been completed.
Intramed would rely on a corporate partner to seek FDA approval for these
products, although no assurance can be given as to whether or when Intramed will
successfully complete development of any new products and obtain regulatory
approval. In addition, there is no assurance any such products would be
commercially successful.

NEUROSURGERY. Intramed believes that miniature endoscopy can be applied
to certain neurosurgical procedures. These would include placement. of shunts
for treatment of hydrocephalus, as well as biopsy and tumor resection. Intramed
believes that such procedures may be done more effectively and more easily when
guided by direct visualization with miniature endoscopes. Intramed has entered
into a development agreement, with a third party, the terms of which provide
funds for a program to develop products for this area.

OPHTHALMOLOGY. Traditional treatment methods for people suffering from
blockage of the tear ducts can involve traumatic surgery to the face. Intramed's
products have been used to explore the tear ducts and to guide mechanical or
laser devices to remove the blockages in a minimally invasive procedure.
Additionally, Intramed's products have been used for direct visualization within
the eye during. retinal surgery.

GENERAL. An important factor in Intramed's success will be acceptance
by surgeons of minimally invasive surgical procedures using Intramed's
miniaturized, single use endoscopes. A number of nonendoscopic surgical
procedures are currently performed to address medical applications for which
Intramed's products are intended. For certain applications, such procedures are
currently more generally accepted than minimally invasive procedures, and there
can be no assurance that minimally invasive procedures will gain greater
acceptance for these applications. For the vascular and general surgery markets,
this will require a significant investment by Intramed in physician education
and the willingness of physicians to learn and adopt new minimally invasive
procedures that use endoscopes. For the urology market, this involves
replacement of reusable endoscopes with single use endoscopes. Intramed
currently offers endoscopic products for use in specific areas of vascular,
general and urologic surgery. Intramed's long-term growth will depend upon its
ability to expand its product line and develop, produce and market additional
endoscopic and therapeutic products in these markets and to expand into other
surgical markets. There can be no assurance that Intramed will be able to do so
successfully, nor that the use of minimally invasive techniques in general, nor
of disposable endoscopic devices in particular, will be accepted by surgeons in
Intramed's existing markets or such other markets.

RESEARCH AND DEVELOPMENT

The medical device industry is characterized by extensive research efforts
and rapid technological progress. New technology and developments are expected
to continue at a rapid pace in both industry and academia. There can be no
assurance that such new technology and developments will not result in
procedures which become more generally accepted than minimally invasive
techniques. Intramed's research and development efforts are directed toward the
development of new miniature endoscopes and the therapeutic instruments wed in
conjunction with these

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endoscopes. The expertise of Intramed's seven person research and development
department in the fields of optics, biomaterials, catheter design and fiber
optic packaging has allowed Intramed to develop and refine its proprietary
technology in miniature endoscopy. Intramed also uses outside consultants to
assist in optical design and relies on its Scientific Advisory Board for the
advancement of ideas for new applications of its technology as well as for
clinical testing of new products. In addition, Intramed receives ideas from its
customers for new products as well as improvements for its existing designs.

Intramed incurred research and development expenses of approximately
$888,000, $909,000 and $1,006,000 in 1991, 1992 and 1993, respectively.

CUSTOMERS AND MARKETING

The principal customers for Intramed's products are hospitals which
purchase products based on the preference of their surgeons. Intramed currently
directly markets its products to more than 3,000 surgeons domestically and has
recently commenced marketing to surgeons internationally. Intramed believes that
education and training are critical to the adoption and proper use of endoscopes
by surgeons. Customer education is emphasized by supporting and participating in
a variety of medical education programs for endoscopy both domestically and
internationally. Intramed believes such medical education programs, by providing
surgeons with reports on clinical performance, have proven effective in
introducing particular minimally invasive procedures and in positioning
Intramed's products for these procedures. Intramed plans to expand its
educational efforts.

During 1993, Intramed converted from using primarily distributor
organizations to using primarily direct sales representatives for the domestic
distribution of its vascular surgery products. Intramed has twelve direct
employee sales representatives and uses five distributor organizations.
Internationally, Intramed's vascular surgery products are marketed by a network
of 20 distributor organizations in Western Europe, Canada and Asia-Pacific.
Distributors customarily purchase Intramed's products at a discount from the
list price and resell the products to hospitals. Intramed has an agreement with
each distributor that requires minimum purchases to maintain the exclusive
territory and bars the distributor from marketing competitive products.

The four person marketing staff manages and supports Intramed's direct
sales representatives and distributors by generating sales leads, conducting
product training sessions, exhibiting at medical meetings, creating sales
support materials, advertising in surgical journals and developing video tape
programs. Intramed is seeking a partner or distributor network for marketing
Intramed's general surgery products. In September 1992, Intramed entered into an
agreement with Linvatec, a subsidiary of Bristol Meyers Squibb, which granted to
Linvatec the exclusive rights to Intramed's technology and products for the
general and thoracic surgery markets. As part of the agreement, Linvatec paid a
license fee in consideration of development and marketing investments previously
made by Intramed, as well as committing to certain minimum purchases in each
contract year. In September 1993, Linvatec chose to relinquish these exclusive
distribution rights.

Intramed's urology products are marketed by Bard, a major heath care
company. In order to obtain funding resources and distribution for its urology
products, Intramed entered into a relationship in 1988 granting Bard the
exclusive right to distribute such products worldwide. Sales to Bard represented
39%, 24% and 12% of net sales in 1991, 1992 and 1993, respectively. Intramed has
also granted to Bard the right to distribute all future urological products. In
addition, before Intramed may enter into another corporate partner relationship
with regard to future gynecological products, Intramed must offer marketing
rights to Bard on a no less favorable basis. Intramed has also granted to Bard a
non-exclusive manufacturing license with regard to all products Bard
distributes. Bard's exercise of such license is contingent, however, upon
Intramed's failure to supply such products to Bard or bankruptcy. To date, Bard
has not exercised its manufacturing license with regard to any of Intramed's
products.

Intramed does not normally have any significant backlog, because its
practice is to ship product within 60 days after receipt of written order.

MANUFACTURING

Intramed's manufacturing operations consist primarily of assembly,
testing, inspection and packaging. Intramed's manufacturing facility contains a
clean room assembly area where the endoscopic products are produced, tested and
packaged. Intramed's products are sterilized at a certified laboratory and
tested for sterility before customer shipment. Intramed's quality control staff
tests all components manufactured by Intramed, as well as all

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individual components and subassemblies manufactured to Intramed's
specifications by outside contractors. The quality control staff also performs
finished goods quality control and inspection and maintains documentation for
compliance with the FDA's current Federal Good Manufacturing Practices
regulations.

Intramed manufactures all of its products at a single facility. Intramed
has qualified two or more sources for all of the components used in its
products, with the exception of one optical element, which is purchased from a
single source with several manufacturing plants. Intramed currently purchases
several components from a single supplier and would require time to obtain
components from the second source. Intramed has not experienced any supply
disruptions or disruption in its manufacturing operations to date. However,
Intramed would be adversely affected if it did not obtain components as required
and expand manufacturing capacity to meet demand or if its single facility were
disrupted.

Intramed warehouses sufficient components to meet its monthly production
needs and carries an inventory of finished goods adequate to meet its present
customers needs. Intramed's assembly operation is not capital intensive, and
Intramed believes that it could expand to accommodate its operations for the
foreseeable future by the addition of more space and personnel.

PATENTS AND PROPRIETARY TECHNOLOGY

Intramed's policy is to protect its technology by seeking patent
protection for its products when possible and to preserving its intellectual
property rights and trade secrets. Intramed has obtained three United States
patents and has made applications for an additional two U.S. patents covering
certain aspects of its technology including an angioscopic valvulotome device.
Intramed's patents expire in 2007, 2009 and 2010. Intramed has also applied for
corresponding foreign patents in Europe, Australia, Canada and Japan. Intramed
has also acquired rights to two United States patents and certain other
intellectual property rights relating to vascular surgery products. Intramed
holds two licenses to patents which expire in 2005. The patents only pertain to
certain portions of the Company's products. No assurance can be given that the
existing patents will be held valid if subsequently challenged, that any
additional patents will be issued or that the scope of any patent protection
will exclude competitors.

Intramed is not currently a party to any patent or other litigation, and
no infringement claims have been asserted against Intramed. However, there has
been substantial litigation regarding patent and other intellectual property
rights in the medical device industry. Litigation, which could result in
substantial cost to and diversion of effort by Intramed, may be necessary to
enforce patents issued to Intramed, to protect trade secrets or know-how owned
by Intramed or to defend Intramed against claimed infringement of the rights of
others and to determine the scope and validity of the proprietary rights of
others. Adverse determinations in litigation could subject Intramed to
significant liabilities to third parties, could require Intramed to seek
licenses from third parties and -could prevent Intramed from manufacturing,
selling or using its products, any of which could have a material adverse effect
on Intramed's business, financial condition and results of operations.

Intramed also relies upon unpatented proprietary technology and trade
secrets, and no assurance can be given that others will not independently
develop or otherwise acquire substantially equivalent proprietary technology and
trade secrets or disclose such technology or that Intramed can meaningfully
protect its rights in such unpatented technology. Intramed requires each of its
employees, consultants and advisors to execute a confidentiality agreement upon
the commencement of an employment, consulting or advisory relationship with
Intramed. There can be no assurance, however, that these agreements will provide
meaningful protection for Intramed's proprietary information in the event of
unauthorized we of disclosure of such information.

Intramed has federally registered "INTRAMED" as a trademark which
Intramed can continue indefinitely.

