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                             ALLEGIANCE CORPORATION
                1996 OUTSIDE DIRECTOR INCENTIVE COMPENSATION PLAN


1.   PURPOSE.  The purpose of the Allegiance Corporation 1996 Outside Director
     Incentive Compensation Plan (the "Plan") is to foster and promote the long-
     term financial success of Allegiance Corporation (the "Company") by
     (i) more closely aligning the personal interests of the directors with
     those of the Company's stockholders and (ii) attracting and retaining
     outstanding persons to serve as directors by enabling them to participate
     in the Company's growth through stock ownership.


2.   SHARES RESERVED.

     2.1  NUMBER OF SHARES RESERVED.   There is hereby reserved for issuance
          under the Plan an aggregate of 350,000 shares of Common Stock of the
          Company ("Common Stock") which may be authorized and unissued or
          treasury shares.  If the Company shall at any time change the number
          of issued shares of Common Stock without new consideration to the
          Company (such as by stock dividend or stock split), the number of
          shares reserved for issuance under this Plan shall be correspondingly
          changed.

     2.2  REUSAGE OF SHARES.  In the event of the termination (by reason of
          expiration, cancellation, surrender, or otherwise) of any Annual
          Option under the Plan, that number of shares of Common Stock that was
          subject to the Annual Option but not delivered shall be available
          again for an Annual Option under the Plan.

     2.3  ADJUSTMENTS TO SHARES RESERVED.  In the event of any merger,
          consolidation, reorganization, recapitalization, spinoff, stock
          dividend, stock split, reverse stock split, exchange, or other
          distribution with respect to shares of Common Stock or other change in
          the corporate structure or capitalization affecting the Common Stock,
          the type and number of shares of stock which are or may be subject to
          Annual Options under the Plan and the terms of any outstanding Annual
          Option (including the Option Price ) shall be equitably adjusted by
          the Board of Directors to preserve the value of the Annual Options
          awarded or to be awarded under the Plan.


3.   PARTICIPATION.  Participation in this Plan is limited to members of the
     Board of Directors of the Company (a "Director") who are not salaried
     officers or employees of the Company or any subsidiary (an "Outside
     Director").  Each Outside Director shall begin participation in the Plan on
     the first day of his or her first term as a Director and participation
     shall continue until the Outside Director no longer serves as a Director.

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4.   ADMINISTRATION.  This Plan is intended to be self-governing.  All grants of
     options to Outside Directors under the Plan shall be automatic and
     nondiscretionary and shall be made strictly in accordance with the terms of
     the Plan.  To the extent that questions of administration arise, they shall
     be resolved by the entire Board of Directors and the Board of Directors
     shall comply with all applicable law in administering the Plan.


5.   PAYMENT OF ANNUAL RETAINER IN OPTIONS.  As soon as practicable after the
     first day of each Term Year (as defined below), in lieu of an annual cash
     retainer, each Outside Director shall be granted an option to purchase
     shares of Common Stock (an "Annual Option").  The terms of each Annual
     Option shall be as follows:

          5.1  TERM.  The term of the Annual Option shall be ten (10) years.

          5.2  EXERCISE.  Except as provided in subsection 6.2 below, the Annual
               Option shall be exercisable only while the Outside Director
               remains a Director of the Company.

          5.3  OPTION PRICE.  The exercise price per share of Common Stock (the
               "Option Price") shall equal the Fair Market Value of a share of
               Common Stock determined on the date the Annual Option is granted.

          5.4  VESTING.  Subject to subsection 6.2 below, the Annual Option
               shall become exercisable as to all of the shares subject to the
               option on the last day of the Term Year in which the Annual
               Option is granted.

          5.5  NUMBER OF SHARES. Each Annual Option shall be to purchase 
               10,000 shares of Common Stock; provided, that in the case of
               a Term Year which is other than 12 months in duration, the
               Annual Option shall be to purchase that number of shares of
               Common Stock which is equal to 10,000 multiplied by a
               fraction the numerator of which is the number of months in
               the Term Year and the denominator of which is 12.

     For purposes of this Section 5, a "Term Year" shall mean the period
     beginning on the first day following the annual meeting of the Company's
     stockholders, or if later, the first day a person first serves as an
     Outside Director, and ending on the day of the succeeding annual meeting;
     provided, that with respect to the Outside Directors serving on the
     effective date of the Plan, the first Term Year for such Outside Directors
     shall mean the period beginning October 1, 1996 and ending on the day of
     the annual meeting of the Company's stockholders occurring in 1998.

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6.   OPTION EXERCISES.

