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Prior to the Distribution, Edwards Lifesciences employees participated in Baxter-sponsored defined benefit pension plans covering substantially all employees in the United States and Puerto Rico and employees in certain European countries. The benefits were based on years of service and the employees’ compensation during five of the last 10 years of employment as defined by the plans. Effective as of the Distribution, Edwards Lifesciences’ employees ceased to be eligible to accrue any additional benefits under the Baxter plan for United States employees. Edwards Lifesciences did not adopt a pension plan for United States employees to replace the Baxter plan in the United States. The pension liability related to Edwards Lifesciences’ United States employees’ service prior to the Distribution remains with Baxter. With respect to the Puerto Rico and certain European plans, Baxter transferred the assets and liabilities relating to Edwards Lifesciences’ employees to Edwards Lifesciences as of the Distribution. Edwards Lifesciences has adopted a defined benefit pension plan in Puerto Rico and in certain European countries. 

Pension expense for the Baxter-sponsored plans relating to Edwards Lifesciences’ employees was $ 0.4 million for the three months ended March 31 , 2000 , and $ 5 million for the year ended December 31 , 1999 . 

In addition to pension benefits, Edwards Lifesciences participated in Baxter-sponsored contributory health care and life insurance benefits for substantially all domestic retired employees through the Distribution. Baxter and Edwards Lifesciences froze benefits under these plans as of the Distribution for Edwards Lifesciences employees. Edwards Lifesciences has not established new health care and life insurance plans for employees retiring subsequent to the Distribution. Expense associated with these benefits relating to Edwards Lifesciences employees was less than $ 1 million in each of the years 2000 and 1999 . 

## note 9. 

## EMPLOYEE BENEFIT PLANS 

## Defined Benefit Plans 

Subsequent to the Distribution, Edwards Lifesciences began sponsoring defined benefit pension plans in Puerto Rico and in certain European countries. A reconciliation of these plans’ benefit obligations, assets and funded status are as follows: 

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For certain of the Company’s European pension plans, the accumulated benefit obligation is in excess of plan assets. The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for these plans were $ 2.0 million, $ 1.6 million and $ 0.6 million, respectively, at December 31 , 2001 , and $ 0.8 million, $ 0.7 million and $ 0 , respectively, at December 31 , 2000 . 

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Assumptions used in determining benefit obligations are as follows: 

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## Net periodic benefit cost 

The Company’s employees in the United States and Puerto Rico are eligible to participate in a qualified 401 (k) and 1165 (e) plan, respectively. Participants may contribute up to 15 % of their annual compensation (subject to tax code limitation) to the plans. Edwards Lifesciences matches the first 3 percent of the participant’s annual eligible compensation contributed to the plan on a dollar-for-dollar basis. Edwards Lifesciences matches the next 2 percent of the participant’s annual eligible compen- sation to the plan on a 50 % basis. Matching contributions relating to Edwards Lifesciences employees were $ 4 million in 2001 and 2000 and $ 3 million in 1999 . 

The Company has a nonqualified deferred compensation plan for a select group of management that provides the opportunity to defer a specified percentage of their cash compensation. Participants may elect to defer up to 100 % of bonus and 15 % of total annual compensation. The Company’s obligations under this plan are unfunded. The amount accrued under this plan was $ 2 million at December 31 , 2001 and 2000 . 

The Edwards Lifesciences Corporation Executive Option Plan (the “Executive Plan”) became effective for participation by eligible employees in 2001 . Eligible employees who participate in the Executive Plan may not participate in the Company’s nonqualified deferred compensation plan. Under the Executive Plan, executive officers and certain other key employees may elect to forgo a portion of their annual salary and bonus for an option to purchase shares of mutual funds or the Company’s common stock. The options are granted quarterly with an initial exercise price equal to 25 % of the fair market value per share (as defined in the Executive Plan) of the respective security on the grant date. The number of shares subject to each option is determined such that the difference between the aggregate fair market value (as defined in the Executive Plan) and the aggregate exercise price under the option is equal to the amount of forgone compensation attributable to the option. A total of 95,000 shares of the Company’s common stock has been reserved for issuance under the Executive Plan. 

## Defined Contribution Plans 