COMPETITION

Competition in the endoscopic industry is intense and is expected to
increase. There are numerous competitors in the general surgery and urology
markets, most of which provide reusable endoscopes. Intramed's principal
competition in the vascular marketplace is from Olympus Corporation, a
manufacturer of optical products including reusable endoscopes. Intramed
believes that there are a limited number of manufacturers of single use
endoscopes, although Intramed believes that it manufactures the only deflecting
single use endoscope, which is important for procedures involving curved body
structures. Intramed expects to encounter intense competition in any new markets
it enters with new endoscopic and therapeutic products. Many of Intramed's
competitors,

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particularly those competitors which are large medical and pharmaceutical
companies, have substantially greater financial, manufacturing, marketing and
technological resources than Intramed. These companies also have substantially
greater experience in research and development, obtaining regulatory approval
and manufacturing and marketing, and represent significant long-term competition
for Intramed. There can be no assurance that the Company's competitors will not
succeed in developing technologies and products that are more effective than
those being developed by Intramed or that would render Intramed's technology,
existing products and proposed products obsolete or noncompetitive.

Intramed believes that the primary competitive factors within the
endoscopic market are optical quality, innovation, price, product reliability
and ease of use. In addition, Intramed believes that the relative speed with
which companies can develop products, complete clinical testing, obtain
regulatory approval and supply commercial quantities of the product to the
market are also important competitive factors. Although many of Intramed's
competitors have greater resources than Intramed, Intramed believes that it
currently competes favorably with respect to each of the foregoing competitive
factors.

A number of non-endoscopic surgical procedures are currently performed to
address medical indications for which Intramed's products are intended. For
certain indications, such procedures are currently more generally accepted than
minimally invasive procedures, and there can be no assurance that minimally
invasive procedures will gain greater acceptance for these indications.

GOVERNMENT REGULATION

The manufacture and marketing of Intramed's products are subject to
extensive and rigorous federal and state regulation in the United States and to
various regulatory requirements in other countries. Intramed and its products
are regulated by the FDA under a number of statutes including the Federal Food,
Drug, and Cosmetic Act (the "FDC Act"). The FDC Act provides two basic review
procedures for medical devices. Certain products may qualify for a submission
authorized by Section 510(k) of the FDC Act, wherein the manufacturer gives the
FDA a premarket notification of the manufacturer's intention to commence
marketing the product. The manufacturer must, among other things, establish
that the product to be marketed is substantially equivalent to another legally
marketed product. In some cases, the manufacturer must include data gathered
under an investigational device exemption ("IDE") granted by the FDA allowing
human clinical studies. Marketing may commence when the FDA issues a letter
finding substantial equivalence. To date, Intramed has received a 510(k)
marketing clearance finding substantial equivalence from the FDA for all its
products, although there can be no assurance that in the future Intramed will
continue to receive 510(k) clearances for its products. In addition, from time
to time, Intramed makes minor modifications to its existing products, which
Intramed believes do not require separate 510(k) clearance. There can be no
assurance, however, that the FDA will not take a contrary position.

If a medical device does not qualify for the 510(k) procedure, the
manufacturer must file a pre-market approval ("PMA") application. This requires
more extensive prefiling testing than the 510(k) procedure and involves a
significantly longer FDA review process. FDA approval of a PMA application
occurs after the applicant has established safety and efficacy to the
satisfaction of the FDA under an IDE procedure requiring preclinical laboratory
and animal tests and human clinical studies. Approval of a PMA application
includes specific requirements for labelling of the medical device with regard
to appropriate indications for use.

Intramed is registered as a medical device manufacturer with the FDA and
state agencies, such as the Food and Drug Branch of the California Department of
Health Services. Intramed is subject to inspection on a routine basis by both
the FDA and the state of California for compliance with the FDA's current Good
Manufacturing Practice regulations. Those regulations impose certain procedural
and documentation requirements upon Intramed with respect to manufacturing and
quality assurance activities. Additionally, Intramed must comply with various
FDA requirements for design, safety, advertising, labelling, recordkeeping and
reporting of adverse experiences with the use of the product. The FDA actively
enforces regulations prohibiting marketing of products for non-indicated uses.
Failure to comply with applicable regulatory requirements can result in, among
other things, fines, suspensions or loss of approvals, seizures or recalls of
products, operating restrictions and criminal prosecutions. Changes in existing
requirements or adoption of new requirements could affect adversely the ability
of Intramed to comply with regulatory requirements. Failure to comply with
regulatory requirements could have a material adverse affect on Intramed's
business, financial condition and results of operations.

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Intramed is also subject to regulation in each of the foreign countries in
which it sells its products. Many of the regulations applicable to Intramed's
products are similar to those of the FDA. However, the national health or social
security organizations of certain countries require Intramed's products to be
qualified before they can be marketed in those countries. To date, Intramed has
not experienced significant difficulty in complying with these regulations.

In addition to being regulated by the FDA, Intramed is also subject to
regulation under the Occupational Safety and Health Act, the Environmental
Protection Act, the Toxic Substances Control Act, the Resource Conservation and
Recovery Act and other current and potential future federal, state and local
regulations.

There can be no assurance that Intramed will obtain timely regulatory
approval for its future products, or that existing approvals will not be
withdrawn. Moreover, regulatory approvals, if granted, may include significant
limitations on the indicated uses for which a product may be marketed. Failure
to comply with applicable regulatory requirements can, among other consequences,
result in fines, suspensions of regulatory approvals, product recalls, seizure
of products, operating restrictions and criminal prosecution. In addition,
governmental regulations may be established that could prevent or delay
regulatory approval of Intramed's products. Delays in receipt of, or failure to
receive, approvals, or the loss of previously received approvals, could have a
material adverse effect on Intramed's business, financial condition and results
of operations.

REIMBURSEMENT

Intramed's products are purchased by hospitals and other users, which bill
various third-party payors, such as governmental programs and private insurance
plans, for the health-care services provided to their patients. Third-party
payors carefully review and are increasingly challenging the prices charged for
medical products and services. While to date Intramed believes that procedures
using its products have generally been reimbursed, payors could deny
reimbursement if they determine that the device used in the procedure was not
used in accordance with established payor protocol regarding cost-effective
treatment methods, was experimental, or was used for an unapproved indication.
The federal government is currently reevaluating its policies and procedures
regarding medical reimbursement. This has led to general uncertainty regarding
future reimbursement for medical products. Failure by hospitals and other users
of Intramed's products to obtain reimbursement from third-party payors and/or
changes in government and private third-party payors' policies toward
reimbursement for procedures employing Intramed's products could have a material
adverse effect on Intramed's business, financial condition and results of
operations.

Government agencies generally reimburse hospitals for medical treatment at
a fixed rate according to diagnosis-related groups ("DRGs") regardless of the
particular procedure performed or devices used. Whether or not the DRG
reimbursement is sufficient to cover the hospital's actual costs in a particular
case, the ceiling on reimbursement may provide an incentive to reduce such
costs. To the extent that DRGs, and similar programs of private insurers,
provide such an incentive, Intramed believes that they may promote the use of
minimally invasive diagnostic and surgical procedures such as endoscopy which
reduce post-operative hospitalization costs.

Fees for physicians' and surgeons' services are paid by Medicare and other
third-party payors on the basis of what physicians and surgeons have charged for
the particular type of procedure or service. Medicare payments of physicians'
surgical fees will, over a five-year period beginning in 1992, shift to a fee
schedule based on the resource-based relative value of the services rendered.

PRODUCT LIABILITY AND INSURANCE

Medical device companies are subject to an inherent risk of product
liability and other liability claims in the event that the use of their products
results in personal injury. Intramed maintains product liability insurance with
coverage of $5 million per occurrence and an annual aggregate maximum of $5
million. There can be no assurance that a future claim will not exceed insurance
coverage or that such coverage will continue to be available. Although Intramed
has not experienced any product liability claims to date, any such claims could
have an adverse impact on Intramed's business, financial condition and results
of operations.

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EMPLOYEES

As of March 1, 1994, Intramed had 41 employees including 7 in research and
development, 9 in manufacturing, 3 in quality assurance and regulatory affairs,
18 in marketing and sales, and 4 in administration. Intramed believes that the
success of its business will depend, in part, on its ability to attract and
retain qualified personnel. There can be no assurance that Intramed will be able
to attract and retain the qualified personnel or develop the expertise needed
for its business. Intramed currently has a small research and management group.
The loss of the services of one or more members of the research or management
group or the inability to hire additional personnel and develop expertise as
needed would have an adverse effect on Intramed. Intramed believes that it has a
good relationship with its employees.

PROPERTIES

Intramed leases an approximately 12,000 square foot facility in San Diego,
California under a lease expiring in December 1994. This facility contains
approximately 3,000 square feet of clean room space, 3,000 square feet of
warehouse and 6,000 square feet of offices and research lab space.

INTRAMED MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

INTRODUCTION

Intramed was formed in April 1987 and commenced research and development
of its initial endoscope products for the urology market. These products were
introduced commercially in June 1989, and are marketed and distributed by Bard
pursuant to a corporate partnership. Intramed commercially introduced its
initial products for the vascular market in the fourth quarter of 1990. These
products are being marketed and distributed by Intramed through a combination of
direct sales representatives and independent distributor organizations. Intramed
commercially introduced its initial products for the general surgery market in
the third quarter of 1991. In September 1992, Intramed entered into an agreement
with Linvatec, a subsidiary of Bristol-Myers Squibb, which granted Linvatec the
exclusive rights to distribute Intramed's technology and products for the
general and thoracic surgery markets. Linvatec began distribution of such
products in December 1992. In September 1993, Linvatec chose to relinquish its
exclusive distribution rights and has made only minor purchases since that date.
Intramed is committed to continued research and development of new products.