          6.1  MANNER AND EFFECT OF EXERCISE.  An Annual Option may be exercised
               by notice to the Company specifying the number of shares of
               Common Stock to be purchased and shall be accompanied by payment
               of the option price by check or by the delivery of shares of
               Common Stock then owned by the Outside Director or certification
               of such ownership.  Payment may also be made by delivering a
               properly-executed exercise notice to the Company, together with a
               copy of irrevocable instructions to a broker to deliver promptly
               to the Company the amount of sale or loan proceeds to pay the
               exercise price.  The exercise notice shall include such other
               documentation as the Company or broker or transfer agent, if
               applicable, shall require to effect an exercise of the Annual
               Option and delivery to the Company of the sale or loan proceeds
               required to pay the exercise price.  An Annual Option may not be
               exercised for a fraction of a share.  A share certificate for the
               number of shares of Common Stock acquired shall be issued to the
               Outside Director  as soon as practicable after exercise of an
               Annual Option.  No adjustment shall be made for a dividend or
               other right for which the record date is prior to the date the
               stock certificate is issued, except as provided in Section 2.  An
               exercise of an Annual Option in any manner shall result in a
               decrease in the number of shares of Common Stock which thereafter
               may be available, both for purposes of the Plan and for sale
               under the Annual Option, by the number of shares of Common Stock
               as to which the Annual Option is exercised.

          6.2  TERMINATION OF OUTSIDE DIRECTOR.  In the event an Outside
               Director's status as a Director terminates for any reason, all of
               the Outside Director's Annual Options shall become fully
               exercisable and all such Annual Options shall remain exercisable
               for a period of twelve (12) months following the date the Outside
               Director's status as a Director terminates (but in no event later
               than the expiration of the ten (10) year term of any Annual
               Option).  To the extent that the terminating Outside Director
               does not exercise any Annual Option within the time specified
               herein, the Annual Option shall terminate.


7.   GENERAL

     7.1  EFFECTIVE DATE.  The Plan will become effective upon its approval by
          Baxter International, Inc., the Company's sole stockholder.

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     7.2  DURATION.  The Plan shall remain in effect until all Annual Options
          granted under the Plan have been satisfied by the issuance of shares
          of Common Stock, or have been terminated in accordance with the terms
          of the Plan.  No option may be granted under the Plan after the tenth
          anniversary of its effective date.

     7.3  NON-TRANSFERABILITY OF OPTION.  No Annual Option granted under the
          Plan may be transferred, pledged, or assigned by an Outside Director
          except by will or the laws of descent and distribution in the event of
          death, and the Company shall not be required to recognize any
          attempted assignment of such rights by any Outside Director.  During
          an Outside Director's lifetime, options may be exercised only by the
          Outside Director or by the Outside Director's guardian or legal
          representative.  Notwithstanding the foregoing, an Outside Director
          may transfer an Annual Option to members of the Director's immediate
          family or trusts or family partnerships for the benefit of such
          persons, subject to such terms and conditions as may be established by
          the Board of Directors.

     7.4  COMPLIANCE WITH APPLICABLE LAW.  The award of any Annual Option under
          the Plan may also be made subject to such other provisions as may be
          appropriate to comply with federal and state securities laws or stock
          exchange requirements.  If, at any time, the Company determines that
          the listing, registration, or qualification of any Annual Option, or
          the shares of Common Stock issuable pursuant thereto, is necessary on
          any securities exchange or under any federal or state securities or
          blue sky law, or that the consent or approval of any governmental
          regulatory body is necessary or desirable, the issuance of shares of
          Common Stock pursuant to any Annual Option, or the removal of any
          restrictions imposed on shares subject to an Annual Option, may be
          delayed until such listing, registration, qualification, consent, or
          approval is effected.

     7.5  NO CONTINUED RETAINER.  Participation in the Plan will not give any
          Outside Director the right to be retained as a Director of the Company
          or any right or claim to any benefit under the Plan unless such right
          or claim has specifically accrued under the terms of the Plan.

     7.6  TREATMENT AS A STOCKHOLDER.  No Annual Option granted to an Outside
          Director under the Plan shall create any rights in such Outside
          Director as a stockholder of the Company until shares of Common Stock
          are registered in the name of the Outside Director.

     7.7  AMENDMENT OR DISCONTINUATION OF THE PROGRAM.  The Board of Directors
          may amend, suspend or discontinue the Plan at any time; provided,
          however, that no amendment, suspension or discontinuance shall
          adversely affect any outstanding Annual Option and if any law,
          agreement or exchange on which 

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          the Company's Common Stock is traded
          requires stockholder approval for an amendment to become effective, no
          such amendment shall become effective unless approved by vote of the
          Company's stockholders.

     7.8  FAIR MARKET VALUE.  Except as otherwise determined by the Board of
          Directors, the Fair Market Value of a share of Common Stock as of any
          date shall be equal to the closing sale price of a share of Common
          Stock on that date as reported on the New York Stock Exchange
          Composite Reporting Tape.

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