This Memorandum of Understanding, dated as of March 5, 1999, is between Baxter International Inc. ("Baxter") and the Retirement Plans for the Employees of the Sisters of Mercy Regional Community of Detroit, the Sisters of Charity of Cincinnati and the Service Employees International Union (collectively referred to herein as "the Shareholders").

This Memorandum of Understanding describes a proposal whereby in exchange for Baxter's acceptance and agreement of the terms set forth below, the Shareholders will withdraw their resolution, "Phase-Out of Production of Medical Products Containing PVC," from inclusion in the Baxter 1999 Proxy Statement.

1. Baxter is committed to exploring and developing alternatives to PVC products and to developing and implementing proposed timetables for substituting its current containers for intravenous ("IV") solutions with a container that does not contain PVC. Baxter will acknowledge and discuss this at its 1999 Annual Meeting of Stockholders, to be held on May 4, 1999.

2. Baxter will provide to the Shareholders a list identifying each category of PVC- containing products that it currently manufactures.

3. Timetable:

Baxter will provide to the Shareholders a timetable for replacing its current containers for IV solutions with an IV container that does not contain PVC.

The timetable will include measurable and verifiable benchmarks.

The timetable will include in scope Baxter's global product line of IV containers.

The Shareholders will provide input on this timetable to Baxter.

4. In the future, Baxter will update the Shareholders on the steps to be taken towards replacing its global line of PVC-containing products other than IV containers with non-PVC alternatives.

5. Baxter will request that the Vinyl Institute, the American Plastics Council and the Chlorine Chemistry Council refrain from using Baxter products in their public advertising campaigns.

6. Baxter agrees to meet with the Shareholders no later than September 10, 1999 to assess the implementation status of the above items.

7. Baxter agrees to meet annually with the Shareholders and other individuals or groups, as mutually agreed upon by the parties hereto, for the duration of the timetable set forth in item three above. The Shareholders agree that, assuming this annual face-to-face dialogue is progressing in a mutually satisfactory manner, the Shareholders will not file resolutions similar to the pending resolution for inclusion in Baxter's future proxy statements.

This Memorandum of Understanding is intended solely to be a summary evidencing the current understandings of Baxter and the Shareholders as reflected in discussions between them to date. It is expressly understood that (i) this Memorandum of Understanding is not intended to, and does not, constitute an agreement between Baxter and the Shareholders to take or refrain from taking any action, and (ii) Baxter and the Shareholders will have no rights or obligations of any kind whatsoever by virtue of this Memorandum of Understanding or any other written or oral expression by either party; provided, however, that the agreement by the Shareholders to withdraw their resolution as described above will be binding on the Shareholders when both parties have signed and delivered a copy of this letter.

The undersigned individual executing this document on behalf of the Shareholders has the valid and legally binding authority to represent and to enter into this Memorandum of Understanding on behalf of all of the parties collectively referred to herein as the "Shareholders," including the authority to agree to withdraw the resolution "Phase-Out of Production of Medical Products Containing PVC" from the Baxter 1999 Proxy Statement.

Baxter and the Shareholders agree to announce this Memorandum of Understanding through a mutually-agreed upon joint press release.

BAXTER INTERNATIONAL INC. SHAREHOLDERS

By: Jack McGinley Title: Group Vice President Baxter International, Inc. Of Detroit

By: Gordon Judd CSG Title: Coordinator, Corporate Responsibility IV Systems/Medical Products Sisters of Mercy Regional Community