On March 30, 1994, Intramed and shareholders holding a majority of
Intramed's outstanding Common Stock entered into an Agreement and Plan of
Reorganization with Baxter International Inc. and a Baxter subsidiary, pursuant
to which Baxter has agreed (i) to purchase from the Majority Shareholders a
controlling interest in Intramed effective in early April, 1994, and (ii) to
acquire the remaining outstanding shares of Intramed pursuant to a merger of
Intramed into a Baxter subsidiary as soon as possible after obtaining all
necessary regulatory approvals, the approval of Intramed's shareholders and the
satisfaction of certain other conditions. The consideration to be issued in the
transaction, regardless of whether shares are sold directly to Baxter by the
Majority Shareholders or acquired by Baxter through the Merger, will be
approximately $2.72 of Common Stock of Baxter International Inc. per share of
Intramed, valuing the Baxter stock at its average market price over the ten days
prior to the effectiveness of the Merger.

RESULTS OF OPERATIONS

NET SALES. Net sales decreased from $3.13 million in 1991 to $2.86
million in 1992 and $2.73 million in 1993. Urology products sold to Bard
represented 39%, 24% and 12% of net sales for 1991, 1992 and 1993, respectively.
The remainder of sales consisted of sales of vascular and general surgery
products. From 1992 to 1993 vascular surgery product sales increased 8% and
general surgery product sales increased 15%. The increase in vascular surgery
and general surgery product sales in 1993, however, were not enough to offset a
52% decline in urology product sales, causing total sales to decrease from 1992
to 1993. Similarly an 85% increase in general surgery product sales and
unchanged vascular surgery product sales from 1991 to 1992 were not enough to
offset a 44% decline in urology product sales, which resulted in total sales
decreasing from 1992 to 1991. The decrease in sales to Bard from 1992 to 1993
was due in part to original stocking orders placed by Bard in 1992 for
Intramed's rigid urology scope which was introduced in January 1992. All of the
1993 sales and nearly all of the 1992 sales of urology endoscopes to Bard were
for rigid scopes. The decrease in sales to Bard from 1991 to 1992

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was due to a decline in demand for Intramed's flexible urology products.
Intramed believes that the market for urology endoscopes in general has shifted
to a greater emphasis on rigid scopes. Intramed believes that urologists have
generally found the rigid scopes to be easier to use than the flexible scopes.
In January 1993, Bard discontinued sales of the deflecting tip flexible
urethroscope. In the fourth quarter of 1992, Intramed recorded a reserve of
$255,000 for anticipated costs associated with the withdrawal of this product.
In 1993, Intramed recorded contract revenues relating to Bard's failure to meet
contractual minimum purchases. While Intramed's diversification into vascular
and general surgery products has offset the declining urology product sales to
Bard, if urology product sales continue to decline, such other product sales
will need to increase to avoid further adverse effects to Intramed. Primarily
due to the high level of competition in the urology market, especially from
reusable scopes, Intramed is not planning significant growth in this market.

During 1993, Intramed converted most of its domestic sales effort for
vascular surgery products from an independent distribution network to direct
sales representatives. Intramed believes that the increased level of customer
support available with a direct employee sales force should increase sales to
the vascular surgeon. In 1993, Intramed entered into an agreement with a
distributor to establish initial distribution for vascular products in France
and Germany. Intramed has used distributors to sell the vascular surgery
products in Western Europe, Canada and Australia. Intramed also introduced in
1993 a new reusable vascular scope in the international market. Intramed
believes that direct sales representation in the domestic market and increased
emphasis on the international market caused the increase in vascular product
sales from 1992 to 1993 and will provide continued growth for what is now
Intramed's largest product line.

In September 1992, Intramed entered into an agreement with Linvatec, a
subsidiary of Bristol-Meyers Squib, which granted to Linvatec the exclusive
rights to distribute Intramed's products for the general and thoracic surgery
markets. Linvatec began distribution in December 1992. In connection with this
agreement, Intramed recorded licensing fees of $400,000 in 1992. In September
1993, Linvatec chose to relinquish the exclusive distribution rights to
Intramed's general and thoracic surgery products and paid to Intramed $178,000
in additional licensing and termination fees. Intramed is seeking an
alternative channel of distribution for its general surgery products, and
anticipates sales for this product line will be lower in 1994 compared to 1993
sales. Intramed recorded contract revenues of $120,000 in 1993 relating to
Bard's failure to meet contractual minimum purchases. In addition, Intramed
received $50,000 in licensing fees in 1993 from a distributor for the right to
distribute certain of Intramed's products.

COST OF SALES. Intramed's gross margin on product sales as a percent of
net sales increased from 23.9% in 1991 to 26.9% in 1992 to 34.7% in 1993. The
increased gross margin as a percentage of net sales from 1991 to 1992 and from
1992 to 1993 was due to the decline as a percentage of net sales of urology
product sales, which have a lower gross margin than Intramed's other products
and the increase as a percentage of net sales of vascular surgery products
sales, which generally have the highest gross margin of Intramed's products. In
addition, in 1993 a portion of the vascular surgery products were sold through
the direct employee sales force which provided higher gross margins than sales
through the regional distributors.

RESEARCH AND DEVELOPMENT. Research and development expenses increased
from $888,000 in 1991 to $909,000 in 1992 and $1,006,000 in 1993. These
increases were due to higher prototype production and testing. The increase in
1992 related primarily to development and introduction of Intramed's angioscopic
valvulotome, and the increase in 1993 was due to the development and
introduction of a reusable angioscope for sale in the international marketplace.
Research and development expenses as a percentage of net sales increased from
28.4% in 1991 to 31.8% in 1992 to 36.9% in 1993 as a result of spreading
increasing research and development expenditures over decreasing net sales.
Intramed plans to decrease its research and development expenditures in 1994.

SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and
administrative expenses increased from $1,389,000 in 1991 to $2,182,000 in 1992
and to $2,494,000 in 1993. The 57% increase from 1991 to 1992 was due to
increased direct marketing efforts for the vascular and general surgery
products, as well as additional administrative expenses associated with being a
publicly held company. The 14% increase from 1992 to 1993 was primarily due to
the cost of establishing a direct sales force in the domestic marketplace for
the vascular product line. Intramed anticipates that selling, general and
administrative costs will continue to increase in 1994 primarily due to the
incurring of a full year of expenditures relating to the direct sales force for
vascular products.

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INCOME TAXES. At December 31, 1993, Intramed had net operating loss
carryforwards for federal income tax purposes of approximately $8,500,000 which
will begin to expire in 1998 if not utilized to offset future income. In
addition, Intramed had research and development tax credit carryforwards of
$330,000 at December 31, 1993. Pursuant to the Tax Reform Act of 1986, annual
utilization of Intramed's net operating loss and research and development tax
credit carryforwards will be limited, because in 1991 Intramed experienced a
cumulative change in ownership of more than 50% for federal-income tax purposes.
The sale of Intramed Common Stock by the Majority Shareholders to Baxter also
constituted such a change in ownership in 1994.

NET LOSS. Intramed has incurred a net loss in each year since inception
and anticipates it will incur a substantial net loss in fiscal 1994. Intramed
expects that selling, general and administrative expenses will continue to
increase during 1994, as Intramed expands its sales and marketing staff and
activities. In order to become profitable, Intramed must successfully increase
sales of its existing products, develop new products for its existing markets,
increase gross margins through higher volumes and manufacturing efficiencies,
manage its operating expenses and expand its distribution capability. There is
no assurance that Intramed will achieve profitability.

Intramed believes that there are a number of trends and factors in the
market for Intramed's products which could affect Intramed's future operating
results. Intramed believes that trends are occurring which favor a growth in
minimally invasive surgery, an increasing need for procedure-specific endoscopic
devices, and a preference for single use rather than reusable products to
minimize the risk of hospital-related patient infections, and that such trends
could affect the market acceptance of Intramed's products. There can be no
assurance, however, that such trends, to the extent that they actually are
occurring, will continue, nor what their actual effect will be upon Intramed's
results of operations. In addition, factors such as the intense competition and
rapid technological change inherent in Intramed's markets, the reimbursement
policies of third-party payors, and the regulatory requirements and actions by
various government bodies could also have a material adverse effect on
Intramed's results of operations.

BALANCE SHEET ACCOUNTS

Accounts receivable were $270,000 at December 31, 1993 compared to
$664,000 at December 31, 1992. This was due to the shipment of a stocking order
to Linvatec of approximately $300,000 in December 1992. Inventories were
$1,271,000 at December 31, 1993 compared to $752,000 at December 31, 1992. The
distribution channel for Intramed's products changed from selling primarily to
large distributors, such as Bard, Linvatec, and stocking distributors for the
vascular product line in 1992 to selling primarily directly to hospitals through
a direct employee sales force for domestic vascular sales in the second half of
1993. This required Intramed to maintain a larger stock of finished goods
inventory. In addition, Intramed made a large purchase of a raw material item
in 1993 which is the most expensive component of Intramed's products. The
purchase was made to obtain favorable pricing. This caused raw material
inventory to increase in 1993 compared to 1992. Accounts receivable increased
from $270,000 at December 31, 1993 to $504,000 at June 30, 1994 due to an
increase in net sales from $519,000 in the fourth quarter of 1993 to $796,000 in
the second quarter of 1994. Accounts payable increased from $251,000 at
December 31, 1993 to $393,000 at June 30, 1994 due in part to accruals made
relating to the acquisition of Intramed by Baxter. Accrued payroll and related
expenses increased from $112,000 at December 31, 1993 to $212,000 at June 30,
1994 due to the timing of pay periods, which required more pay days to be
accrued at June 30, 1994 and due to a larger accrual for salesperson's
commission, as a result of higher sales.

LIQUIDITY AND CAPITAL RESOURCES.

