2005 Financial Review

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 15 - Share-Based Compensation Plans

The Company has stock incentive plans to encourage employees and nonemployee directors to remain with the Company and to more closely align their interests with those of the Company’s shareholders.

Stock Option Plans

In May 2005, the shareholders of the Company approved the 2005 Equity Incentive Plan (the “2005 Plan”) as the successor plan to the 1988 Stock Option Plan (the “1988 Plan”). As a result, the 1988 Plan terminated in May 2005 except as to options still outstanding. The 2005 Plan is similar to the 1988 Plan but also allows for grants of restricted stock and restricted stock units as well as performance units and other share-based awards. No restricted stock, restricted stock units, performance units or share-based awards other than stock options were granted in 2005 under the 2005 Plan. The Company also has a Non-Employee Directors’ Stock Option Plan (the “Directors’ Plan”).

Options are granted at a price not less than the average quoted market price on the date of grant. All grants in the last three years under the 2005 Plan and the 1998 Plan have a maximum term of six years and all of these grants either vest over three years from the date of grant or vest 100% at the end of the third year. The Directors’ Plan options are granted with a maximum term of ten years and vest in full at the end of six months. There are 4.6 million shares underlying options that are authorized, but not yet granted. Although it has not expressed any intent to do so, the Company has the right to amend, suspend, or terminate its stock incentive plans at any time by action of the Company’s Board of Directors.

The table below summarizes the activity in all plans for options of the Company’s common stock for 2005, 2004 and 2003.

The following table summarizes information about stock options outstanding and exercisable as of December 31, 2005.

There were 1.5 million shares of exercisable options with a weighted-average exercise price of $20.68 per share at December 31, 2004 and 2.3 million shares of exercisable options with a weighted-average exercise price of $22.62 per share at December 31, 2003.

In conjunction with the sale of BAX Global in the first quarter of 2006, 0.3 million options held by BAX Global employees were modified such that the options became immediately vested. This modification will result in additional compensation expense of $7.4 million and will be recorded within discontinued operations in the first quarter of 2006. The weighted-average exercise price of these options is $25.67 and the options must be exercised within 90 days.

Employee Stock Purchase Plan

Under the 1994 Employee Stock Purchase Plan (the “ESPP”), as amended in 2004, the Company was authorized to issue common stock to eligible employees. The ESPP was terminated in June 2005. The ESPP was a noncompensatory plan that allowed eligible employees to buy the Company’s common stock at below market value, subject to plan limitations on the amount an employee could purchase annually. Under the ESPP, the Company sold approximately 0.1 million shares of common stock to employees in both 2005 and 2004, and approximately 0.2 million shares in 2003.