As of December 31, 1993, Intramed had cash and cash equivalents of
$1,175,000 and working capital of $2,223,000. In comparison, Intramed had cash,
cash equivalents and short-term investments and working capital of $3,170,000
and $4,237,000, respectively as of December 31, 1992. The decrease was caused by
cash of $1,845,000 used to fund operations and $176,000 to fund investments in
property and equipment and patent and technology rights. Intramed received
$26,000 for the issuance of common stock to employees through the Employee Stock
Purchase Plan.

Intramed has no significant commitments for the purchase of capital
equipment. Intramed's raw material inventory balance increased in 1993 compared
to 1992, due to minimum order purchase commitments for certain product
components which were fulfilled in January of 1994. Finished goods inventory
increased in 1993 compared

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to 1992 due to lower than anticipated sales volume in the second half of 1993.
Intramed anticipates that inventory balances will decrease in 1994.

Intramed requires working capital to fund its ongoing business operations,
including research and development of new products and expansion of Intramed's
sales and marketing staff and activities and distribution networks, including
continued expansion of direct marketing activities. Since inception and through
December 31, 1993, Intramed has incurred losses of approximately $9.8 million.
Attaining profitable operations is dependent upon a number of factors, including
but not limited to Intramed's ability to increase sales of its existing markets,
increase gross margins, through higher volumes and manufacturing efficiencies,
manage its operating expenses, expand its distribution capability and obtaining
additional equity or debt financing. In response to these uncertainties,
Intramed entered into the Reorganization Agreement. If the Merger does not
occur, Intramed would need to raise additional equity or debt financing. There
can be no assurance that such financing would be available.

EXECUTIVE OFFICERS AND DIRECTORS OF INTRAMED

The following table sets forth certain information with respect to the
executive officers and directors of Intramed:

Name Age Position with Intramed

Stuart L. Foster . . . 43 President, Chief Executive
Officer and Director

Stephen A. Sosnowski . 39 Vice President, Research and
Development and Operation, Secretary
and Director

Alan J. Schempp . . . . 41 Vice President, Business Development

Steven J. McGowan . . . 38 Vice President, Finance and
Administration and Chief Financial
Officer

Kerry Pope, Jr. . . . . 48 Vice President, Sales and Marketing

Thomas Fogarty, M.D. . 60 Director

Pieter Halter . . . . . 49 Director

John Walker . . . . . . 45 Director

STUART L. FOSTER joined Intramed in January 1990 as Vice President,
Research and Development and since January 1992 has been its President, Chief
Executive Officer and a Director. From December 1983 to July 1989, he was with
SensorMedics Corporation, a medical device company which he co-founded, most
recently as its Vice President and General Manager. Mr Foster left SensorMedics
in July 1989 to become an independent consultant in the medical device industry.
Mr. Foster has a B.S. and M.S. in Biomedical Engineering from Rensselaer
Polytechnic Institute and the University of Southern California, respectively.

STEPHEN A. SOSNOWSKI, a co-founder of Intramed, has been its Vice
President, Operations, Secretary and a Director since July 1987. He became Vice
President, Research and Development in February 1992. Prior to co-founding
Intramed, Mr Sosnowski held management positions with the Edwards division of
Baxter Healthcare Corporation, which specialized in cardiovascular catheters.
Mr. Sosnowski has a B.A. in Chemistry and Biology from Chapman University, and
an M.B.A. from the University of Phoenix.

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ALAN J. SCHEMPP, a co-founder of Intramed, was its Vice President, Sales
and Marketing from September 1989 to December 1992, has been its Vice President,
Business Development since January 1993 and from July 1987 through February 1988
was a Director. From August 1988 to August 1989, he was Vice President, Sales
and Marketing of Paramed Technology, Inc. Mr. Schempp has a B.F.A. in
Architectural Design from the University of Kansas and an M.B.A. from the
University of Phoenix.

STEVEN J. MCGOWAN joined Intramed in June 1990 as Controller and since
January 1992 has been its Vice President, Finance and Administration. From
December 1987 to June 1990, he was with Luminous Bond, a consulting group which
provided legal and financial services to privately held companies with common
ownership. Mr. McGowan has a B.A. in Economics from the University of
California, San Diego and an M.S. in Accounting from San Diego State University.
Mr. McGowan is a Certified Public Accountant and prior to his industry
experience spent four years as a Senior Auditor at Ernst & Young.

KERRY POPE, JR. joined Intramed in September 1993. From 1986 through June
1993, he served in increasingly responsible positions with Vitaphore
Corporation, a manufacturer and marketer of high-end collagen-based medical
devices, culminating in the position of Vice President, Marketing and Sales.
Prior to that, Mr. Pope held various sales and marketing positions with Neuro
Science, Inc., Diasonics, Inc. and American Hospital Supply Corporation, and
with DiaMed Healthcare Systems, Inc. as a founder and President. Mr. Pope served
as an officer in the United States Air Force and received his B.S. in business
from the University of Maryland.

DR. THOMAS FOGARTY has been a Director of the Company since June 1992.
Dr. Fogarty is a Professor of Surgery at Stanford University Medical School in
California. He has been issued patents on numerous medical devices utilized
primarily in cardiovascular surgery. Dr. Fogarty founded and has served as a
director of several privately held companies and is currently a director of
Cardiovascular Imaging Systems, Inc., a publicly held company. He holds an M.D.
from the University of Cincinnati.

PIETER HALTER has been a Director of the Company since January 1989. He
has been a General Partner of Southern California Ventures, a venture capital
firm, since January 1988. From January 1979 to December 1987, Mr. Halter was
the President and Chief Executive Officer of Biomedical Business International,
a health-care information company which he founded. He is currently the
technology editor for MedPro Month, a newsletter for medical industry
executives. Mr. Halter is also President of Medical Data International,Inc.,
the publisher of MedPro Month.

JOHN WALKER has been a Director of the Company since January 1992 and
Chairman of the Board since June 1992. Since August 1991, he has been a limited
partner of Alpha Partners, a venture capital fund. Since February 1993, Mr.
Walker has been President and Chief Executive Officer of Arris Pharmaceutical
Corporation, a biopharmaceutical company. From July 1986 to December 1991, he
was Chairman of the Board and Chief Executive Officer of Vitaphore Corporation,
a manufacturer of medical devices which was acquired by Union Carbide Chemicals
and Plastics, Inc. in April 1990. Prior to that, he spent 15 years at American
Hospital Supply Corp., where he served as president of its division, The
American Hospital Company.

The term of office of each person elected as a director will continue
until the next annual meeting of shareholders or until his or her successor has
been elected.

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SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT

As of April 15, 1994, there were 3,556,620 shares of Intramed Common Stock
issued and outstanding. The following table sets forth the beneficial ownership
of Common Stock of Intramed as of April 15, 1994 by: (a) each director and each
nominee for director; (b) each executive officer; (c) all directors and
executive officers as a group; and (d) each person known to Intramed to be the
beneficial owner of more than 5% of the outstanding shares of its Common Stock.

Name and Address of Beneficial Owner Shares Beneficially Owned (1)
------------------------------------ -----------------------------
Number Percent

Baxter International Inc. (2)
One Baxter Parkway
Deerfield, IL 60015 2,081,555 58.5%

Southern California Ventures II (3)(10)
2 Park Plaza, Suite 750
Irvine, CA 92714 611,075 17.1%

Alpha Venture Partners III (4)(11)
2200 Sand Hill Road
Menlo Park, CA 94025 494,974 13.8%

C.R. Bard, Inc. (5)(12)
731 Central Avenue
Murray Hill, NJ 07074 316,411 8.7%

Robertson, Stephens and Company (6)
555 California Street
San Francisco, CA 94104 340,500 8.7%

Special Situations Fund III, L.P.
625 Madison Avenue
New York, NY 10022 248,800 8.0%

Stephen A. Sosnowski (7)(16)(17)
11100 Roselle Street
San Diego, CA 92121 147,400 4.1%

Pieter Halter (13)(16) 611,075 17.1%

John Walker (14)(16) 494,974 14.0%

Thomas Fogarty, M.D. (8)(16) 68,207 1.9%

Stuart L. Foster (16)(17) 12,426 0.3%

Alan J. Schempp (9)(17) 163,468 4.6%

Kerry Pope, Jr. (17) 15,000 0.4%

Steven J. McGowan (17) 1,929 0.1%

All directors and officers as a group (8 persons) (15)
1,519,479 42.2%

(1) Beneficial
ownership is determined in accordance with the rules of the Securities and
Exchange Commission and generally includes voting or investment power with
respect to securities. Shares of Comon Stock subject to options, warrants
and convertible notes currently exercisable or convertible, or exercisable
or convertible within 60 days are deemed outstanding for computing the
percentage of the person holding such options but are not deemed
outstanding for computing the percentage of any other person. Except as
indicated by footnote, and subject to community property laws where
applicable, the

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persons named in the table above have sole voting and investment power
with respect to all shares of Common Stock shown as beneficially owned by
them.

(2) In connection with the proposed acquisition of Intramed by Baxter, Baxter
has acquired 2,081,555 shares of Intramed's Common Stock from the Majority
Shareholders pursuant to the Reorganization Agreement.

(3) In connection with the proposed acquisition of Intramed by Baxter,
Southern California Ventures II sold 585,875 shares of the Common Stock
beneficially owned by it to Baxter as a Majority Shareholder pursuant to
the Reorganization Agreement.

(4) In connection with the proposed acquisition of Intramed by Baxter, Alpha
Venture Partners III sold 474,974 shares of the Common Stock beneficially
owned by him to Baxter as a Majority Shareholder pursuant to the
Reorganization Agreement.

(5) In connection with the proposed acquisition of Intramed by Baxter, C.R.
Bard, Inc. sold 256,411 shares of the Common Stock beneficially owned by
it to Baxter as a Majority Shareholder pursuant to the Reorganization
Agreement.

(6) In connection with the proposed acquisition of Intramed by Baxter,
Robertson, Stephens and Company sold 310,500 shares of the Common Stock
beneficially owned by it to Baxter as a Majority Shareholder pursuant to
the Reorganization Agreement.

(7) In connection with the proposed acquisition of Intramed by Baxter, Mr.
Sosnowski sold 128,548 shares of the Common Stock beneficially owned by
him to Baxter as a Majority Shareholder pursuant to the Reorganization
Agreement.

(8) In connection with the proposed acquisition of Intramed by Baxter, Dr.
Fogarty sold 61,779 shares of the Common Stock beneficially owned by him
to Baxter as a Majority Shareholder pursuant to the Reorganization
Agreement.

(9) In connection with the proposed acquisition of Intramed by Baxter, Mr.
Schempp sold 163,468 shares of the Common Stock beneficially owned by him
to Baxter as a Majority Shareholder pursuant to the Reorganization
Agreement.

(10) Includes 25,200 shares issuable upon exercise of warrants.

(11) Includes 19,800 shares issuable upon exercise of warrants.

(12) Includes 60,000 shares issuable upon exercise of warrants.

(13) Southern California Ventures II, of which Mr. Halter is a general partner,
owns 611,075 shares of Intramed Common Stock. Mr. Halter disclaims
beneficial ownership of these shares.

(14) Alpha Venture Partners III, of which Mr. Walker is a general partner, owns
494,974 shares of Intramed Common Stock. Mr. Walker disclaims beneficial
ownership of these shares.

(15) Includes shares held by entities affiliated with certain directors, as
described in footnotes (13) and (14).

(16) The person indicated is a director of the Company.

(17) The person indicated is an officer of the Company.

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INTRAMED INFORMATION INCORPORATED BY REFERENCE

For certain information with respect to Intramed and historical financial
information, see Intramed's Quarterly Reports on Form 10-QSB for the quarters
ended March 31, 1994 and June 30, 1994 incorporated by reference in this Proxy
Statement/Prospectus. See "Incorporation of Certain Documents by Reference."

DESCRIPTION OF BAXTER CAPITAL STOCK

Baxter is authorized to issue up to 350,000,000 shares of Baxter Common
Stock, par value $1.00 per share, 277,148,631 shares of which were issued and
outstanding or held in treasury at April 30, 1994 and, at April 30, 1994
beneficially owned by approximately 81,000 stockholders. In addition, Baxter is
authorized to issue up to 100,000,000 shares, no par value, preferred stock
("Baxter Preferred Stock"). As of April 30, 1994 there were no shares of Baxter
Preferred Stock outstanding.

BAXTER COMMON STOCK

The holders of Baxter Common Stock are entitled to one vote per share on
all matters to be voted upon by the stockholders. Subject to the rights of
holders of Baxter Preferred Stock, the holders of Baxter Common Stock are
entitled to receive such dividends as may be declared from time to time by the
Board of Directors out of funds legally available therefor and in the event of
liquidation, dissolution or winding-up of Baxter, to share ratably in all assets
remaining after payment of all liabilities. The holders of Baxter Common Stock
received a dividend of one preferred stock purchase right for each share of
Baxter Common Stock held of record, which is described in more detail under
"Description of Baxter Capital Stock--Preferred Stock Purchase Rights." The
holders of Baxter Common Stock have no preemptive or conversion rights and are
not subject to further calls or assessments by Baxter. There are no redemption
or sinking fund provisions applicable to the Baxter Common Stock.

PREFERRED STOCK AND SHAREHOLDER RIGHTS PLAN

PREFERRED STOCK. Baxter's Restated Certificate of Incorporation
provides that the Board of Directors may issue an aggregate of 100,000,000
shares of Baxter Preferred Stock from time to time in one or more series.

The Baxter Board of Directors is authorized to determine, among other
things, with respect to each additional series which may be issued: (i) the
dividend rate, conditions and preferences, if any; (ii) whether dividends will
be cumulative and, if so, the date from which dividends will accumulate; (iii)
whether, and to what extent, the holders of a series will enjoy voting rights,
if any, in addition to those prescribed by law; (iv) whether and upon what
terms, a series will be convertible into or exchangeable for shares of any other
class of capital stock or other series of Baxter Preferred Stock; (v) whether,
and upon what terms, a series would be redeemable; (vi) whether a sinking fund
will be provided for the redemption of a series and, if so, the terms and
conditions of the sinking fund, and (vii) the preference if any, to which a
series will be entitled on voluntary or involuntary liquidation, dissolution or
winding up of Baxter. With regard to dividends, redemption and liquidation
preference, any particular series of Baxter Preferred Stock may rank junior to,
on a parity with, or senior to any other series of Baxter Preferred Stock and
Baxter Common Stock. The Board of Directors, without shareholder approval, can
issue Baxter Preferred Stock with voting and conversion rights which could
adversely affect the voting power of the holders of Baxter Common Stock. The
issuance of Baxter Preferred Stock under certain circumstances could have the
effect of delaying or preventing a change of control of Baxter or other
corporate action.

SERIES A JUNIOR PARTICIPATING PREFERRED STOCK. Baxter's Restated
Certificate of Incorporation provides that the Baxter Board of Directors shall
issue an aggregate of 3,500,000 shares of Baxter Preferred Stock, no par value,
to be designated Series A Junior Participating Preferred Stock (the "Series A
Preferred Stock").

PREFERRED STOCK PURCHASE RIGHTS. During 1989, holders of Baxter Common
Stock received a dividend of one preferred stock purchase right (collectively,
the "Rights") for each share of Baxter Common Stock held of record. Each Right
entitles the registered holder to purchase from Baxter one one-hundredth of a
share of Series A Preferred Stock for $70.00. The Rights will become
exercisable (and transferable apart from the Baxter Common Stock) on the earlier
of (i) 10 days following a public announcement that a person or group has
acquired 20% or

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more of the Baxter Common Stock, or (ii) 10 business days following the
commencement of an offer to acquire 20% or more of the Common Stock.

If, after the Rights become exercisable, any person or group (the
"Acquirer") acquires 20% or more of the Baxter Common Stock (except pursuant to
an offer for all outstanding shares of Baxter Common Stock which the independent
directors determine to be fair to and otherwise in the best interests of Baxter
and its stockholders), each Right may be exercised for Baxter Common Stock (or,
in certain circumstances, cash, other property or securities) having a value of
$140.00. In specified circumstances, each Right may be exercised for common
stock of an acquiring entity having a value of $140.00. All Rights held by the
Acquirer will be null and void. Baxter may generally redeem the Rights at a
price of $.01 per Right at anytime until 10 days following a public announcement
that a person or group has acquired 20% or more of the Baxter Common Stock. The
Rights will expire on March 20, 1999, unless earlier redeemed.

OPTIONS, STOCK SUBSCRIPTIONS, RESTRICTED STOCK AND PERFORMANCE SHARES

At March 31, 1994, options covering an aggregate of 12,940,006 shares of
Baxter Common Stock were outstanding pursuant to various Baxter employee stock
option plans.

At March 31, 1994, stock subscriptions covering an aggregate of 2,327,847
shares of Baxter Common Stock were outstanding pursuant to certain Baxter
employee stock purchase plans.

At March 31, 1994, restricted stock covering an aggregate of 1,329,316
shares of Baxter Common Stock and performance shares covering an aggregate of
49,547 shares of Baxter common Stock were outstanding pursuant to various
compensation plans of Baxter.

BAXTER DIVIDEND POLICY

For the fiscal year ended December 31, 1993, Baxter declared cash
dividends of $1.00 per share on its Common Stock and as of March 31, 1994,
Baxter declared cash dividends at an annualized rate of $1.00 per share on its
Common Stock. Baxter plans to increase future dividends in line with
improvements in earnings and cash from performance.

DESCRIPTION OF INTRAMED CAPITAL STOCK

Intramed is authorized to issue up to 20,000,000 shares of Intramed Common
Stock, no par value, 3,564,589 shares of which were issued and outstanding at
August 31 1994 and held of record by approximately 75 shareholders. In
addition, Intramed is authorized to issue up to 5,000,000 shares, no par value,
of preferred stock ("Intramed Preferred Stock") from time to time in one or more
series. As of August 31, 1994, there were no shares of Intramed Preferred Stock
outstanding.

INTRAMED COMMON STOCK

The holders of Intramed Common Stock are entitled to one vote per share on
all matters to be voted upon by the shareholders and they may cumulate their
votes in the election of directors. Subject to the rights of holders of
Intramed Preferred Stock, the holders of Intramed Common Stock are entitled to
receive such dividends as may be declared from time to time by the Intramed
Board of Directors out of funds legally available therefor. The holders of
Intramed Common Stock have no preemptive or conversion rights and are not
subject to further calls or assessments by Intramed. There are no redemption or
sinking funds provisions applicable to the Intramed Common Stock.

PREFERRED STOCK

Intramed's Amended and Restated Articles of Incorporation provide that the
Board of Directors may issue an aggregate of 5,000,000 shares of Intramed
Preferred Stock from time to time in one or more series.

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The Intramed Board of Directors is authorized to determine, among other
things, the designations of any additional series of Intramed Preferred Stock
and to determine the rights, preferences, privileges and restrictions granted to
or imposed upon any wholly unissued series of Intramed Preferred Stockholders.

OPTIONS AND WARRANTS

As of September 30, 1994, there were options to purchase approximately
60,000 shares of Intramed Common Stock outstanding, warrants covering an
aggregate of 189,000 shares of Intramed Common Stock outstanding and the holders
of options to purchase 359,533 shares of Intramed Common Stock had accepted the
offer to cancel their options in exchange for $.50 per share underlying such
options. In the Merger, options covering approximately 60,000 shares of
Intramed Common Stock will be substituted by Baxter, at the Exchange Ratio, for
Merger Options. Certain warrants to purchase an aggregate of 105,000 shares of
Intramed Common Stock will expire upon the closing of the Merger. Other
warrants to purchase 84,000 shares of Intramed Common Stock at an exercise price
of $6.60 per share will be assumed by Baxter and converted into warrants to
purchase shares of Baxter Common Stock, exercisable for that number of shares of
Baxter Common Stock equal to 84,000 shares multiplied by the Exchange Ratio at
an exercise price equal to $6.60 divided by the Exchange Ratio.

COMPARISON OF RIGHTS OF HOLDERS
OF BAXTER AND INTRAMED COMMON STOCK

Upon consummation of the Merger, the former shareholders of Intramed,
which is a corporation organized under California law, will become stockholders
of Baxter, a corporation governed by the laws of Delaware, as well as by the
Restated Certificate of Incorporation and Bylaws of Baxter. There are
substantial similarities between California and Delaware law, as well as between
the corporation charters and Bylaws of Baxter and Intramed; however, a number of
differences do exist. The following is a summary of those differences that
might significantly affect the rights of Intramed shareholders.

STOCKHOLDER APPROVAL OF MERGERS, REORGANIZATIONS AND CERTAIN BUSINESS
COMBINATIONS. Both the California General Corporation Law (the "CGCL") and the
Delaware General Corporation Law (the "DGCL") generally require that a majority
of the stockholders of both the acquiring and target corporations approve
statutory mergers. The DGCL does not require a stockholder vote of the
surviving corporation in a merger (unless the corporation provides otherwise in
its certificate of incorporation) if (i) the merger agreement does not amend the
existing certificate of incorporation, (ii) each share of the surviving
corporation outstanding before the merger is an identical outstanding or
treasury share after the merger, and (iii) the number of shares to be issued by
the surviving corporation in the merger does not exceed 20% of the shares
outstanding immediately prior to the merger. The CGCL contains a similar
exception to its voting requirements for reorganizations of corporations whose
shareholders immediately prior to the reorganization, or the corporation itself,
or both, will, immediately after the reorganization, own equity securities
constituting more than five-sixths of the voting power of the surviving or
acquiring corporation or its parent entity.

Both the CGCL and DGCL also require that a sale of all or substantially
all of the assets of a corporation be approved by a majority of the voting
shares of the corporation transferring such assets.

With certain exceptions, the CGCL requires that mergers, reorganizations,
certain sales of assets and similar transactions be approved by a majority vote
of each class of shares outstanding, subject to certain exceptions. In
contrast, the DGCL generally does not require class voting, except in certain
transactions involving an amendment to the certificate of incorporation which
adversely affects a specific class of shares. Should Baxter authorize and issue
shares of a new class of capital stock, the holders thereof would vote with the
holders of the Common Stock on proposals not adversely affecting the Common
Stock or unless otherwise provided in its Certificate of Incorporation. In such
event the holders of Common Stock, if in the minority, would be unable to
control the outcome of a vote, and, if in the majority, would be able to control
the outcome of such a vote.

Section 1203 of the CGCL also provides that, except in certain
circumstances, when a tender offer or a proposal for a reorganization or for a
sale of assets is made by an interested party (generally a controlling or
managing party of the target corporation), an affirmative opinion in writing as
to the fairness of the consideration to be paid to the shareholders must be
delivered to shareholders. This fairness opinion requirement does not apply

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to a corporation which does not have shares held of record by a least 100
persons, or to a transaction which has been qualified under California state
securities laws. Furthermore, if a tender of shares or vote is sought pursuant
to an interested party's proposal and a later proposal is made by another party
at least ten days prior to the date of acceptance of the interested party
proposal, the shareholder must be informed of the later offer and be afforded a
reasonable opportunity to withdraw any vote, consent or proxy, or to withdraw
any tendered shares. While the management of Intramed does not believe that
Section 1203 applies to the Merger, it has nevertheless obtained a written
opinion from Houlihan Lokey as to the fairness to the Intramed Shareholders,
from a financial point of view, of the Merger Shares to be paid to the Intramed
Shareholders pursuant to the terms of the Reorganization Agreement.

The CGCL also requires that holders of nonredeemable common stock receive
nonredeemable common stock in a merger of the corporation with the holder of
more than 50% but less than 90% of such common stock or its affiliate unless all
of the holders of such common stock consent to the transaction. This provision
of the CGCL may have the effect of making a "cash-out" merger by a majority
shareholder more difficult to accomplish.

Although the DGCL does not parallel the CGCL in this respect, under some
circumstances, Section 203 of the DGCL ("Section 203") does provide similar
protection against coercive two-tiered bids for a corporation in which the
stockholders are not treated equally. Section 203 only applies to Delaware
corporations which have a class of voting stock that is listed on a national
securities exchange, are quoted on an interdealer quotation system or are held
of record by more than 2,000 stockholders. A Delaware corporation may elect not
to be governed by Section 203 by a provision in its original certificate of
incorporation or an amendment thereto or to the bylaws, which amendment must be
approved by majority stockholder vote and may not be further amended by the
board of directors. Since Baxter is listed on the New York Stock Exchange,
Section 203 applies to Baxter. Baxter's Certificate of Incorporation and
Bylaws, as amended through the date of this Proxy Statement/Prospectus, do not
contain a provision electing not to be governed by Section 203, and Baxter does
not intend to elect not to be governed by Section 203.

Section 203 prohibits a Delaware corporation from engaging in a "business
combination" with an "interested stockholder" for three years following the date
that such person becomes an interested stockholder. With certain exceptions, an
interested stockholder is a person or group who or which owns 15% or more of the
corporation's outstanding voting stock (including any rights to acquire stock
pursuant to an option, warrant, agreement, arrangement or understanding, or upon
the exercise of conversion or exchange rights, and stock with respect to which
the person has voting rights only), or is an affiliate or associate of the
corporation and was the owner of 15% or more of such voting stock at any time
within the previous three years.

For purposes of Section 203, the term "business combination" is defined
broadly to include mergers with or caused by the interested stockholder, sales
or other dispositions to the interested stockholder (except proportionately with
the corporation's other stockholders) of assets of the corporation or a
subsidiary equal to ten percent or more of the aggregate market value of the
corporation's consolidated assets or its outstanding stock; the issuance or
transfer by the corporation or a subsidiary of stock of the corporation or such
subsidiary to the interested stockholder (except for transfers in a conversion
or exchange or a pro rata distribution or certain other transactions, none of
which increase the interested stockholder's proportionate ownership of any class
or series of the corporation's or such subsidiary's stock); or receipt by the
interested stockholder (except proportionately as a stockholder), directly or
indirectly, of any loans, advances, guarantees, pledges or other financial
benefits provided by or through the corporation or a subsidiary.

The three-year moratorium imposed on business combinations by Section 203
does not apply if: (i) prior to the date on which such stockholder becomes an
interested stockholder the board of directors approves either the business
combination or the transaction which resulted in the person becoming an
interested stockholder; (ii) the interested stockholder owns 85% of the
corporation's voting stock upon consummation of the transaction which made him
an interested stockholder (excluding from the 85% calculation shares owned by
directors who are also officers of the target corporation and shares held by
employee stock plans which do not permit employees to decide confidentially
whether to accept a tender or exchange offer); or (iii) on or after the date
such person becomes an interested stockholder, the board approves the business
combination and it is also approved at a stockholder meeting by 66-2/3% of the
voting stock not owned by the interested stockholder.

Section 203 has been challenged in lawsuits arising out of ongoing
takeover disputes, and it is not yet clear whether and to what extent its
constitutionality will be upheld by the courts. Although the United States
District

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Court for the District of Delaware has consistently upheld the constitutionality
of Section 203, the Delaware Supreme Court has not yet considered the issue.
Baxter believes that so long as the constitutionality of Section 203 is upheld,
Section 203 will encourage any potential acquirer to negotiate with Baxter's
Board of Directors. Section 203 also has the effect of limiting the ability of
a potential acquirer to make a two-tiered bid for Baxter in which all
stockholders would not be treated equally. Section 203 should also discourage
certain potential acquirers unwilling to comply with its provisions.

RIGHTS UPON LIQUIDATION. Intramed's Amended and Restated Articles of
Incorporation contain no provision relating to the liquidation, dissolution or
winding up of Intramed, whether voluntary or involuntary.

Baxter's Restated Certificate of Incorporation provides that in the event
of any liquidation, dissolution or winding up of Baxter, whether voluntary or
involuntary, after payment to holders of Baxter Preferred Stock of the amounts
to which they are entitled, the holders of Baxter Common Stock are entitled to
share ratably, according to the number of shares held, in all remaining assets
of Baxter available for distribution to its stockholders.

CUMULATIVE VOTING. Both the CGCL and Intramed's Bylaws provide for
cumulative voting of shares by any shareholder in any election of directors
provided that (i) the name of the candidate for whom the shareholder wishes to
cumulate votes has been placed in nomination prior to commencement of the voting
and (ii) the shareholder has given notice prior to commencement of the voting of
his, her or its intent to cumulate votes. If any shareholder has given the
notice set forth in clause (ii) above, all shareholders are entitled to cumulate
votes.

Under the DGCL, cumulative voting in the election of directors is not
mandatory. The Restated Certificate of Incorporation and Bylaws of Baxter do
not provide for cumulative voting and, therefore, the stockholders of Baxter do
not have cumulative voting rights. The elimination of cumulative voting limits
the ability of minority stockholders to obtain representation on the Board of
Directors.

CLASSIFIED BOARD OF DIRECTORS. A classified board is one in which a
certain number, but not all, of the directors are elected on a rotating basis
each year. Intramed's Amended and Restated Articles of Incorporation and Bylaws
do not provide for a classified Board of Directors.

The DGCL permits, but does not require, a classified board of directors,
with staggered terms under which one-half or one-third of the directors are
elected for terms of two or three years, respectively. The Restated Certificate
of Incorporation and Bylaws of Baxter currently provide for a classified Baxter
Board of Directors with staggered terms under which one-third of the directors
are elected each year for terms of three years. In addition, the Restated
Certificate of Baxter provides for the holders of any one or more classes or
series of Baxter Preferred Stock issued by Baxter to have the right, voting
separately by class or series, to elect one or more directors. A classified
board of directors makes a change in the composition of the board of directors,
and a potential change in control of a corporation, a lengthier and more
difficult process.

SIZE OF THE BOARD OF DIRECTORS. The Bylaws of Intramed provide for a
Board of Directors of from four to seven members, with the number of directors
currently set at five. This fixed number may be changed within the stated range
by the Intramed Board of Directors or a vote of the holders of a majority of the
outstanding Intramed shares entitled to vote. The indefinite number of
directors may be changed, or a definite number may be fixed without provision
for an indefinite number, by the vote of the holders of a majority of the
outstanding Intramed shares entitled to vote, provided, however, that an
amendment reducing the fixed number or the minimum number of directors to a
number less than five cannot be adopted if the votes cast against its adoption
are equal to more than 16-2/3% of the outstanding shares entitled to vote
thereon.

The Restated Certificate of Incorporation of Baxter provides for a Baxter
Board of Directors of from 12 to 20 members, with the exact number to be
determined by resolution of the Baxter Board. The exact number of directors is
currently set at 12 members. Baxter's Bylaws provide that the number of
directors may be increased or decreased at any time by the affirmative vote of a
majority of the directors.

REMOVAL OF DIRECTORS. Section 303 and 304 of the CGCL provide that (i)
directors may be removed by the remainder of the board, without cause, upon
approval by the holders of a majority of the outstanding shares of common stock
entitled to vote (subject to certain limitations which prevent any such removal
where the removal is opposed by a number of votes sufficient to elect a
director, if the corporation's board were elected by a

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cumulative vote) and (ii) directors may be removed for fraudulent or dishonest
acts or gross abuses of authority or discretion following a suit brought by
shareholders holding at least 10% of the outstanding shares of any class of
capital stock. In addition, Section 302 of the CGCL permits a corporation's
board to remove directors declared of unsound mind by a court or convicted of a
felony. Intramed's Bylaws are governed by the provisions of the CGCL.

Section 141(k) of the DGCL provides that (i) in the case of a Delaware
corporation having cumulative voting, if less than the entire board is to be
removed, a director may not be removed without cause unless the number of shares
voted against such removal would not be sufficient to elect the director under
cumulative voting and, in the case where the holders of a class or series are
entitled to elect one or more directors (which is the case of Baxter), any
director so elected may not be removed without cause unless the number of shares
voted against such removal (based on the vote of the holders of the outstanding
shares of that class or series) would not be sufficient to elect the director
under cumulative voting and (ii) a director of a corporation with a classified
board of directors may be removed only for cause, unless the certificate of
incorporation otherwise provides (which in the case of Baxter it does not).
Although Baxter does not have cumulative voting, it does have a classified board
of directors, therefore a director may be removed only with cause.

FILLING VACANCIES ON THE BOARD OF DIRECTORS. Intramed's Bylaws provide
that any vacancy on the Intramed Board of Directors other than one created by
removal of a director may be filled by a majority of the remaining directors
even if less than a quorum, or by a sole remaining director. However, a vacancy
created by the removal of a director by a shareholder vote or by a court order
may be filled only (i) by a vote of the holders of a majority of shares entitled
to vote at a duly called shareholder meeting or (ii) by the unanimous written
consent of all outstanding shares entitled to vote thereon. Each director so
elected shall hold office until the next annual meeting of the shareholders and
until a successor has been elected and qualified. Any vacancies on the Board of
Directors (other than those created by removal) not filled by the directors may
be filled by written consent of the holders of a majority of the outstanding
shares entitled to vote thereon.

Baxter's Restated Certificate of Incorporation and Bylaws provide that any
vacancy on the Baxter Board of Directors that results from an increase in the
number of directors may be filled by a majority of the directors then in office,
and any other vacancy on the Baxter Board of Directors may be filled by a
majority of the directors then in office (even though less than a quorum) or by
a sole remaining director. Any director elected to fill a term resulting from
an increase in the number of directors shall have the same term as other members
of his or her class, and a director elected to fill any other vacancy shall have
the same remaining term as that of his or her predecessor.

AMENDMENTS TO CHARTER DOCUMENTS. Neither Intramed's Amended and
Restated Articles of Incorporation nor Bylaws contain any provisions relating to
amendments to the Articles of Incorporation of Intramed. Under the CGCL,
Intramed's Articles of Incorporation may be amended with the approval of the
Intramed Board of Directors and, in certain instances, the approval of the
holders of a majority (or, in certain instances, a supermajority) of the
outstanding Intramed shares entitled to vote.

Pursuant to the DGCL and Baxter's Restated Certificate of Incorporation,
the Certificate of Incorporation of Baxter may be amended with the approval of
the Baxter Board of Directors and upon adoption thereof by the affirmative vote
of a majority of the votes cast by the holders of Baxter capital stock entitled
to vote thereon; however, any amendment to Article Sixth regarding the
classified Baxter Board of Directors requires the affirmative vote of at least
two-thirds of the holders of all the outstanding shares entitled to vote
thereon.

AMENDMENTS TO BYLAWS. Intramed's Bylaws may be amended or repealed or
new bylaws may be adopted by either the Intramed Board of Directors or by the
holders of Intramed Common Stock entitled to exercise a majority of the voting
power; provided that (i) if the Articles of Incorporation of Intramed set forth
the number of authorized directors, then the authorized number of directors may
be changed only by an amendment of the Articles of Incorporation, and (ii) the
authority of the Intramed Board of Directors to amend or repeal bylaws or adopt
new bylaws is subject to the authority of the Intramed Shareholders.

Under the DGCL, bylaws may be amended or repealed or new bylaws adopted by
action of the stockholders entitled to vote thereon; provided, however, that any
corporation may, in its certificate of incorporation, confer the power to adopt,
amend or repeal bylaws upon its Board of Directors. The Baxter Bylaws are
governed by this provision of the DGCL.

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POWER TO CALL SPECIAL STOCKHOLDERS' MEETINGS; STOCKHOLDER ACTION BY
WRITTEN CONSENT; REQUIRING STOCKHOLDER NOTICE OF NEW BUSINESS AT ANNUAL
MEETING. Pursuant to Intramed's Bylaws, special meetings of Intramed's
shareholders may be called at any time by the Intramed Board of Directors, the
Chairman of the Board, the President, or by one or more shareholders holding
shares entitled to cast not less than 10% of the votes at such meeting.
Intramed's Bylaws permit the Intramed shareholders to act by the written consent
of all holders entitled to vote at a meeting, provided that in acting to fill a
vacancy on the Board of Directors not filled by the remaining directors,
Intramed's Bylaws permit shareholders to fill such vacancy by written consent of
holders of a majority of the shares entitled to vote for the election of
directors. Intramed's Bylaws do not require its shareholders to provide prior
written notice to Intramed in order to submit new matters at the shareholders'
annual meeting.

Pursuant to Baxter's Bylaws, special meetings of Baxter's stockholders may
be called at any time by the Baxter Board of Directors, the Chairman of the
Board, Chief Executive Officer or Secretary. Under the Baxter Bylaws, the
Baxter stockholders do not have the right to call a special meeting of
stockholders. The Restated Certificate of Incorporation of Baxter expressly
provides that no action which requires the vote or consent of the stockholders
of the corporation may be taken without a meeting and vote of stockholders and
the power of stockholders to consent in writing without a meeting to the taking
of any action is specifically denied. Baxter's Bylaws require the stockholders
of Baxter to provide prior written notice to Baxter in order to submit new
matters at the stockholders' annual meeting. Such notice must set forth, among
other things, 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.

The result of the foregoing provisions is that it is more difficult to
take stockholder action under Baxter's Bylaws and Restated Certificate of
Incorporation than under Intramed's Bylaws and Amended and Restated Articles of
Incorporation. For example, formal proxy contests can only occur at Baxter's
annual meeting of stockholders or when the Board of Directors agrees to call a
special meeting.

SHAREHOLDER RIGHTS PLAN. In March 1989, the Board of Directors of
Baxter adopted a Rights Plan which is described in more detail under
"Description of Baxter Capital Stock -- Preferred Stock and Shareholder Rights
Plan." In the past, Delaware courts have upheld the validity of plans such as
the Rights Plan.

LOANS TO OFFICERS AND EMPLOYEES. Under the CGCL and Intramed's Bylaws,
Intramed may, upon approval of the Board of Directors alone, make loans of money
or property to, or guarantee the obligations of, any officer of Intramed or its
parent or subsidiary, whether or not a director, or adopt an employee benefit
plan or plans authorizing such loans or guaranties provided that (i) the Board
of Directors determines that such a loan or guaranty or plan may reasonably be
expected to benefit Intramed, (ii) Intramed has outstanding shares held of
record by 100 or more persons (as determined in Section 605 of the CGCL) on the
date of approval by the Board of Directors, and (iii) the approval of the Board
of Directors is a vote sufficient without counting the vote of any interested
director or directors. Pursuant to Intramed's Bylaws the foregoing provision is
effective only if it has been approved by the shareholders of Intramed in
accordance with Sections 315(b) and 152 of the CGCL.

Under DGCL, a corporation may make loans to, guarantee the obligations of
or otherwise assist its officers or other employees and those of its
subsidiaries (including directors who are also officers of employees) when such
action, in the judgment of the directors, may reasonably be expected to benefit
the corporation.

INDEMNIFICATION AND LIMITATION OF LIABILITY. There are certain
differences between the CGCL and DGCL respecting indemnification and limitation
of liability. The laws of both states permit corporations to adopt a provision
in their articles of incorporation eliminating the liability of a director to
the corporation or its shareholders for monetary damages for breach of the
director's fiduciary duty of care. The Amended and Restated Articles of
Incorporation of Intramed eliminates the liability of directors for monetary
damages to the corporation to the fullest extent permissible under the CGCL.
The CGCL does not permit the elimination of monetary liability where such
liability is based on: (i) intentional misconduct or knowing and culpable
violation of law; (ii) acts or omissions that a director believes to be contrary
to the best interests of the corporation or its shareholders, or that involve
the absence of good faith on the part of the director; (iii) receipt of an
improper personal benefit; (iv) acts or omissions that show reckless disregard
for the director's duty to the corporation or its shareholders, where the
director in the ordinary course of performing a director's duties should be
aware of a risk of serious injury to the corporation or its shareholders; (v)
acts or omissions that constitute an unexcused pattern of inattention that
amounts to an abdication of the director's duty to the corporation and its
shareholders; (vi) interested transactions between the

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corporation and a director in which a director has a material financial
interest; and (vii) liability for improper distributions, loans or guarantees.

The Restated Certificate of Incorporation of Baxter eliminates the
liability of directors for monetary damages to the corporation to the fullest
extent permitted by the DGCL. The DGCL does not permit the elimination of
monetary liability where such liability is based on: (i) breaches of the
director's duty of loyalty to the corporation or its stockholders; (ii) acts or
omissions not in good faith or involving intentional misconduct or knowing
violations of law; (iii) the payment of unlawful dividends or unlawful stock
repurchases or redemptions; or (iv) transactions from which the director
received an improper personal benefit. Such limitations of liability provision
also may not limit a director's liability for violation of, or otherwise relieve
Baxter or its directors from the necessity of complying with federal or state
securities laws, or affect the availability of non-monetary remedies such as
injunctive relief or rescission.

The CGCL permits indemnification of expenses incurred in derivative or
third-party actions, except that with respect to derivative actions (i) no
indemnification may be made without court approval when a person is adjudged
liable to the corporation in the performance of that person's duty to the
corporation and its shareholders, unless a court determines such person is
entitled to indemnity for expenses, and then such indemnification may be made
only to the extent that such court shall determine, and (ii) no indemnification
may be made without court approval in respect of amounts paid or expenses
incurred in settling or otherwise disposing of a threatened or pending action or
amounts incurred in defending a pending action which is settled or otherwise
disposed of without court approval.

Indemnification is permitted by the CGCL only for acts taken in good faith
and believed to be in the best interests of the corporation and its
shareholders, as determined by a majority vote of a disinterested quorum of the
directors, independent legal counsel (if a quorum of independent directors is
not obtainable), a majority vote of a quorum of the shareholders (excluding
shares owned by the indemnified party) or the court handling the action.

The CGCL requires indemnification when the individual has successfully
defended the action on the merits (as opposed to Delaware law which requires
indemnification relating to a successful defense on the merits or otherwise).

The Restated Certificate of Incorporation of Baxter provides for
indemnification of its officers and directors to the fullest extent permitted by
the DGCL. The DGCL generally permits indemnification of expenses incurred in
the defense or settlement of a derivative or third-party action, provided there
is a determination by a disinterested quorum of the directors, by independent
legal counsel or by a majority vote of a quorum of the stockholders that the
person seeking indemnification acted in good faith and in a manner reasonably
believed to be in or (in contrast to the CGCL) not opposed to the best interests
of the corporation. Without court approval, however, no indemnification may be
made in respect of any derivative action in which such person is adjudged liable
for negligence or misconduct in the performance of his duty to the corporation.
The DGCL requires indemnification of expenses when the individual being
indemnified has successfully defended the action on the merits or otherwise.

Both the CGCL and the Amended and Restated Articles of Incorporation of
Intramed provide for indemnification of agents (as defined in Section 317 of the
CGCL) through bylaws, agreements with agents, vote of shareholders or
disinterested directors or otherwise in excess of that specifically authorized
by Section 317 of the CGCL, subject to certain limits set forth in Section 604
of the CGCL.

The DGCL and the Restated Certificate of Incorporation of Baxter provide
that the indemnification provided by statute shall not be deemed exclusive of
any other rights under any bylaw, agreement, vote of stockholders or
disinterested directors or otherwise. Baxter has entered into indemnification
agreements with its officers and directors.

INSPECTION OF STOCKHOLDER LIST. Both the CGCL and DGCL allow any
stockholder to inspect the stockholder list for a purpose reasonably related to
such person's interest as a stockholder. The CGCL provides, in addition, for an
absolute right to inspect and copy the corporation's shareholder list by persons
holding an aggregate of 5% or more of a corporation's voting shares or
shareholders holding an aggregate of 1% or more of such shares who have filed a
Schedule 14B with the Securities and Exchange Commission relating to the
election of directors.

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The DGCL does not provide for any such absolute right of inspection, and
no such right is granted under the Restated Certificate of Incorporation or
Bylaws of Baxter. Lack of access to stockholder records, even though unrelated
to the stockholder's interest as a stockholder, could result in impairment of
the stockholder's ability to coordinate opposition to management proposals,
including proposals with respect to a change in control of the corporation.

LEGAL MATTERS

Certain legal matters with respect to the legality of the issuance of the
shares of Baxter Common Stock offered hereby and the tax-free status of the
Merger will be passed upon for Baxter by Brobeck, Phleger & Harrison, Los
Angeles, California.

EXPERTS

The consolidated financial statements of Baxter and its subsidiaries,
incorporated in this Proxy Statement/Prospectus and the Registration Statement
by reference to the Annual Report on Form 10-K for the year ended December 31,
1993, have been so incorporated in reliance on the report of Price Waterhouse
LLP, independent accountants, given on authority of said firm as experts in
auditing and accounting.

With respect to the unaudited historical consolidated financial
information of Baxter for the three-month period ended March 31, 1994 and the
six-month period ended June 30, 1994, incorporated by reference in this Proxy
Statement/Prospectus and Registration Statement, Price Waterhouse LLP reported
that they have applied limited procedures in accordance with professional
standards for a review of such information. However, their separate reports
dated May 12, 1994 and August 9, 1994, incorporated by reference herein, state
that they did not audit and they do not express an opinion on the unaudited
historical consolidated financial information. Price Waterhouse LLP has not
carried out any significant or additional audit tests beyond those which would
have been necessary if their reports had not been included. Accordingly, the
degree of reliance on their reports on such information should be restricted in
light of the limited nature of the review procedures applied. Price Waterhouse
LLP is not subject to the liability provisions of Section 11 of the Securities
Act of 1933 (the "Act") for their reports on the unaudited historical
consolidated financial information because those reports are not a "report" or a
"part" of the registration statement prepared or certified by Price Waterhouse
LLP within the meaning of Sections 7 and 11 of the Act.

The financial statements of Intramed audited by Ernst & Young LLP have
been included in this Proxy Statement/Prospectus and the Registration Statement
in reliance on their report given on their authority as experts in auditing and
accounting.

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INDEX TO FINANCIAL STATEMENTS

Report of Ernst & Young, Independent Auditors.......................F-1
Balance Sheets at December 31, 1992 and 1993........................F-2
Statements of Operations for the years ended December 31, 1991,
1992 and 1993.......................................................F-3
Statements of Shareholders' Equity for the years ended
December 31, 1991, 1992 and 1993....................................F-4
Statements of Cash Flows for the years ended December 31, 1991,
1992 and 1993.......................................................F-5
Notes to Financial Statements.......................................F-6

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REPORT OF ERNST & YOUNG, INDEPENDENT AUDITORS

The Board of Directors and Shareholders
Intramed Laboratories, Inc.

We have audited the accompanying balance sheets of Intramed Laboratories, Inc.
as of December 31, 1992 and 1993, and the related statements of operations,
shareholders' equity and cash flows for each of the three years in the period
ended December 31, 1993. These financial statements are the responsibility of
Intramed's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Intramed Laboratories, Inc. at
December 31, 1992 and 1993, and the results of its operations and its cash flows
for each of the three years in the period ended December 31,1993 in conformity
with generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that Intramed
Laboratories, Inc. will continue as a going concern. As more fully described in
Note 1 to the financial statements, Intramed has incurred recurring operating
losses and negative cash flows from operations. These conditions have raised
substantial doubt about Intramed's ability to continue as a going concern. The
financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the amounts
and classification of liabilities that may result from Intramed's inability to
continue as a going concern.

ERNST & YOUNG

San Diego, California
January 28, 1994, except for the second
and third paragraphs of Note 1 as to which
the date is March 30,1994.

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INTRAMED LABORATORIES, INC.

BALANCE SHEETS

(In thousands, except share data)

ASSETS

· Enlarge/Download Table

December 31,
------------
1992 1993
---- ----

Current assets:
Cash and cash equivalents $ 297 $ 1,175
Short-term investments 2,873 -
Accounts receivable, less allowance for doubtful accounts
of $30 at December 31, 1992 and 1993 664 270
Contract receivable 300 -
Inventories 752 1,271
Other current assets 149 58
-------- --------
Total current assets 5,035 2,774

Property and equipment:
Machinery and equipment 500 626
Office furniture and fixtures 150 155
Leasehold improvements 30 42

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Baxter International Inc · S-4/A · On 10/6/94

Filed On 10/6/94 · SEC File 33-53937 · Accession Number 912057-94-3331

Pre-Effective Amendment to Registration of Securities Issued in a Business-Combination Transaction · Form S-4Filing Table of Contents

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Pre-Effective Amendment to Registration of Securities Issued in a Business-Combination Transaction · Form S-4
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